Jul 16, 2019

Central banks are cutting rates around the world

Photo: Biddiboo/Getty Images

With the Fed universally expected to cut U.S. interest rates this month, central banks around the globe are doing the same, and an increasing number of policymakers aren't even waiting for Powell to make the announcement.

Why it matters: The central banks represent 3 of the world's largest emerging market countries and their actions send a clear signal that even with global debt rising to new highs, especially in EM, policymakers are prioritizing easy money and stimulus.

  • The expected cuts follow lower rates in India and a host of other emerging countries that have cut rates in recent weeks.
  • Australia and New Zealand also made recent rate cuts, and markets already have priced in lower rates from the ECB, meaning the overwhelming majority of the world has or is expected to cut rates soon.

What's happening: Analysts expect the South African Reserve Bank, Bank of Korea and Bank Indonesia to lower rates at their respective policy meetings on Thursday.

Why you'll hear about this again: The Fed's rate cuts were expected to help weaken the dollar, which President Trump and U.S. businesses have complained about since 2018. However, with central banks around the globe following suit, the dollar could continue its outperformance, especially as uncertainty from Brexit, Japan and the U.S.-China trade war weigh on sentiment and boost the dollar's safe-haven appeal.

Go deeper: The case for a Fed rate cut

Go deeper

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.

Go deeperArrowAug 6, 2019

Jay Powell's constraints

Illustration: Sarah Grillo/Axios

Jay Powell did his best impression this week of a Fed chair making his own data-driven decisions about where he should set short-term interest rates. The reality, however, is that the markets and the president are giving him very little choice.

Driving the news: Powell cut interest rates on Wednesday — the first time the Fed has done so in over a decade. In doing so, he effectively fulfilled a prophecy that the fixed-income markets (and even the stock market) had been making for all of 2019. They saw the rate cut coming long before the Fed was willing to admit it, and they were right all along.

Go deeperArrowAug 4, 2019

Jerome Powell's rate cut could send the dollar "significantly higher"

Data: Investing.com; Chart: Axios Visuals

The dollar rose to its highest level in more than 2 years after the Federal Reserve's rate cut Wednesday, as currency markets got a reality check about the growth prospects of the greenback against the world's other currencies.

What's happening: Strategists have been expecting the dollar to weaken for the past 2 years, yet it has remained strong against global peers like the euro, pound and yuan. After Jerome Powell's Wednesday press conference, the dollar looks poised to rise to new highs.

Go deeperArrowAug 1, 2019