FED Chairman Jerome “Jay” Powell & FOMC raised interest rates by .25% in an attempt to cool this sizzling economy. With the fate of the economy in his hands, Powell wields interest rates and monetary policy like Gandalf from “Lord of the Rings”, warning inflation that it shall not pass… 2%. It’s a new era and Powell got the Power!
In the not so distant past, disaster struck. Pensions were empty and jobs were hard to come by. It was not uncommon to drive through neighborhoods and see two to three “foreclosure” signs peppered along the street rather than “for sale”signs.
If you were not impacted you likely knew someone who was. It hit close to home for many of us. What am I referring to? You guessed it…The ugly recession.
Here enters the Fed to save the day…
You may be asking, “who is the Fed and why should I care..?” The Fed(Federal Reserve) is the central bank of the United States. Congress created the FED to promote the effective operation of a healthy U.S. economy and, more generally, to work on behalf of the public interest.
They basically control the environment for how money will be made. This means that a drop of his words can impact your pockets negatively or positively.
Whether you are a homeowner or buying a home… Powell’s influence can help or hurt you at the bank.
Thinking about retirement? Your 401k investments and pensions could feel his love or his wrath. His reach can span all the way down to the cost of groceries at the store. This is the power of FED and since Powell is at the helm ,he has it all.
In retrospect, it’s been 10 years since the Financial crisis rocked the US economy. Many Americans lost their jobs, homes, lives, and hopes & dreams. The FED did the economy a solid to get it back on it’s feet by dropping the interest rates and keeping it super low to recover.
Today the economy is boomin! We are in a 9-year bull market. Unemployment is low, too many jobs to be filled, wages are growing, and inflation is low and stable.
Consumer spending has risen due to job gains and wage gains. Investment by businesses and emerging markets are on the rise. Powell projects the strength of this economy to continue into the near future. Thanks for the heads up!
However, to prevent this hot economy from overheating the FEDs have been gradually increasing interest rates to simmer it down without breaking it.
Today Powell’s goal is to use his power to foster a strong economy for all Americans–one that provides a lot of jobs and low & stable inflation through monetary policy and regulation.
President Trump is not happy about FED decision to raise rates but Powell doesn’t care. Powell has a very important job in keeping the US economy healthy and they don’t make decisions based on politics but instead on data.
Trump is concerned with the FED derailing the strength of the US economy and increasing the cost of doing business, which could hurt his objectives.
The US economy has strengthened, and Powell forecasts that strength to continue.
Powell’s clique, The Federal Market Open Committee(FMOC,) includes all 7 board of Governers FED members along with the presidents of the reserve banks.
This committee meets regularly to assess the conditions and outlook of the economy and makes decisions accordingly.
When they meet, believe me, Wallstreet has their ears glued to the streets waiting for the outcome. This most recent meeting lead Wall St. to sell off in the markets! These meetings normally result in strong sell offs or run ups in the stock market.
A good rule of thumb for swing traders is to close trades and take profits (also known as going flat) before the meeting because no one knows the direction of the aftermath, we just know that it will be strong.
At that moment the Fed goal is to keep Inflation near 2%. They believe the best way to sustain the economies strength is to raise interest rates by .25% intervals.
For now we will have to sit back and watch how the whole thing plays out but as a new or seasoned trader it is important to keep our eye on these moves.
Stay on the lookout for when the FEDS meet and stay ready to make your play. Wall St. already have the next interest rate hike for FOMC meeting December 18 baked into the markets.
The Market can swing either way depending on the direction of the head or tail winds. But as an option trader there is always money to be made.
With that, happy trading Wallstreet Jackboyz and Girlz!