US director of the Federal Reserve signals monetary policy easing due to falling inflation - positive reaction from the markets

US director of the Federal Reserve signals monetary policy easing due to falling inflation - positive reaction from the markets

According to a report from www.faz.net, there are indications that the US Federal Reserve may cut interest rates. Christopher Waller, director of the Fed, recently said that there would be good reasons for monetary easing if inflation continues to decline. These statements are generating positive reactions in the markets, both in the USA and in Europe.

The prospect of a rate cut in the US has an immediate impact on the markets. The yield on the two-year government bond promptly fell, responding to market expectations of loose monetary policy. A positive trend was also observed on Wall Street, as the Dow Jones Industrial Index rose by 0.9 percent. In Europe, the leading German indices also rose, partly due to lower inflation figures and the hope of interest rate cuts triggered by Waller's statements.

These positive market reactions indicate that investors and market participants are taking Waller's statements seriously and are already factoring them into their forecasts. A reduction in interest rates could lead to lower borrowing costs and an overall increase in economic activity.

Overall, Christopher Waller's statements seem to be boosting the stock exchanges and the financial market. However, it remains to be seen how the US Federal Reserve will react in concrete terms and to what extent the hopes raised will actually come true.

The hope on the stock markets is that the interest rate peak has been reached and key interest rates will soon fall again - at least in the USA. There are now the first official signals that market participants' hopes are not entirely unfounded. On Tuesday evening, Christopher Waller, director of the US Federal Reserve, said there was a good economic case for monetary easing if inflation continues to decline for another few months. After ten interest rate increases in a row, the Fed decided not to raise the key interest rate for the first time in mid-June and only turned the interest rate screw again in July. Since then, the key interest rate in the world's largest economy has been 5.5 percent, one percentage point higher than in the euro zone. The US Federal Reserve's next monetary policy meeting is scheduled for mid-December. Waller left it open for good reason when exactly the Fed would lower interest rates again. “I don’t know how long that might be – three months, four months, five months.” But he is increasingly confident that monetary policy is currently well positioned to slow the economy and bring inflation back to 2 percent. The market reaction was prompt: the yield on the two-year government bond, which reacts particularly sensitively to possible changes in monetary policy, fell to 4.78 percent. In addition, the yield gap to the German two-year federal bond narrowed.
Wall Street also reacted positively to the Fed director's comments. The Dow Jones Industrial Index closed 0.9 percent higher at 35,417 points on Tuesday. Waller's loud reflections on American interest rate policy also gave a boost to the European stock markets. Ahead of the consumer price data from Germany early on Wednesday afternoon, the German leading index rose by 1 percent to 16,162 points in the afternoon, also under the impression of lower inflation in Germany. This means it reached its highest level since the beginning of August. The average value index M-Dax rose by 1.1 percent to 26,294 points. The Eurozone index Euro Stoxx 50 gained 0.7 percent to 4.77 points. The euro also benefited: it was worth just under $1.10.