Fed’s monetary policy report: The economy is improving, and the gradual rate hike is still the main issue

on Friday (July 13), the Fed disclosed a semi-annual monetary policy report submitted to Congress. The report is generally optimistic. The report said that the US economic growth was strong in the first half of this year, and the Fed is expected to continue to raise interest rates gradually . Due to the expected wording of the report, the US dollar and gold did not respond significantly.

  This is from Bao Weier second document since early February at the helm of the Fed, the Fed submitted to Congress. Powell is scheduled to answer questions about Congress next Tuesday and next Wednesday.

The 63-page report is in line with current expectations as detailed by the Fed at the policy meeting, that is, strong economic growth and low unemployment require a rate hike, but the lack of severe inflationary pressures means that it can maintain a gradual rate hike.Download the app Read this article for more in-depth coverage
  The 63-page report is in line with current expectations as detailed by the Fed at the policy meeting, that is, strong economic growth and low unemployment require a rate hike, but the lack of severe inflationary pressures means that it can maintain a gradual rate hike.

  The Fed said in the report that in the first half of this year, the overall economic activity of the United States seems to have grown steadily, and the economy continues to be supported by favorable consumer and business confidence. In the first half of the year, household wealth increased, foreign economic growth was stable, and domestic financial conditions were loose.

  Therefore, the Fed expects that “interest rates will gradually increase” is appropriate. The Fed is currently striving to continue to promote economic expansion. This round of expansion is the second longest economic expansion in history.

  The Fed said that the Trump administration’s tax cuts may lead to a rebound in consumer spending from a downturn and may provide modest boosts for this year’s economic growth.

  Powell mentioned in an interview on Thursday that the US economy is relatively optimistic. He said that he believes that the US economy is still in a “very good position” and that recent government tax and spending plans may boost GDP growth within three years.

  Since the tightening cycle began in December 2015, the Fed has raised interest rates seven times, and recently raised the benchmark interest rate by another 25 percentage points in mid-June. The Fed is expected to raise interest rates twice before the end of the year.

  In addition, Fed policy makers once again stated in the report that wage growth has been weaker than expected given the current unemployment rate of 4%. If labor demand is still strong, more workers in the golden age will enter the labor market. Wage growth may be under pressure due to weak productivity, and the labor market is still likely to be further slack.

  Focus on the impact of trade protectionism

  The report mentions the Trump administration’s trade protectionist policy. Although there was no discussion, the report stated that “although there is not a lot of pressure, uncertainty is a concern of financial markets.”

  Many policymakers expressed concern about trade disputes with major allies, and Powell said on Thursday that high tariffs on products and services could damage the economy.

  Earlier announced US July University of Michigan consumer confidence index initial value of 97.1, less than expected 98, due to consumer concerns about trade protectionism. After the data was released, the US dollar index fell in a short-term.

  Curtin, head of consumer research at the University of Michigan, said that consumer confidence declined in early July, but it was almost the same as the average of the previous 12 months. The current decline in consumer confidence is due to growing concerns about the negative impact of tariffs on the domestic economy. They are worried about the future economic growth rate and rising inflation.

  After the Fed disclosed the report, there was no significant fluctuation in the market. Mainly because the tone and content of the report are basically consistent with the contents of the previous Fed policy meeting.

  After the disclosure of the report, the US dollar and gold did not respond significantly. As of press time, the US dollar index was 94.7902, a decrease of 0.02%; spot gold is now reported at 1242.46 US dollars / ounce, an increase of 0.4%.