Monday, 15 October, 2018

Markets cautious ahead of Fed rate decision

FOMC Scenario Table Fed announces interest rate decision
Kelvin Reese | 30 September, 2018, 05:15

David Kohl, the chief currency economist at Julius Baer said the bank in the coming year expects Fed to continue raising rates, despite the escalation in trade conflict.

"Economic activity has been rising at a strong rate".

Wednesday's rate hike was the third this year and the seventh in the last eight quarters.

Yet Some investors see limited need for the Fed to keep raising rates as inflation shows no signs of picking up, despite continued economic growth and the jobless rate near a two-decade low.

And those with adjustable rate mortgages expecting a rate reset this year will see the rate jump to 5.25 percent or more. "And so they're nearly going to pay any price to have a vehicle".

He also said the Fed didn't have any precise understanding of when policy would be neutral, suggesting Powell himself may not be attaching major importance to the Fed's median estimate of the neutral rate of 2.9 per cent. Another increase is expected later this year, with more to come in 2019.

Economists have cited a raft of possible causes for the slow wage growth.

At a news conference earlier this year, Powell called the issue "a bit of a puzzle".

Ever since the Fed began its streak of rate hikes in late 2015, credit cards are the consumer product that have been impacted the most, Barrington said.

Given that the most recently quarterly GDP growth experienced in the U.S. was 4.2 per cent, effectively they are saying that the growth rate that Trump claimed in his address to the United Nations this week made the USA economy the "envy of the world" and the "fastest-growing economy in the world" (it isn't) is temporary and unsustainable and is going to fall away quite sharply.

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Leftist Bolivian President Evo Morales bluntly declared that "the United States does not care about human rights or justice". It was only the third time in United Nations history that a USA president chaired a Security Council meeting.

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And Trump's claim comes amid an escalation of tensions between Washington and Beijing, spurred by their growing trade dispute. China retaliated with equal tariffs on $ 34 billion in USA goods, including on soybeans, wheat, corn, sorghum and beef.

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But it's another if Thibodeau really is trying to hold onto Butler and ignoring what his boss has told him to do. Only time will tell whether or not the Heat are able to make the most attractive offer and get the deal one.

In addition to its formal statement, the Fed released the economic projections of the members of its Federal Open Markets Committee. There are also troubles beyond USA borders.

Mr Powell said the United States economy has successfully absorbed the increases so far.

Add to that the uncertainty surrounding the deepening trade dispute between the USA and China, leading to tariffs leveled on hundreds of billions of dollars' worth of goods.

Whatever the outcome of Fed policy, Powell dismissed President Donald Trump's criticism of previous rate hikes. "It washes up on our shores, as well". This figure, the so-called r*, is the interest rate that takes hold when the economy is growing at its potential with inflation stable at 2% and unemployment at its natural rate.

In my opinion, removing "accommodation" means there is no preset path of rate hikes and every Fed meeting moving forward becomes a toss-up. Now that money is flowing, and now that inflation is ticking up, most analysts say it's about time to ease up off that gas pedal.

Stocks stayed in positive territory most of the day, but tumbled into the red in the final minutes following Powell's news conference, a sudden change in direction that is not unusual on the day of Fed decisions.

The point is that that the Fed wants to get to neutral.

There were no dissents in the Fed's policy statement. "Hindsight is 20/20, but they have to make policy today". Probably not much in the short term. "I'd rather pay down debt or do other things, create more jobs, so I'm anxious about the fact that they seem to like raising interest rates". That causes those bonds' prices to drop, and the dynamic has caused numerous most popular bond funds to lose money this year. But those funds will also be earning more in interest thanks to the higher rates and should be able to offset those losses in the long run, as long as rates rise gradually.

"Rising rates are going to be good news for savers and bad news for borrowers", Bankrate's McBride says.

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