Written by Michael S. Derby and Heard Schneider
New York (Reuters) -On Monday, US Federal Reserve officials are cautious about the repercussions of the last classification of credit classification of the US government and unstable market conditions while continuing to move in a very unconfirmed economic environment.
“We will put this decline in the same perspective that we do with all the information received: What are the effects of this regarding us by achieving our derived goals without commenting on what this classification might mean in the context of the political economy,” Vice President of Philip Jefferson said at a conference held by the Federal Reserve in Atlanta.
On Friday, MOODY classification agency reduced the US government’s credit rating one amid increasing concern about the deficit and interest costs that are still at an unsustainable pace. The last main classification agencies were to reduce the American sovereign rating of the highest level.
Although it is not an imminent issue for the Federal Reserve, the costs of borrowing in the high market over time are linked to the deterioration of the American financial situation that makes credit more expensive in general and creates control over economic activity. In turn, this becomes a consideration of how the Federal Reserve Bank set monetary policy and its expectations for the long -term economic activity.
“Reducing” will have effects on the cost of capital and a group of other things, and therefore it can have ripples through the economy. “With the flowing economy,” I think we will have to wait for three to six months to start knowing where this is stabilized, and I think this will be an important specified about people’s willingness and their witnesses to invest in the United States. “
While concerns about the financial situation of the government have been present for years, federal reserve officials regularly warned that long -term borrowing trends were on an insulting road, the huge continuous levels of spending, which joined the Republican budget plan now looking and that may add more debts, raises concerns about nearby insects.
At the same time, the Tram’s aggressive and risk commercial policy agenda, which targets most of the world with high customs tariffs in an attempt to restore more factory to the United States, shake confidence in the United States as a reliable investment place.
On Monday, stock markets were selling with the high revenues of bonds. President Donald Trump said he did not agree to the measures taken by the classification agency.
We are still attractive
Speaking at a conference held by the New York Mortgage Banking Association, New York Reserve Chairman John Williams acknowledged market issues, but he suggested that some concerns were exaggerated.
Williams said: “We have heard over the past few months, and there are some rumors or concerns about, well, do investors want to invest strongly” in the treasury and other dollar assets that are granted major changes in government policy and great levels of economic uncertainty.
He said that investors are “clearly” weighing future options. However, investors and “the United States” have seen a great place for investment, including the treasury and fixed income assets, so I think this narration still exists. “
In the emergence of his hometown, the head of the Minneapolis team, Neil Kacquary, said that in the long run, keeping the investor’s confidence is one of the main issues that will determine whether government borrowing rates are still managed.
“At the present time, there is a question mark raised about what is the competitive position of the United States for other advanced economies around the world,” said Kashkari. “Given all changes in politics and debt issues.
“There is more than a question mark more than it was a year or two,” he said, adding, “We do not know,” How will all this fade.
Anxiety about the future of official financial affairs in particular indicates the traditional role of the US government market as a world safe haven for investors. This role is challenged by the possibility markets will not be able to accommodate the huge supply from the treasury debts smoothly, as commercial policy can deter investors and raise the flow of dollars to the American markets.
“The topic of Sell-MARICA in today’s trading with American bonds, stocks and dollars, all of which are sharply indicating the MOODY classification in the American classification, that this is a formatting device for a basic transformation in the global investor preferences that come out of the Trump tariff and the broader geological trauma that is still in the process.”
In this current climate of extensive uncertainty and anxiety, “the fact that the American cabinet and the dollar do not gather now, accomplish and shave a small part of the cabinet’s charm.”
The effect of changing MOODY categories is still under progress and others do not see a major impact. “We expect a few consequences to reduce MOODY”.
Federal Reserve officials who spoke on Monday also continued to send the waiting signal and vision about expectations for monetary policy.
Williams said that the economy is in a good place with the interest rate policy “in a good position” to respond to what awaits us. Meanwhile, Postek said with his current expectations, it will now take longer to reduce inflation to 2 %, “I am largely inclined in one cut this year.”
(Participated in the reports of Michael S. Derby; edited by Andrew Katuhn, Paul Simao and Andrea Richie)
