— This is the script of CNBC's news report for China's CCTV on August 1, 2018, Wednesday.
The fed has increased interest rate in March and June since this year. In terms of the meeting this time, the Fed will announce their decision about interest rate on Wednesday. According to the estimate from the Fed Funds and Futures, the probability of increasing interest rate in this month is only 3%. So the common sense in the market is there will be no political change in this Federal Reserve Monetary Policy Conference, the Fed will remain inactive. However, most investors believe that the fed will increase interest rate in Sep and Dec this year, and the controversial point is that the criticism from US President Trump on the Fed increase interest rate. In the last month, 20th, July, Trump told CNBC that he is not satisfied about increasing interest rate. He thinks, except for the US, the major central banks including Europe Central Bank still maintain a loose monetary policy, resulting in the depreciation of the euro and the appreciation of the dollar and making the US at a disadvantage in international trade.
[Trump, U.S. President] "I put a very good man in the Fed, I dont necessarily agree with him because he's raising interest rates.
because you know, we go up, everytime he goes up, they want to raise rates again. I'm not happy about it. but at the same time, I'll be letting them do what they feel is the best."
Trump's interview immediately triggered financial market volatility, causing US stock market and dollar's exchange rate declined, at the same time, many insiders criticized on that, saying this statement is a "crossing border" behavior; president should not interfere with the independence of the fed.
In fact, the incidents that president interfered with the fed's decision in US history, like Nixon asked the Fed Chairman Burns to keep interest rate at a low level till the end of the election, resulting in severe stagnant inflation in the United States. Since then, the independence of the Fed has become increasingly enhanced. But currently, Trump also nominated three others to join the Fed's Open Market Committee, in addition to appointing Powell and Quarks as Fed chairman and the Fed's financial supervisor, respectively, and that is currently awaiting confirmation from the Senate. The policy attitudes of the above people are almost always regarded as mainstream. Therefore, Trump has almost no influence on the Fed's policies, just has rights to adjust those staff.
So it is possible for us to see Trump will criticize the Fed continuously, and the market will take action for that, however, it has a great possible that the Fed will continue to make policies based on its own path. Because there is no plan to hold a press conference after this meeting, so the market has limited space to understand the thoughts of Fed officials. And that means the statement that will be released after the meeting is very important. In the overnight, the 3 stock indexed buoyed, and treasury yield maintained stable. So it can be said that the market is waiting for the meeting statement, and any wording change in it will make the market confirm and adjust the expectation on the time and frequency of increasing rate. We will keep an eye on this issue.