Tag Archives: Interest rates

The Federal Reserve has indicated that it will now pause – for a second time, supposedly. Remember the first: after raising its benchmark rates apparatus in December while still talking about an inflationary growth acceleration requiring even more hikes throughout 2019, in a matter of weeks that was transformed into a temporary suspension of them. Expecting the easy disappearance of “transitory” factors, that Fed pause was to be followed by the second half rebound...

Is the recession scare over? Can we all come out from under our desks now? The market based economic indicators I follow have improved since my last update two months ago. The 10 year Treasury rate has moved 40 basis points off its low. Real interest rates have moved up as well but not quite as much. The difference is reflected in slightly higher inflation expectations. The yield curve has also steepened as the 10 year Treasury yield rose faster than the 2 year. This...

They remain just as confused as Richard Fisher once was. Back in ’13 while QE3 was still relatively young and QE4 (yes, there were four) practically brand new, the former President of the Dallas Fed worried all those bank reserves had amounted to nothing more than a monetary head fake. In 2011, Ben Bernanke had admitted basically the same thing. But who was falling for it? The stock market, sure. Investors on Wall Street are still betting as if it will work any day...

Federal Reserve policymakers appear to have grown more confident in their more optimistic assessment of the domestic situation. Since cutting the benchmark federal funds range by 25 bps on July 31, in speeches and in other ways Chairman Jay Powell and his group have taken on a more “hawkish” tilt. This isn’t all the way back to last year’s rate hikes, still a pronounced difference from a few months ago. The common forecast relies entirely on the subjective...

What if Germany’s economy falls into recession? Unlike, say, Argentina, you can’t so easily dismiss German struggles as an exclusive product of German factors. One of the most orderly and efficient systems in Europe and all the world, when Germany begins to struggle it raises immediate questions about everywhere else. This was the scenario increasingly considered over the second half of 2018 and the first few months of 2019; whether or not recession. Over the past...

Our hypothesis that the market had reached peak dovishness toward the Fed remains intact after the employment data. Job growth was the strongest since January. The participation rate and the unemployment rate ticked up. Average hourly earnings edged 0.2%  higher, and, with revisions, maintained a 3.1% year-over-year pace, which is a bit disappointing. United States The jobs report trumps the PMI/ISM data and suggests...

Since President Trump declared the end of the tariff truce with China in early May, an important focus for investors was the G20 meeting. It was only as it drew near was a meeting between the two heads of state confirmed. What was billed as an extraordinary meeting reportedly lasted less than 90 minutes, and the results were broadly as expected. The press quotes US officials confirming that the talks are “back on track”...

I know some people who are always bullish gold. I am not. In fact, I often think I can find higher returning assets. However, I have recently have turned bullish gold, and while in Toronto on business, I was invited to the set of Bloomberg to discuss my change of heart. Many of the reasons the gold bugs cite would seem to justify owning gold bullion not paper claims on gold, like gold mining companies or gold ETFs. The...

Central banks are prepared to take fresh measures to strengthen and extend the business cycle primarily because price pressures are below what their predecessors thought would be acceptable levels. Draghi, speaking for the ECB, the Federal Reserve, and the Bank of Japan ratcheted up their concerns, which, even without new initiatives, were sufficient to drive interest rates lower. Eurozone There is no real definition...

The European Central Bank’s meeting on 6 June is unlikely to result in major policy changes, but instead will focus on risk assessment and TLTRO-III. The press conference could set the stage for a policy response should downside risks materialise.Long story short, the ECB should continue to err on the side of caution, while preparing for dovish contingencies, which could range from the easy to the scary. The easy plan would follow if risks to the outlook remain firmly tilted to the downside....