'Powell walks into a minefield every attempt he makes': strategist

Kenneth Underwood
·Senior Producer
Updated

President Donald Trump continued his attack on the Federal Reserve Wednesday, complaining the central bank can’t keep up with the rest to the world.

The latest Twitter jab comes after a number of attacks on the central bank and on Fed Chair Jerome Powell, following his closely watched comments at the central bank’s annual meeting in Jackson Hole last week.

“Jay Powell walks into a minefield every attempt he makes,” Krishna Memani, Invesco’s vice chair of investment, told Yahoo Finance’s On the Move. “By Jackson Hole, in my opinion, he [Powell] has thrown in the towel. Effectively they are down the path of rate cutting for quite some time.”

Despite the expected rate cuts this year, Memani said not all of the voting members of the central bank may be on board.

“There is a significant amount of resistance from the regional Fed presidents... in all of these pockets, those Fed presidents think the economy is in good enough shape, and we don’t need anything, but I think if the Fed doesn’t cut, the dollar strengthens,” Memani said. “The strengthening of the dollar is probably something that is going to be very bad for the U.S. economy. So, they have no choice, I think despite the resistance from three or four presidents, we are probably going to see a cut in September, maybe in October and maybe one in December.”

U.S. Fed Chair Jerome Powell and Governor of the Bank of England Mark Carney chat during the three-day "Challenges for Monetary Policy" conference in Jackson Hole, Wyoming, U.S., August 23, 2019. REUTERS/Jonathan Crosby TPX IMAGES OF THE DAY
U.S. Fed Chair Jerome Powell and Governor of the Bank of England Mark Carney chat during the three-day "Challenges for Monetary Policy" conference in Jackson Hole, Wyoming, U.S., August 23, 2019. REUTERS/Jonathan Crosby TPX IMAGES OF THE DAY

Get used to the inverted yield curve

Despite positive economic data, there are warning signs that have many investors concerned that a recession is on the way.

The yield curve inverted further Wednesday with the 30-year Treasury yield (^TYX) hitting an all-time low, something Memani says investors need to get used to.

“The Fed made a policy mistake in 2018 by tightening too much. They are in the process of unwinding that, but that process will take some time,” Memani said. “For the yield curve to get its normal shape they’ll probably have to cut four or five times before the yield curve steepens up again. That’s not gonna happen, so get used to the idea that the curve is going to get inverted.”

Kenneth Underwood is a senior producer for Yahoo Finance. Follow him on Twitter @TheKennyU.

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.