Tag Archives: Federal Reserve

On his blog, Stephen Williamson discusses the Fed’s plan to maintain a much larger balance sheet in the future than before the crisis. He is not convinced that this plan is a good one. But what’s the harm in a large Fed balance sheet? The larger the balance sheet, the lower is the quantity of Treasury securities in financial markets, and the higher is reserves. Treasuries are highly liquid, widely-traded securities that play a key role in overnight repo markets. Reserves are highly liquid...

Swiss Franc The Euro has fallen by 0.25% at 1.1367 EUR/CHF and USD/CHF, February 13(see more posts on EUR/CHF and USD/CHF, ) Source: markets.ft.com - Click to enlarge FX Rates The Federal Reserve has long been clear on the sequence of events as it innovated the playbook during the Great Financial Crisis. There would be a considerable period between when the Fed would finish its credit easing operations that...

The January employment report was mixed.  It is unlikely to have a material impact on expectations for Fed policy.  However, it does suggest the downside risks may not materialize. The US economy grew 304k jobs, well above expectation.  It is marred by a 70k net downward revision of the past two months, and notably a 90k cut in December’s estimate, which brings it to 222k (from 312k).  The participation rate edged...

Eurozone Last week the focus was on Europe. Prospects of a delay in Brexit helped extend sterling’s gains to 11-week highs. Disappointing flash PMI for the eurozone and a dovish Draghi pushed the euro below $1.13 for the first time since mid-December. Speculation that the Reserve Bank of Australia would be forced to cut interest rates saw the Australian dollar punch through $0.7100. For its part, the yen was...

“The sky is falling. The sky is falling,” they cried, as equities plunged in December.  It is signaling a recession, we were told. Instead, global equities have begun the year with a strong advance. The S&P 500 gapped higher ahead of the weekend, extending this year’s rally to about 14%. It has now retraced more than 50% of the decline, not from the December high but from the record high in late September. It has...

How do business cycles end? In the US, conventional wisdom is that they are murdered by the Federal Reserve. It is too slow to raise rates and then goes too quickly. This view is espoused by numerous well-respected economists and policymakers. President Trump’s criticism of the Federal Reserve is anchored by such views. America’s ambivalence toward a central bank is around 200-year old. It was the Panic of 1893 that...

The secret of health for both mind and body is not to mourn for the past, nor to worry about the future, but to live in the present moment wisely and earnestly. Buddha Review It’s that time of year again, time to cast the runes, consult the iChing, shake the Magic Eight Ball and read the tea leaves. What will happen in 2019? Will it be as bad as 2018 when positive returns were hard to come by, as rare as affordable...

The S&P 500 fell more than 12% in a few weeks. The 10-year Treasury yield fell nearly 40 bp. There were cries that the sky was falling. A recession is imminent, we are warned by prognosticators. The Fed went ahead and raised interest rates on March 21, 2018, and the S&P 500 proceeded to gap lower the next day and continued to sell-off the following day. Investors did not like the unanimous decision. Yet far from...

The $1.1475-$1.1550 is an important area for the euro. Many bulls see a rounded bottom being carved and a break above it would be embraced as a confirmation. The lower-end corresponds to the 100-day moving average. Such a bottom pattern, if confirmed, would project toward $1.1800 the high in H2 18. On the downside, the low from H2 18 was near $1.1200. This is just above a key (61.8%) retracement of the January...

People do not just disagree on what should and will happen, but they disagree on what has happened. As William Faulkner instructed: “The past is not dead. Actually, it’s not even past. This is clear in the narratives about the sharp drop in equity markets. It seems that the most common explanation places the onus on the Federal Reserve. Fed Chair Powell’s was seemingly hawkishness in early October (during a time when...