The Fed has murdered price discovery in the markets and has enlisted other central banks as henchmen. The SNB (Swiss National Bank) has bought millions of dollars worth of Apple stock, for example, and it remains to be seen what the central banks will do if the slight downturn of the last few days persists. They may all buy the dip.
The account of the Federal Reserve’s early May meeting, which the Fed published Wednesday, suggested the decision to raise interest rates in June still hangs in the balance.
“Members generally judged that it would be prudent to await additional evidence indicating that the recent slowdown in the pace of economic activity had been transitory before taking another step in removing accommodation,” the Fed said in an account, released after a standard three-week delay.
Some economists expect the Fed to resume its plan of increasing key interest rates at a gradual pace if the US economy outperforms itself this year. Do you share this point of view?
I do not think the economy really needs to outperform to make the Federal Reserve raise rates. If the economy evolves as expected, the Fed will be hiking interest rates. The Federal Open Market Committee feels that the economy is performing well and that monetary policy needs to be in a normal position. Currently, monetary policy in the US is accommodative, but with the economy close to normal, the FOMC believes that policy should be close to normal too.
President Donald Trump has had experience with bankruptcy. This will prove to be useful as his tax plan, if approved by Congress, will push the US ever closer to financial disaster.
Economists wax eloquent over the platitude that debt stifles growth. It is therefore not surprising that growth in the US has slowed since 2008 and Europe struggles to match pre-crisis results.
Financial markets are reacting with a bit of confusion. Some are seeing the headline number and thinking a hike is on the cards while others are digging below the surface and concluding it might not be.
The big event of November was, of course, the election of Donald Trump in the United States. The first thing to keep in mind is the uncertainty surrounding his plans, especially his economic programme. Second, there can be a wide gap between what a candidate says and what he does, once in office. That said, Trump’s statements do provide us with a general outline of at least three complementary scenarios.
The U.S. Federal Reserve decided to raise interest rates for the first time in 2016 and the second time in a decade. At the conclusion of its two-day Federal Open Market Committee (FOMC) December meeting, committee members voted unanimously to raise the U.S. central bank’s target range for the federal funds rate to 0.50 to 0.75 percent. The FOMC raised interest rates for the first time in nearly a decade last December.
Janet Yellen, the Fed chairwoman, said “growth is a touch stronger, unemployment is a shade lower” as she announced a 0.25% increase in the benchmark rate to 0.50-0.75%.
