Saturday August 27, 2016 - 13:07:57 GMT
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Fed Sends Confused Policy Tightening Signals
John M. Bland, MBA
Fed to Raise Interest Rates
The focus for the last several weeks has been on the speech Friday by Fed Chair Yellen at the Kansas City Fed Symposium at Jackson Hole, Wyo. Over the years, this has become a major event for global central bankers. It was especially significant this year with many feeling the Fed has been falling behind the curve on policy, and that the time has long past for what is in essence an emergency stimulus program at the central bank. Chair Yellen did not disappoint. Yellen said that case for rate hike has strengthened in recent months and that the economy is nearing the Fed's employment and inflation targets.
Fed signals are typically vague because oficials like to to leave an escape hatch in case conditions change. The timing of a rate hike was left vague. Timing really does not matter as long as markets feel its a done deal. With rates at such a low level the only impact on the economy of an expected 25bp rate hike will only be psychological. Later in the morning Fed Vice Chair Stanley Fischer muddied the waters when he introduced the risk of a second rate hike before yearend. By the end of the day, many were confused again by what indeed the Fed's message had been. Was it one or two rate hikes this year
Current Market Conditions
The week ahead starts with the late summer bank holiday in the U.K. The absence of London always is a damper on trade.The week will also see a slew of PMI reports, which will give us a broader picture of how the global economy is performing generally. Friday will see the August U.S. employment data. Markets will be keenly watching to see if the recent uptick in U.S. jobs growth is sustained. This is a key element in the outlook for future Fed policy.
WEEKLY HIGH IMPACT NEWS:
29-Aug MON
00:00 GB- Holiday
12:30 US- PCE Deflator
30-Aug TUE
14:00 US- Consumer Confidence
31-Aug WED
07:55 DE- Employment
12:15 US- ADP Employment
14:00 US- Pending Homes Sales
14:30 US- Weekly Crude
1-Sep THU
All Day Mfg PMIs
12:30 US- Weekly Jobless
2-SEP FRI
12:30 US- Employment
12:30 US/CA- Trade
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
co-founder
www.global-view.com
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