Category Archives: FED

Central Bank, ECB, Europe, FED, USA

Jackson Hole Guide: Investors Seek Yellen Job-Market View

Here’s what to look for from the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole,Wyoming, which runs Aug. 21-23.

— Yellen’s keynote: The highlight will be Fed Chair Janet Yellen’s speech Aug. 22 on labor markets at 10 a.m. New York time. She’ll probably reiterate the Fed’s view that there is plenty of room for improvement in the labor market, according to Dean Maki, chief U.S. economist at Barclays Plc in New York.

— In July, the Federal Open Market Committee changed the language of its policy statement to highlight “significant underutilization of labor resources” as a justification for continued easy-money policies, even though the unemployment rate has fallen faster than Fed officials had forecast. The Fed chief will probably “point to measures like the elevated number of workers that are employed part time for economic reasons as evidence” of continued slack, Maki said.

— Yellen “would like to move away from this being a market-moving policy speech and get it back to being more of an academic exercise,” said Michelle Girard, chief U.S. economist at RBS Securities Inc. in Stamford,Connecticut. “I don’t think that she will use this as a tool to signal anything in terms of the Fed’s thinking, or certainly any meaningful change in the Fed’s thinking.”

— Wage focus: Tepid growth in wages is one area Yellen could choose to explore in more detail if she wants to advance the conversation, said Ethan Harris, co-head of global economics research at Bank of America Corp. in New York.

Stagnant Wages

— Average hourly earnings rose 2 percent in July from the year before, matching the mean increase over the past five years and down from 3.1 percent in the year ended December 2007, Labor Department data showed in the latest employment report. Separately, the employment cost index, a measure of labor cost changes, advanced 2 percent in June from the previous year.

— “A more careful look at wages would be a good place for her to plow some new ground,” Harris said. “They are way too weak, no sign of improvement, and if you’re going to defend why the Fed is going so slowly here, that’s your exhibit A: slow wage growth.”

— Conference participants will be mostly academics and central bankers; economists from major Wall Street banks weren’t invited this year.

— Draghi’s outlook: European Central Bank President Mario Draghi will follow Yellen with the keynote luncheon address. Investors will be seeking further insights into how weak his 18-nation economy is and whether he’s more likely to deploy Fed-style quantitative easing that the ECB has resisted.

Europe Stalls

— The euro area unexpectedly stalled in the second quarter as its three biggest economies failed to grow, adding to the region’s deflation risks. Draghi already committed this month to intensifying the unprecedented stimulus he unveiled in June if the outlook deteriorates.

— Draghi’s challenge may be compounded if Yellen remains focused on boosting the U.S. labor market, according to Alberto Gallo, head of macro credit research at Royal Bank of Scotland Group Plc in London. That’s because her bias toward continued stimulus will keep the dollar weak against the euro.

— Draghi “has tried to push down the euro and has so far won little ground against the dollar,” Gallo said. “The ECB is under even more pressure to do more.”

— Structural woes: Panel discussions on labor-market research presented at the conference may reveal “a growing awareness that underutilized labor resources may be a more permanent fixture,” rather than a cyclical shift, said Eric Green, global head of foreign exchange and rates at TD Securities USA LLC in New York.

‘Hawkish’ Tone

More here : http://www.bloomberg.com/news/2014-08-20/jackson-hole-guide-investors-seek-yellen-job-market-view.html

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ECB, Economy, Europe, FED

Why Currencies Are Poised for More Shifts

The world’s major currencies, which had traded in a relatively stable range, are now in motion — buffeted by different regional growth and interest rates as well as a simmering brew of geopolitical tensions.

Differences are particularly noticeable between the U.S. and Europe, and how far apart currencies in those regions move will be a function of monetary policy at the European Central Bank (while the ECBmeets this week, its major policy actions are likely to come in autumn).

Last week’s economic data confirmed that the euro area and the U.S. are on quite different growth trajectories. Their banking systems are also in different stages of healing. The U.S. is growing faster and mending more quickly, so we should expect a widening diversion in monetary policies. Look for a gradually less accommodating Federal Reserve while the ECB seeks to further loosen its monetary and credit policies. In short, the dollar should continue to appreciate against the euro.

Geopolitical factors also favor a stronger dollar, largely because Europe is more economically and financially exposed to developments in Ukraine and the Middle East than the U.S. Moreover, the euro once enjoyed support from global traders chasing yields on peripheral euro-zone bonds — but there is less capital at work in that realm now.

Read more here : http://www.bloombergview.com/articles/2014-08-04/why-currencies-are-poised-for-more-shifts

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FED

The Feds revised their interest rate forecasts

The Feds revised their interest rate forecasts late last month hoping to normalize them faster than many market watchers would have anticipated. The new forecasts are higher, the projections having being raised for 2015-2016. This is a good move for extremely low rates can negatively affect the job hunt and the economic growth of U.S.

With low interest rates, old workers delay their retirement holding onto their job as the investment income from fixed income products is too meager to sustain them, this, in turn, crowds out the youth from employment opportunities.

Even companies are reducing their investment in the economy for they can not comprehend the true level of economic growth in the country i.e, growth in the absence of an extraordinary macroeconomic policy. People are also taking up heavy debts to buy back their stocks or to pay dividends due to the low cost of financing. While this improves the price-earnings ratio, it can stunt growth oriented capital projects.

With the labor supply demand mismatch, there is an increasing wage inflation: those employed are earning more, while those unemployed aren’t getting jobs. In the medium term this can lead to higher levels of inflation as can also be seen by the CPI indications.

Finally, unconventional monetary policy of recent years has encouraged significant bouts of capital misallocation, resulting in crowded trades, correlated risks and the overly stretched valuations seen in markets today.

These in turn, are increasing systemic risk, raising the potential for a violent capital unwinding.

Thus, fiscal initiatives, at this point, would perhaps be more beneficial to the economy than the current policy of zero-interest rate.

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ECB, Europe, FED

Important week for Euro

The European Central Bank announced some measures to ease monetary policy two weeks ago. The euro had been on a downtrend since May and by these measures the ECB increased its support to the economy.

The result?

Two weeks later, EUR/USD stabilized just above 1.35.

This week’s Eurozone economic calendar will be an important test for the euro because investors will be watching to the data in order to give confirmation on the need for additional easing.

Economists are not expecting major changes in economic activity but after the plunge in investor confidence (ZEW survey), the risk is a big disadvantage of these reports.

The rate of the EUR/USD will depend mostly on Eurozone data because the U.S. economic calendar is busy with Tier 2 economic reports. The Fed needs will probably start talking about normalizing monetary policy in September, when the central bank updates its forecasts and Janet Yellen gives a press conference.

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FED, USA

Four Dimensions of the FOMC Meeting

The FOMC meeting is the week’s highlight even though policy outcome seems a foregone conclusion. It will continue with the tapering course that Bernanke put on the Fed on before he left. However, there are more moving parts than usual, and it is worth reviewing.
Essentially, there are four elements of the FOMC meeting: composition, statement, forecasts and press conference.
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  • Forecasts
  • Press Conference

http://www.marctomarket.com/2014/06/four-dimensions-of-fomc-meeting.html

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BOE, ECB, Economy, FED

Unprecedented stimulus by the Fed and other central banks made many traditional models useless,

If the insatiable demand for bonds has upended the models you use to value them, you’re not alone.

Just last month, researchers at the Federal Reserve Bank of New York retooled a gauge of relative yields on Treasuries, casting aside three decades of data that incorporated estimates for market rates from professional forecasters. Priya Misra, the head of U.S. rates strategy at Bank of America Corp., says a risk metric she’s relied on hasn’t worked since March.

After unprecedented stimulus by the Fed and other central banks made many traditional models useless, investors and analysts alike are having to reshape their understanding of cheap and expensive as the global market for bonds balloons to $100 trillion. With the world’s biggest economies struggling to grow and inflation nowhere in sight, catchphrases such as “new neutral” and “no normal” are gaining currency to describe a reality where bonds are rallying the most in a decade.

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BOE, ECB, Europe, FED, Trading, USA

Dr Faber predict stock market crash #Stockmarket #nasdaq

Dr Faber is predicting a 1987-type stock market crash this year only it will be worse.

The US technology-heavy Nasdaq plummeted by 3.1 per cent on Thursday night (US time), its biggest one-day drop since November 2011.

Dr Faber, the editor of the Gloom, Boom & Doom Report, has already called for growth stocks to decline this year. He said ridiculous stock valuations were not the crash catalysts, saying the Federal Reserve was also to blame.

“This year, for sure – maybe from a higher diving board – the S&P will drop 20 per cent,” Dr Faber said.

CNBC noted that Dr Faber predicted in August last year a 1987-type crash was looming.

Since then the S&P 500 has risen about 9 per cent.

Mr Grantham said the bust would be particularly painful because “the Fed and other central banks around the world have taken on all this leverage that was out there and put it on their balance sheets.”They will become cheap again. That’s how we will pay for this. It’s going to be very painful for investors,”

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FED, USA

Notes from #FOMC from 9-Apr-2014

Several Fed Officials Said Forecasts Overstated Rate Rise Meeting minutes revealed that in March, Fed Reserve policy makers discussed that a rise in their median projection for the main interest rate exaggerated the likely speed of tightening. Treasury yields rose last month after policy makers predicted that the benchmark interest rate would rise faster than previously forecast. The Fed reduced the monthly pace of bond purchases from $65 billion to $55 billion, and repeated it is likely to continue paring the program in “further measured steps”.

U.S. stocks rose, with the benchmark Standard & Poor’s 500 Index increasing 0.6 percent to 1,862.17 at 2:03 p.m. in New York. The yield on the 10-year Treasury note rose 1 basis point, or 0.01 percentage point, to 2.69 percent.

The committee last month scrapped its pledge to keep the main interest rate low at least as long as unemployment exceeds 6.5 percent

The economy and employment are showing steady gains, the economy isn’t “running flat-out, but it’s running fast enough to push down the unemployment rate and put people back to work.”Payrolls excluding government agencies rose by 192,000 workers after a 188,000 gain in February that was larger than first estimated. That brought the job count to 116.1 million, beating the January 2008 high of 116 million.

While flagging “a weak first quarter in the U.S. due to weather,” it is expected that the economy would grow at a 3 percent annual pace for “the rest of the year and into 2015.” Miami-based Lennar Corp., the biggest U.S. home builder by market value, saw customer traffic and sales volume rise through the first quarter.

Janet Yellen, 67, succeeded Ben S. Bernanke as Fed chief in February after three years as vice chair. In that role, she helped shape communication as the central bank sought to support the recovery from the longest recession since the Great Depression.

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FED, Trading, USA

Payrolls in U.S. – #NFP Rose 192,000 in March, Unemployment at 6.7%

Employers in the U.S. boosted payrolls and the unemployment rate held at 6.7 percent even as more Americans entered the labor force, showing steady progress that will prompt Federal Reserve policy makers to continue reducing stimulus while keeping interest rates low.

Payrolls rose 192,000 last month after a 197,000 gain in February that was larger than first estimated, the Labor Department reported today in Washington. The median forecast in a Bloomberg survey projected a 200,000 gain. Private employment, which excludes government jobs, surpassed the pre-recession peak for the first time.

Employment in January and February was revised higher, showing the effect on the labor market from inclement winter weather was less severe than previously thought. The gain puts payroll growth in step with the average over the past two years and shows companies are optimistic about the outlook for demand

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FED, Trading

Meet the #Fed’s new intellectual powerhouse

Janet Yellen led her first monetary policy meeting as chair last week. But with Yellen’s emphasis so far on consensus and continuity, the key news from the Fed last week wasn’t anything Janet Yellen said, but what Federal Reserve Board Governor Jeremy Stein said at the International Research Forum on Monetary Policy on Mar. 21.

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Jeremy Stein is currently the junior member of the Federal Reserve Board, having served only since May 30, 2012. (Several recent nominees to the Federal Reserve Board have yet to be approved.) But with Ben Bernanke’s departure, Stein now has the most distinguished academic record of anyone currently making decisions about US monetary policy. His background as a Harvard Professor of Economics and former President of the American Finance Association shows. He holds office hours for staff at the Federal Reserve Board, and from the half hour that I once spent with him, I can say that he stands ready to debate the fine points of economic models with anyone. In his speech last Friday, Governor Stein showed how much genuine light an academic approach can shed on practical monetary policy questions in the right hands.

http://qz.com/

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