Summary for the 21st of March 2019


At the Fed Interest Rate Decision meeting yesterday, the Federal Reserve kept the federal funds target rate unchanged, as expected by the market. The signals about being patient on rate hikes were repeated, and the dot-plot showed only one rate hike in 2020. Most surprising message was the message about the Fed would slow down the balance sheet reduction program in May, and that the program would end in September.

The Fed indicates that the growth in the economic activity has slowed and thus downward adjusted the future economic growth. Job gains have been solid. Inflation has declined, excluded the volatile food and energy prices, inflation remains near the 2% objective. The Fed speaks about a weaker global economic growth, uncertainty and tighter lending terms, and sees weaker rise in inflation.

Fed’s dot-plot shows a clear sight of downward adjustment of interest rate from what it had projected in December. Most of the members of the Federal Reserve see unchanged interest rate this year, and only one rate hike next year, and that the rate would be at a neutral rate in two years. The fact that the interest rate is close to the neutral rate might explained why the inflation hasn’t risen so much, and the reason the Fed has softened their approach toward interest rates.

The Fed has decided to reduce the treasury securities sell off. Under the current program, the Fed will reduce its balance sheet by letting 30 billion dollars of treasury to roll off each month(let them mature at face value) and not selling them( or else this would drive up the interest rates). From May, the roll off would be at 15 billion dollars a month. The balance sheet reduction program will stop completely at the end of September.

Indices for 21st of March: After the Fed’s rate decision, the US stock market started with a gain, the prolonged trade negotiation between the US and China, and a disappointed quarterly report from FedEx had removed most of the gains.

Dow: -0.6% (20th of March)
S&P 500: -0.3% (20th of March)
Nasdaq: +0.1% (20th of March)
Nikkei: Closed  (21st of March)
Chinese indices: +1.3% (21st of March)
STOXX Europe 600 Index: -0.04% (21st of March)

This post is sponsored by my video course in Portfolio Analysis, check it out if you are interested:
Quick and Easy Portfolio Analysis Video Course  (Skillshare)
Quick and Easy Portfolio AnalysisVideo Course  (Udemy)
and Facebook page for other information:
Quick&Easy Financial Economics



Comments

Post a Comment

Popular posts from this blog

Summary for the 2nd of October -Weaker manufacturing outlook

Last week’s flash PMI estimates for the EU area and yesterday’ final PMI numbers are indicating that the weakening in the manufacturing sector isn’t country specific, but rather the weakening is across countries. The decline in Germany’s manufacturing sector is less than expected by the financial markets, while the decline in France is higher than expected. The same goes for Spain and Italy. The UK’s PMI index has increased by 0.9 to 48.3 and is more than expected, though 48.3 still indicates a weaker outlook. The US Manufacturing PMI has increased to 51.1 while the ISM index declines by 1.3 percent to 47.8, the lowest value since 2009. Despite weakening activities in the manufacturing sector for the developed countries, for the developing countries the outlook is still positive. The global PMI value in the manufacturing sector has risen from August to September. Past months’ decline has been due to weaker growth in the global trade. The WTO has updated its global trade forecast ...
Read more

Summary for the 15th of October

China’s balance of trade shows a fall in exports by 3.2 percent, comparing to a year ago and the imports fall by 8.5 percent, the first fall since May this year. China is the largest contributor to world economic growth, through the weaker imports, China’s economic decline is affecting the rest of the world economy, such as the Euro area. The Euro area’s industrial production for  August has risen by a little more than the markets have expected. The industrial production in the Euro area has been weakening since the start of 2018. Finland is currently holding the council of the EU presidency. At a press conference with the European Council President elect, Charles Michel, the Finnish prime minister, Antti Rinne, says that The EU needs more time to reach a Brexit agreement. Boris Johnson is hoping to seal a Brexit deal before the EU summit on Thursday, so that he will be able to present it to the British Parliament on Saturday for approval, in doing so, he won’t need to postpo...
Read more

Summary for the 21st of October Brexit drama

On Saturday, the British parliament is withholding the final decision of the revised Brexit deal and forcing Boris Johnson to ask the European Council for an extension to the 31 st of January. Instead the parliament has greed on Oliver Letwin’ amendment, which states that there wont be a no deal Brexit until the parliament has agreed on the revised Brexit deal this week. And on Saturday night, Boris Johnson has sent an unsigned letter to the European Council asking for a Brexit delay as well as a personal letter to the Council asking the EU leaders not to delay Brexit. The US stock exchange has closed in negative on Friday after Johnson & Johnson has to recall 33 000 bottles of baby powder in the US after health regulators found trace amounts of asbestos in a bottle purchased online. Boeing has admitted that two of its employers in 2016 misled the FAA about the 737 Max and its technical system. Weaker than expected Chinese economic indicators also contributes to the negative...
Read more