Julius Baer Research | Against all odds the US Federal Reserve (Fed) continues to show a bias towards normalising rates. Comforted by stabilising financial conditions and a pickup in inflation, the Fed will try to guide market expectations towards additional rate hikes this year.
Benjamin Cole via Historinhas | Thanks to the extraordinary insights of blogger Kevin Erdmann, the issue of US housing costs and inflation has been brought into better focus. Erdmann recently brought up manufactured housing, or house-trailers, a wonderful topic.
Marcus Nunes | Ms. Yellen also said that she did not think the Fed, by raising rates in December, had contributed significantly to the latest round of economic problems. When Senator Dean Heller, Republican of Nevada, asked Ms. Yellen whether the Fed had caused stock prices to fall, she responded, “I don’t think it’s mainly our policy.”
In an attempt to out-macho the US and impress Germany , the ECB under Trichet decided to stamp on headline inflation hitting nearly 3% in early 2011, while core remained solidly below 2%.
Marcus Nunes | The answer is that much more is needed, especially since lately we´ve had the Fed and the ECB/BoJ pulling in opposite directions. Some policy coordination would greatly increase their productivity.
Benjamin Cole via Historinhas | In general, the “class glass” is a poor lens for analyzing U.S. politics and macroeconomic policies. To be sure, the nation has interest-group politics in spades, and groups are often well-financed.
Today the Fed’s FOMC holds its first meeting of 2016 with 4 planned board changes. In summary, we can say that 1 hawk (hard line) will be leaving and 4 joining. This means that the balance is still in favour of the doves (soft line), but less so than in 2015.The markets will react positively if the Fed sends a clear message that it will take into account the situation of both the US and the global economy before implementing further rate hikes.
Julius Sen, Academic Director at the London School of Economics thinks that “we have a flexible model. The market knows it and plays with it, forcing looser monetary policies and tight fiscal policies with the stability pact in Europe and the ‘sequester’ in the US. Sen claims that “there will be debt reliefs in some eurozone countries.”
It’s like a curse. Every time a central bank raises interest rates, it has to retract. Sometimes it’s because the move has been precipitative. Three weeks after the Fed decided to raise rates, oil prices and the Chinese stock market tumbled in unison and Wall Street started a correction. So had the Fed been too hasty?
Benjamin Cole via Historinhas | Probably, He Is Right. Among serious economists, the words “print more money” are not used, and of course the thought is sacrilege for many. Evidently, some prefer a decade or so of 20+% unemployment (see Spain, Greece), or the perennial loss of about 10% of GDP (the United States) to the idea of printing more money.