Fed’s half-hearted rate cut, Sino-US talks in Sept, Iran’s Zarif sanctioned, UK preps for no-deal: Your Thursday briefing

The US Federal Reserve slashed interest rates by 25 basis point, as analysts had been expecting on Wednesday but the market reaction worldwide went into reverse upon hearing Chairman Powell’s remarks at the press conference after the decision.

Powell knocks out markets in contrepied remarks

Powell, sounding rather unenthusiastic about the the cut he himself voted for along with seven other members as opposed two dissenting voices stated that the move was not the start of a lengthy cycle to prop up the economy facing external threats. But shortly after he told the media, “I didn’t say it’s just one rate cut.” In its FOMC statement, the Fed made clear that the US labor market and economic activity remained strong however, reasoned the cut on “uncertainties about the outlook.” The confusion Powell generated reverberated across the markets as the dollar rose, gold fell, stocks went up and came down again.

Trump fumes over the language

Unsurprisingly enough, President Trump was furious with Powell and perhaps justifiably so given the opposite effect the cut created. He said what the market wanted to hear was that “this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, the European Union and other countries around the world.”

“As usual, Powell let us down, but at least he is ending quantitative tightening, which shouldn’t have started in the first place — no inflation. We are winning anyway, but I am certainly not getting much help from the Federal Reserve,” President complained, in his usual combative and whining style.

China goes own way

Elsewhere in China, the central bank kept its main policy rates on hold on Thursday, choosing to go its own way in the wake of the Fed cut. However, Chinese officials as well as market-watchers do expect some easing in the coming period to support the economy hurt by the trade war with China.

Trade talks in September

Speaking of the trade war, the White House described a fruitless two-day round of face-to-face negotiations between American and Chinese delegations as “constructive.” The WH spokeswoman Stephanie Grisham said the administration expected “negotiations on an enforceable trade deal to continue in Washington, in early September.”

US imposes sanctions on Iran’s Zarif

As with Iran, the US Department of the Treasury imposed sanctions on Iran’s Foreign Minister Mohammad Javad Zarif, upping the already high tensions between the two countries particularly in the oil-rich Middle Eastern arena.

BoJo team gets ready for no-deal

In Britain, the new finance minister Sajid Javid said the government is taking more measures in preparation for a no-deal Brexit by allocating an extra 2.1 billion pounds to ensure the supply of medicines, help citizens who live abroad and improve infrastructure.