While the European Central Bank and BOJ have continued easing – Japan taking rates negative for the first time in their history, and Europe pushing rates further into negative territory – the Federal Reserve’s apparent change of heart gives investors the impression that the gap between policies may be closing.
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The Fed made minor, but important, adjustments to its economic forecast at its March meeting, Bullard said in a speech to the New York Association for Business Economics.
Bullard replied, “I have been very interested in this issue of a global inflation factor, so there’s some global inflation factor and it’s moving around and evidently it’s in a down cycle right now, and then we’re trying to make policy while this big thing is sort of pushing all inflation rates down”.
Bullard said he’s getting “increasingly concerned” about giving forward guidance through projections of how fast interest rates will rise, also referred to as the dot plot. “The continuation of a “wait and see” monetary response is appropriate to ensure economic growth continues, labour markets strengthen further, wages begin to increase more, and all of this supports an eventual increase in now low inflation right back up to our 2% objective”.
Further tightening by the Fed is also considered bullish for the dollar, as foreign investors pile into the greenback in order to capitalize on more favorable rates. The odds of a single 25-basis-point move by December were at 71 percent, climbing from 68 per cent at the end of last week.
That view appears to be more aggressive than the Fed’s overall posture last week. “I don’t have any problem with overshooting”.
MSCI’s index of world shares, down 0.57 percent on the session, was off 1.4 percent for the week. If you’re at 2.1 percent, you’re missing by one tenth. There’s no problem with that. Asian stock markets fell for a second day Thursday after declines in prices of oil…
The Committee did not have to move in March to remain time-consistent. A sharp drop in crude oil prices took a toll on commodity-linked currencies like the Australian and Canadian dollars.
James Bullard, president of the Federal Reserve Bank of St. Louis, joined Tom Keene and Michael McKee on Bloomberg TV/Radio Wednesday.
In addition to looking at the variables that contribute to the SEP, he included three other variables that may influence FOMC decision-making above and beyond expected developments of the real economy and inflation. Note that the US’ trade deficit contrasts sharply with the surpluses seen in regions like the euro area.
Derek Holt, vice president of economics at Scotiabank agrees. The rate continues to linger around 0.37%.
Does Yellen Have To Sing? Following this logic, the first chance of a rate hike would be in June. “It’s really hurting us that we’ve got this kind of alternate meeting thing”. You should have press conferences at every meeting.
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It was a handsome narrative: the FOMC last week clearly reflected a dovish tone, implying two rate hikes in 2016, while modestly upgrading the state of the economy.
