Second Fed Voice Sounds Cautious Note On Global Growth, Pace Of Interest Rate Increases

The Fed is sounding less aggressive about raising interest rates in 2019. Today, Friday, November 16, Federal Reserve Vice Chairman Richard Clarida said that the Federal Reserve has to factor the possibility that the global economy is slowing into its decision on how many times to raise interest rates in 2019.

Clarida’s comments echo those of Federal Reserve chair Jerome Powell in a speech on Wednesday that also flagged the possibility of slower global economic growth.

Today the yield on the 10-year U.S. Treasury is down 4 basis points to 3.07%. The yield on the 2-year Treasury was 2.8%.

The U.S. dollar also fell on the comments with the Dollar Spot Index (DXY) dropping 0.5%.

The odds of an interest rate increase at the Fed’s December 19 meeting remain high at 68.9%, according to the CME FedWatch tool. But that’s down from odds of 72.3% yesterday and odds of 79.5% on October 11.

A drop in the dollar on expectations for a slower than projected schedule of interest rate increases would boost stock prices across the board and most especially for emerging market stocks (as long as the projected slowdown in global economic growth isn’t too severe.)

Today, November 16, the iShares MSCI Emerging Markets ETF (EEM) climbed 0.27%. The Standard & Poor’s 500 was up 0.22% and the Dow Jones Industrial Average closed ahead 0.49%. The NASDAQ Composite was off 0.15%. The Russell 2000 small cap index gained 0.22%.

Oil add a third day onto its recent rally with U.S. benchmark West Texas Intermediate closing up 0.66% at $56.83 a barrel. International benchmark Brent crude gained 0.56% to $66.99 a barrel,