— This is the script of CNBC's news report for China's CCTV on September 27, 2018, Thursday.
The new interest rates decision moved the market into volatility, as we mentioned in the last report that this round of increasing interest rates is in line with what the market expected before, but what draws market's attention is if "monetary policy is still loose" this expression has changed. Before that, many people think if the fed deletes "monetary policy is still loose" this rhetoric marks this round of increasing interest rates is nearly to close, we can see from the DJI that at U.S. time 2pm, the market found this rhetoric has been deleted when this statement announced, and that is the 1st time in 2015; thus, an intraday high was seen. However, the U.S. stocks dived at closing session, that is because Powell explained about that rhetoric at press conference.
Removing "loose" in the announcement signals monetary policy is going on as expected, does not mean changing interest rates, he said, what's more, Powell believes the monetary policy is still loose; interest rates are lower than moderate level some officials expected. And if inflation hikes accidently, that may drive the Fed take action quickly.
What Powell said in press conference made the market think the Fed holds a harder stance than expectation to increasing interest rates in the future, causing DJI plummeted more than 100 points at closing session.
Additionally, S&P500 eased 0.33% and NASDAQ weighed on tech stocks had a decline of 0.21%.
USD jumped over 0.2% to an intraday high while gold eased more than $10 when Powell delivered speech.
Axel Merk
President and Chief Investment Officer at Merk Investments
I think the risk of overheating the economy is quite significant. They do have to continue hiking rates. My own take is, they'll hike more than its currently priced in to the market. Sure you can read that selloff in the market as some others disagreeing with it but I think that's a little bit reading too much into it， because the rate hike expectations did not change much in the aftermath of the Fed announcement.
Meanwhile, this increasing rates decision also made U.S. president Trump unhappy, earlier this year, Trump broke the tradition that president never interfere with the Fed and has criticized the Fed for increasing interest rates many times.
In an exclusive interview with CNBC, he said, U.S. economy is growing, while the Fed increases interest rate is a headwind to the strong improvement every time, and he is not happy about that. After this round of increasing rates, Trump refuted about that decision publicly, and said he supports low interest rates.
Donald Trump
I'm not happy about that, I'd rather pay down debt, what do other things, create more jobs, so about the fact that they seem like to infrease interest rates, we can do other things with the money.
Powell made response to the pressure from the White House, saying the Fed just focus on its own work and doesn't think about political factors, considering his hawk stance, what we can foresee is the U.S. is still on increasing interest rate trajectory.