BY NOMI PRINS
In the Fed’s July report to Congress, Jerome Powell unleashed what was likely the most important statement to the Trump administration. Powell said that interest rate hikes, which had been forecast to include two more hikes this year, would be executed at a gradual pace ‘for now.’
Those two coded words are very important.
The biggest banks on Wall Street will likely view those two words alone to mean that the Fed is still cautious about the economy and the financial markets. What they know is that the Fed is signaling that it reserves the right to return to its full toolkit of monetary policy options.
The Fed could apply one of three options: to further its gradual quantitative tightening (QT) program, to remain neutral, or to launch another round of quantitative easing.