The word of the month for June is going to be: “live”.. as in: “the June Federal Reserve Meeting is “Live”.” Oh.. the excitement of it all..
It’s going to be small helping of porridge this morning as we’ve got a stack of stuff on the table at the moment. So, basically I’m going to rip off my colleague Martin Malone’s thoughts on the coming divergence in global monetary policy following the weekend one-on-one betwixt Japan’s Kuroda and the Fed’s Janet Yellen. While Japan is set to ease further with massive quantitative easing and more exchange-traded fund purchases at the end of July, the US is on path for a “data-dependent” hike – perhaps next month.
My guess – for that is what it is – is that the Fed won’t hike on June 16. But I’ve been wrong before. Much of the commentary says a delay will be due to the Brexit vote on June 23; who knows what box of miseries that may unleash. I reckon the deluge of comments are steering us towards July…but what do I really know?
We’ve got Mo-the-tash (El-Erian) on the wires telling us these Fed comments should be listened to, because Fed heads are “telling us one thing, which is the market is still underestimating the expectation of a rate-hike this summer.”
Since the Fed minutes last week the likelihood of a Fed hike has seized sentiment – with 60%-plus of the market expecting a hike by September. The numbers seem to be shaping up – forecast growth is approaching 2% (current 1.7%) while housing and manufacturing are headed in the right direction.
Martin lists some FED sound bites:
“Because we are closer to full employment and because we are closer to our inflation target, I am more confident now that a more normalised situation makes sense”… Rosengren May 22.
“Some of the headwinds we thought might be a significant problem as recently as March seem to be a little bit less of a significant problem as we go into June”… Rosengren May 22.
“My attitude about June is it’s a live meeting, in which we will have plenty of new data compared to March. Our options are open at this point”.. Bullard May 5.
“I think the incoming data have actually been quite good and reassuring in terms of policy decisions, so, in my view, June is a live meeting”.. Williams, May 17.
“The underlying trend in my view is unmistakable. This economy, despite all the headwinds we face – we continue to move ahead”… Harker, April 12th.
“If the second-quarter data is firming you will see me advocating in the not too distant future that we try to take the next step”.. Kaplan, April 29.
“The most recent data are encouraging and consistent with the Fed policy committee’s view that inflation will gradually move back to target over time”… Mester, May 12.
What’s changed I wonder from the mega-cautious Fed of yesteryear? It’s not the slow steady normalisation of the New New US Economy. The difference, I think, lies in the key issue of “International Headwinds”.
While we teenage scribblers have great fun writing about the imminent collapse of China (which ain't going to happen), the likely economic confragulation of Europe as Spain, Italy and France spiral into political bankruptcy (while probably won’t happen), the effects of a possible British exit from the European Union (which shouldn’t happen, but may yet surprise us), or emerging markets, oil, commodities or the rest.. the fact is bodies like the Fed are much better placed than us to see the real picture. We panic too much about unlikely things...
While the central bankers may be spinning us a line (they undoubtedly are) on the economic outlook – they are in a better position to see it. So do we buy the Fed’s cunningly enthusiastic forward guidance, or do we embrace conspiracy and continue to vote the global picture is much worse than we can see? Bit early to get philosophical this morning… but you might get my drift..
Whatever happens.. when the Fed hikes.. don’t worry, be happy… we’re not heading back to anything that much higher in terms of even moderate single digit interest rates. We are into the dreaded new normal of low growth and low inflation.. dull as dull is…
(But, that’s even more reason the get involved in my Alternative Asset strategies..)
Euroclear and Lyxor Asset Management say they are co-operating in the launch of e-Data Liquidity, a tool enabling fixed income market participants a method of accessing the true intrinsic liquidity of an asset, therefore providing the full liquidity profile.
Order volumes and total automation rates both increased in 2015, according to a report issued today by the European Fund and Asset Management Association (EFAMA) working with SWIFT on the evolution of automation and standardisation rates of fund orders received by transfer agents (TAs) in the cross-border fund centres of Luxembourg and Ireland in 2015.
I read with interest this morning, in the Financial Times, that as part of the UK government's new macho stand against corruption, certain regulations are going to be changed so the true identity of people tendering for government contracts be made know.
My first thought was: WHAT? You mean that until now the government has been awarding contracts to companies whose owners it didn't know? How many rules of due diligence, not to mention common sense, does that break?
British exit from the European Union (Brexit) would have an adverse impact on the UK public sector, with universities and Transport for London (TfL) facing greater downside risks through potential loss of EU funding and lower own-source revenues, says Moody’s Public Sector Europe in a report published today.