Tag: quantitative easing (QE)

The Bond Market Gets Curiouser and Curioser

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


Sometimes the smartest thing is to do nothing.

This column has been pretty harsh on the Federal Reserve for its failure to start tightening monetary policy, as it sort of promised it would back in December. Since then, there’s been a steady stream of “yes we will, no we won’t” pronouncements from the Fed – both from the Fed itself and its individual members – that have left investors confused about the direction of U.S. monetary policy. Now, nine months later, the Fed has still not made the next move in “normalizing” interest rates.

A Reuters survey released last week found that 69 of 95 – that’s nearly three out of four – economists don’t expect the Fed to raise rates until December, after the presidential election, followed by two more hikes next year. We’ll see. Continue reading "The Bond Market Gets Curiouser and Curioser" →

When Did Market Stability Become A Fed Mandate?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


According to the Federal Reserve Act, in which Congress created the Federal Reserve System back in 1913, the U.S. central bank was given the following statutory objectives for conducting monetary policy: maximum employment, stable prices and moderate long-term interest rates.

The Fed has since given itself an additional mandate: market stability. Congress didn’t grant the Fed that power, but that seems to be the Fed’s overriding concern lately. In the process, it’s succeeded in creating what some very smart people believe is the biggest bond bubble of all time, and a pretty big one in equities, too. It’s pushed more and more of the country’s wealth into the pockets of the so-called 1%. It’s also given some people a false sense of financial security that the Fed has created a floor – a guaranteed return, if you will – under which investment returns will not be allowed to fall. Continue reading "When Did Market Stability Become A Fed Mandate?" →

Fed Might Still Raise Rates

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


Not too long ago, July was marked as THE month that the Fed would raise its benchmark rate for the second time in a year. The last time the Fed hiked rates twice in the same calendar year was a decade ago. Now, in the wake of the Brexit shocker, Bloomberg reports markets are pushing the probability of the next rate hike towards the end of 2018. Are investors overly pessimistic? Here are some factors to consider.

Brexit Impact on the US

“Kicking the can” has been a common analogy for the EU’s handling of the Greek debt crisis. In fact, until this day, from way back in 2010 when the crisis over Greece’s debt first erupted, the Greek crisis has not been resolved. Now, with EU leaders and the UK deeply divided on the timing and execution of Brexit, the UK could delay the activation of Article 50 of the Lisbon Treaty – at least until it gets an easy way out of the EU. A slow and drawn out Brexit, while negative for the UK economy in the immediate term due to uncertainty, may have only minimal impact on the US economy in the same time horizon. A slow, drawn out Brexit does not create shocks, and without the threat of an immediate shock, the US economy should weather the transition well. Continue reading "Fed Might Still Raise Rates" →

Fed To Markets: See You In 2019

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


The Federal Reserve has made it pretty clear, by its actions if not by many of its pronouncements, that, like Melville’s Bartleby the Scrivener, it really would prefer not to do anything. Now it looks like it’s planning to take off not just the rest of this year but the next couple of years, too.

Instead of no rate increase this year, which is looking more and more like a done deal, we may not see higher rates until 2019 at the earliest, at least according to one Fed official.

Last week, as expected, the Fed left interest rates unchanged while lowering expectations for future rate increases, both this year and beyond. In arriving at that decision, which was unanimous, the Fed’s monetary policy committee cited recent weakness in the jobs market, previously an area of relative strength in the economy. Continue reading "Fed To Markets: See You In 2019" →

Euro Out Of The Woods?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


No doubt the most dramatic event of the FX market this past week was the ECB decision. Draghi, it seems, has finally "cut the mustard." He delivered a powerful response to the latest softness in Eurozone inflation. Essentially, the ECB expanded its QE program to €80Bln of purchases a month and pushed the deposit rate lower into negative territory. But if you expected these moves to play right into the bears' hands (as it has in times past) you might be in for a surprise.

Eurozone: The Good vs. Bad

When the Euro ended up higher in the aftermath of the ECB decision many were caught off guard. Some claimed the Euro's reprieve was the result of Draghi's rhetoric which suggested no more "bazookas" anytime soon.

But what seems more probable is that Draghi's words might just be the consequence rather than the cause. That is the consequence of some green shots that had started to appear in the latest Eurozone data. Those readings suggested that printing money until the apocalypse was not necessarily needed. That's what we call the "good news."

Below are two important indicators for the Eurozone; the balance of trade and industrial production. Both indicators are keenly scrutinized for this export-oriented region.

EU Industrial Production vs. EU Balance Of Trade
Chart courtesy of Tradingeconomics

The balance of trade figure has upticked higher and reaffirmed its rising trend from 2012. This suggests that the Eurozone exports more goods than it buys. Continue reading "Euro Out Of The Woods?" →