fed

Jerome Powell

FED: Upward Surprise To December’s Projections But Powell To Throw Cold Water Over Taper Talk

Attention will be particularly centred on the discussion of QE tapering. Previous comments by regional Fed members Bostic and Kaplan stoked markets into pricing in the possibility of bond market support fading by year-end. When combined with news of an additional $1.9trn fiscal stimulus package being floated in Washington, this resulted in rising 10-year yields, which has been one driver of the USD rebound witnessed at the beginning of this year. A quicker vaccination campaign being rolled out since December has also added to a brighter economic outlook, bringing the discussion of policy normalisation to the table.


Next Fed's chairman Jerome Powell to take over on February 5

FED: Subtle To The Point Of Evanescence

The new strategy plays on the asymmetry of monetary policy: it is easier to let inflation accelerate in good times – which only entails not acting (keeping rates unchanged) – than propping it up in bad times, because at some point the latter would require ever more action which would collide with the zero bound limit to policy rates.


FEDBALANCE

The Real Challenge Facing The Fed

Mobeen Tahir, Associate Director, Research, WisdomTree | The biggest challenge facing the Fed in the coming months (and years) is to sketch a roadmap for closing the floodgates of liquidity. At this point in time, it might seem like a ‘nice problem to have’. But given long and variable lags between policy implementation and impact on economy, these are issues the Fed needs to be thinking about now. While the Fed’s mandate is to promote maximum employment and ensure price stability, markets have become highly dependent on central bank accommodation as a propellant. As unemployment (currently 10.2% in the US) decreases and inflation (US Core Personal Consumption Expenditure Index inflation is currently 0.9%) rises closer to the Fed’s desired target level of 2%, the central bank will need to tighten policy.


Jerome Powell

The Fed would prefer not to discuss going negative

David Lafferty (Natixis) | Central banks have pinned the front end to zero – or lower – but real rates and inflation premiums have some room to rise into the recovery phase – as slow as it may be. Yields will also see some upward pressure when the Fed and other central banks eventually begin to slow QE purchases. At this point, the Fed would prefer not to discuss going negative as the overnight market recently priced. Another sell-off or prolonged shutdown might put negative rates on the table, but we’re not there yet.

 


Jay Powell

US Corporate Bonds: New York FED To Start Purchases “In Early May”

Markus Allenspach, Head Fixed Income Research, Julius Baer | At this stage, the corporate bond market needs support from the Federal Reserve to digest the negative news flow, such as the net tightening of lending standards for commercial and industrial loans in the senior loan officers’ survey published yesterday or the numerous cyclical data showing the depth of the contraction in the current quarter.


Jay Powell

The Federal Reserve Ventures Into Unchartered Territory

J.P.Marín Arrese | Jerome Powell raises the stakes day by day by making bolder than ever decisions. He shatters the image of shyness, prudence and circumspection he offered when taking over the Fed chairmanship. His last daring move has left markets flabbergasted. No wonder. He has pledged 2.3 trillion to buy ungraded bonds and to set up a massive lending facility for Main Street companies, thus breaking the golden rule of including only high-rated paper in the Fed balance sheet. 


Is it the Fed that has changed... or the world around it?

Is It The Fed That Has Changed… Or The World Around It?

CaixaBank Research | The Fed has cut interest rates in 2019 for the first time in 11 years. However, it has barely lowered its growth outlook for the US and has justified the cut with the weakness of inflation and the persistence of risks. Is it possible that the Fed has changed its reaction function? The results of the analysis in this article suggest so.