I cannot think of many organizations or people that can convey a 180° pivot by the use of a single word, except for the Federal Reserve and its chairman, Jerome Powell. When we looked at the CME’s FedWatch tool yesterday it predicted less than a 20% probability that the Federal Reserve would announce and implement a rate cut today. In fact, that is exactly what happened.
The statement made, as with all Fed statements spoken by Chairman Jerome Powell during the press conference crucial is the ability to read between the lines or understand the nuances of how a single word can indicate a distinct change in direction or action in regards to their monetary policy.
Case in point: Chairman Powell used the word “patience” when asked about future actions and policies of the Federal Reserve. This single word would underscore the concept meticulously, gathering data needed for analysis, and using the findings from this data is a roadmap for future Fed action. Chairman Powell has used that word on numerous occasions to delicately avoid a direct answer to the question being asked.
Today Chairman Powell used the word “uncertainty” instead of “patience”. This change of one single word when referencing the overall demeanor that the Federal Reserve is facing and their framework to solve any issues arising is extremely significant. The Federal Reserve has said that they would take the necessary steps to continue the “economic expansion”, they have also subtly spoke about the unknown effects that the current trade war between the United States and China will have.
However, today’s use of ‘uncertainty’ especially when coming from Chairman Powell is one of the few words, we don’t want to hear our fed leader.
Wishing you as always, good trading,