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Thursday October 11, 2018 - 11:02:34 GMT
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Fed Should Take A Breather On Policy Tightening Before It's Too Late

John M. Bland, MBA, co-founder, Global-View.com


U.S. economy starting to run out of Steam? Many are increasingly worried that the U.S. economy might be starting to run out of growth momentum. They have been pointing for a while at the high end of the housing market and are noticing now that its softness is showing up at the lower price points. Additionally, the steady “normalization” of Fed policy has seen short-term rates steadily rising. At this point, it appears that the central bank has lost its fix on what the “neutral level” of Fed funds might. Once it was put at 2.50% (current target range 2.00% to 2.25%) and it has steadily been drifting higher to above 3.00%. Maybe 2.50% was high enough?

Add to this steadily rising energy prices as global oil supplies shrink due to sanctions on Iran and other key technical delivery constraints. Lastly, note that the “Bond Vigilantes” have emerged recently from a couple decades of hibernation. Some say that it’s the credit markets that have been doing a lot of the policy tightening. Key central banks have halted their “Quantitative Easing” and are no longer adding treasuries to their balance sheets. Some, like the Fed, are now engaged in “Quantitative Tightening (QT)”. The Fed has been disgorging about $50bn a month in Treasures acquired in their QE activities.

Maybe its time now for the Fed preemptively to anticipate the markets. It should cut down on its “QT” and take a breather on additional rate hikes until it is clear whether additional hikes are warranted by the economic outlook. There is no rush to tighten further as monetary policy changes tend to hit the economy with a significant lag. Now is the time for the central bank to reconsider its current monetary policy before it’s much too late.

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Mon 15 Oct 2018
AA 12:30 US- Retail Sales
Tue 16 Oct 2018
AA 08:30 GB- Employment
A 09:00 DE- ZEW Survey
A 13:15 US- Industrial Production
Wed 17 Oct 2018
AA 08:30 GB- CPI
A 09:00 EZ- Final HICP
A 12:30 US- Housing Starts/Permits
A 14:00 US- Existing Homes Sales
A 14:30 US- EIA Crude
AA 18:00 US- Fed Policy Minutes
Thu 18 Oct 2018
A 1:30 AU- Employment
AA 08:30 GB- Retail Sales
A 12:30 US- Weekly Jobless
Fri 19 OCt 2018
AA 12:30 CA- CPI/ Retail Sales

 

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Actionable trading levels delivered LIVE to YOUR charts

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Mon 27 May 2019
AAGB/US- Holiday
Tue 28 May 2019
A 14:00 US- Consumer Confidence
C 13:00 US- Case-Shiller
Wed 29 May 2019
A 08:55 DE- Employment
AA 18:00 US- BOC Decision
A 18:30 US- EIA Crude
Thu 30 Mar 2019
AAEZ/CH- Holiday
A 12:30 US- Weekly Jobless
Fri 31 Mar 2019
AA 10:00 EZ- Flash HICP
A 12:30 US- Personal Income, Spending, Deflator
AA 14:00 US- Final Univ of Michigan


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