Post Tagged with: "Federal Reserve"

The Fed will continue to raises rates, even amid uneven economic data

The Fed will continue to raises rates, even amid uneven economic data

Today the Federal Reserve raised the base USFed Funds interest rate a quarter percentage point to the range between 0.75% and 1.00%. There was only one dissent from Minneapolis Fed President Neel Kashkari. And because this move was anticipated by everyone, the real question now goes to what comes next.

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The coming Fed hike and the problems with its communication

Now the market are putting the odds of a hike next week at 96%, a virtual certainty. But the very fact that Yellen and her compatriots commented on the likelihood of a rate hike at a specific meeting has been the subject of consternation.

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Financial conditions have eased enough to get the Fed to hike in March

For years, many Fed watchers have claimed that the Federal Reserve has a secret third mandate beyond inflation and full employment. And this past February 21st, for the first time a Fed President said directly that, indeed, the Fed does have a third mandate: financial stability.

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The yield curve is still flatter than at anytime since the last recession

The yield curve is still flatter than at anytime since the last recession

If you look at the difference in yield between 2 and 10-year treasuries, the numbers in the last year are the lowest since 2008, when the US economy was in a recession.

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Three charts which show the Fed is tightening aggressively

Three charts which show the Fed is tightening aggressively

I have three charts for you which demonstrate that the US Federal Reserve is tightening monetary policy.

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Some incomplete comments on the current US economic environment

Some incomplete comments on the current US economic environment

This is going to be a quick hit post to get some thoughts down on paper because a few threads are coalescing for me that I want to give some coherence to. The essence of the threads revolves around the tension at the Fed between normalizing policy and the ability of the economy to withstand it. My view has been upbeat about the US economy – and that’s been without a trace of recession worry for the last several months. But there are some negative factors coming together that give me pause. And it begins with housing.

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The Trump Rally is over

The Trump Rally is over

A lot of people are saying the rally in shares since early November that took the Dow over 20,000 is exhausted. That may be the case. However, short of a 1987-style crash, we’re going to have see a recession before shares retreat dramatically from present levels. And the data don’t support the thesis that a recession is coming anytime soon. Instead, we are now seeing a re-acceleration of growth from a mid-cycle slowdown. And that is supportive of shares.

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Monetary offset, the strong dollar and China’s currency manipulation

Monetary offset, the strong dollar and China’s currency manipulation

With the Fed talking up the likelihood of three rate hikes in 2017 while other central banks are still in easing mode, the potential for a US dollar rout and a concomitant closing of the US trade deficit is pretty low. Therefore, given Donald Trump’s hawkish rhetoric on China, the potential that the US government labels China a currency manipulator for the first time since 1994 is high.

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In defense of the Fed’s rate hike campaign

Thought I have been on recession watch for nearly all of 2016, I want to write this post as a reminder that there are upside scenarios for the US and global economy. The Federal Reserve looked forward and felt it could tighten into a slowing economy and rising dollar without the economy falling into recession. And so far, they have proved correct. Thinking of this business cycle in comparison to the last two, let me outline my thinking on what are upside scenarios here.

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Upbeat macro thoughts as Fed’s Jackson Hole Symposium begins

Upbeat macro thoughts as Fed’s Jackson Hole Symposium begins

I haven’t posted much recently – mostly because there haven’t been many developments economically that change my macro view. We still live in a slow growth world, where recession is not the base case n the US, the UK, or the eurozone. And none of the data we have seen in the last few weeks has changed that path.

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Re-calibrating our thinking about Brexit after MPC rate cut

Re-calibrating our thinking about Brexit after MPC rate cut

The Bank of England has cut interest rates and started a quantitative easing program that includes both government and corporate bonds. This approach was enough to send the pound Sterling down to $1.31 and 10-year gilt rates to a record low of 0.677%. While I reiterate my previous bullish views on Anglo-Saxon long rates, US dollar strength and on the UK […]

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Multiple Fed officials now signalling rate hikes

Perhaps we are misreading the Fed’s intentions going forward because multiple Fed officials are signaling the Fed’s intention to raise interest rates multiple times in 2016 and 2017. And while rate hikes are usually considered tightening, to the degree financial market volatility and energy sector debt stress have diminished, rate hikes could be a wash given the interest income they add to the US private sector.

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