Three and a half trillion dollars.
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The period after any move to tighten monetary policy is characterized by sell-offs in assets of the given nation, meaning the long-overdue Fed hike is likely to cause a tumble in the US dollar’s value. “As long as China doesn’t continue to aggressively devalue the Chinese yuan, we will see it in the next six months and the US dollar will be stronger”, said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore, referring to when the Fed might start raising interest rates.
Gold prices were mostly flat today as investors were idle ahead of tomorrow’s release of the Federal Open Market Committee (FOMC) minutes. Economists define interest as the “cost of money”.
Prices have barely risen over the past year and even excluding food and energy, prices are only up 1.8%. However, data suggests that the economy is growing at a much slower rate.
The Bangko Sentral ng Pilipinas thinks the country is ready. “We are still using this method to drive growth“, he said. “Those preemptive measures were designed in anticipation of the US Fed lift-off”.
One thing both agree on as they’re predicting events they don’t want, is that the world is a bit bonkers.
That decline coincided with futures traders reducing the probability that the Fed will raise rates in September. While the Fed is expected to raise its benchmark for short-term interest rates before the end of the year, it has not indicated if it will do so during its September or December meeting.
In a briefing, Ayala Land chief finance officer Jaime Ysmael said the company had been refinancing its liabilities to shift from floating-rate toward fixed-rate loans, as well as lengthening their maturity. A labor force participation rate that remained a relatively low 62.6% in July and evidence that a large part of the improvement in payrolls was due to part-time jobs rather than full-time ones point to continued slack in the workforce. Now there is even more uncertainty. It owed creditors P123 billion as of March 2015. “Yields in the two-year sector are directly affected by policy rates, so there is more upside than downside”.
Gold was trapped in narrow ranges on Tuesday, struggling to move higher as investors looked to a near-term increase in US interest rates in the face of mostly firm economic signals. “History shows that gold prices…generally rise, though sometimes with a lag, after the first rate hike”, the bank said.
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On the flipside, a fresh headwind is the strong dollar. A low interest rate environment would also give less potential room for monetary policy to stimulate economic growth through policy rate changes.
