Aug 6, 2019

Central banks haven't cut this much since the financial crisis

Adapted from a Goldman Sachs chart; Chart: Axios Visuaals

Investors are pricing in a 100% chance the Fed cuts rates at its next meeting in September after Monday's market carnage, joining central banks around the globe that are providing more stimulus to their respective economies.

Why it matters: While the prospect of more interest rate cuts had buoyed the stock market going into last week's Fed meeting, Monday's sell-off showed that investors no longer view that as enough to sustain current price levels.

What's happening: Initially seen as a cautionary pause, the world's central banks have clearly returned to a path of lower interest rates that has not been seen since the global financial crisis.

  • More than half of the world's central banks are expected to cut interest rates in the third quarter, while 0% of central banks are expected to raise rates in the third or fourth quarters, data compiled by Goldman Sachs shows.

What they're saying:

  • "With global growth running at a below-trend rate of 2.75% — down from about 4% a year ago — a synchronized tilt towards easing looks like a natural response to a weaker outlook," Goldman Sachs research analysts wrote in a recent note to clients.

Go deeper

Central banking's brave new world

Illustration: Aïda Amer/Axios

The European Central Bank is leading the charge in the next wave of central bank stimulus measures, but experts and former central bankers argue it will be insufficient to deal with the looming global downturn.

Why it matters: Central banks see that the global economy is in trouble and they are stepping in to act, but are responding to new problems with old solutions. The eurozone already has negative interest rates and the ECB already has spent trillions buying bonds in an attempt to stimulate the economy. In spite of these efforts, major European economies have been unable to generate inflation or growth that's even close to their targets for years.

Go deeperArrowAug 16, 2019

Fed tweets show Trump doesn't understand central banking

Trump announces Powell as his Federal Reserve nominee in November 2017. Photo: Drew Angerer/Getty Images)

President Trump's latest tweets have continued a pattern of attacking the Federal Reserve and his handpicked chairman Jerome Powell for months using a mix of half-truths, mischaracterizations and hyperbolic fantasies, such as a claim that the stock market would be 10,000 points higher if not for the Fed.

Driving the news: On Wednesday morning, Trump said on Twitter that the Fed "cannot 'mentally' keep up with the competition - other countries. At the G-7 in France, all of the other Leaders were giddy about how low their Interest Costs have gone. Germany is actually “getting paid” to borrow money - ZERO INTEREST PLUS! No Clue Fed!"

Go deeperArrowAug 29, 2019

Investors are betting on multiple Fed rate cuts by year-end

Data: CME Group; Chart: Andrew Witherspoon/Axios

Despite Fed chair Jay Powell's "hawkish" rate cut last month, expectations for more cuts from the Fed are growing, thanks in large part to President Trump and the trade war.

What's happening: Investors are now pricing in a 0% chance the Fed doesn't move at its next meeting in September and a nearly 50% likelihood of 3 rate cuts by year-end.

Go deeperArrowAug 7, 2019