Tags: investors | fed | china | trade

Investors Seek Insight on Fed Strategy, China Trade

man holds a US one dollar bill to his face obsesessed with a fantasy of more money.
(Rene Jansa/Dreamstime)

By
Wednesday, 20 February 2019 10:19 AM Current | Bio | Archive

A lot of attention will be turned to the Federal Open Market Committee's (FOMC) January meeting minutes that will be released at 2 p.m. ET.

Economists and investors will look for more information or clarity from what the FOMC members actually said during their discussions at their January 29-30 meeting when it was decided to keep interest rates on hold after hiking four times in 2018.

Investors will also seek additional details about reducing the $4 trillion Federal Reserve balance sheet.The Fed’s balance sheet ballooned in the wake of the 2007-09 recession but policymakers began trimming bond holdings in the final months of 2017.

It could also be interesting to see what the FOMC members think about inflation this year.

This is important for investors because now we are seeing a mild divergence emerging among FOMC members’ personal views on the Fed’s future policy path. How significant the divergence of views and what the FOMC is now looking for as guidance are important questions for investors from today’s FOMC minutes.

Meanwhile, New York Fed President John Williams who is also one of the Fed’s three vice chairs and perhaps the leading economic voice at the Fed at the moment, said in an interview with Reuters he was comfortable with where the level of U.S. interest rates are now. He also said that he sees no need to raise them again unless economic growth or inflation shifts to an unexpectedly higher gear.  

Williams also estimated the so-called balance sheet roll off could end when bank reserves get close to $1 trillion of reserves or somewhat more than that, which is about $600 billion less than current levels. Mr. Williams’ view implies the runoff to continue at least into next year at its current pace.

Elsewhere, Cleveland Fed President Loretta Master said that interest rates will likely rise slightly this year, assuming the economy grows at the healthy clip she anticipates. Mester, who isn’t a voting member at the Federal Open Market Committee, said she estimates a “neutral” rate that neither stimulates nor spurs economic growth to be around 3 percent. The fed-funds rate is currently set in a range between 2.25 percent and 2.5 percent.

Interestingly, Mester told reporters after giving her prepared speech that a couple more rate increases get you more into the range of neutral and then we just have to wait and see how the economy plays out, The Wall Street Journal reported.

Besides all that, the Sino-U.S. trade negotiations still get a lot of attention until we’ll get more specifics.

There were no tweets on trade on the Donald Trump Twitter feed overnight but yesterday President Donald Trump tweeted: “Had the opposition party (no, not the Media) won the election, the Stock Market would be down at least 10,000 points by now. We are heading up, up, up!”

For investors that matters because Trump’s tariffs policy has effectively been a tax on equity markets.

If Trump is focusing on equity markets it does increase the chance that trade tariffs or equity taxes will be lifted.

Trump also commented that there are no magic dates on trade, which appears to me that the March 1 deadline is not in fact a deadline at all but just another day in the Oval Office.

Besides that, we also learned that the United States, as part of a trade deal, is seeking to secure a pledge from China that it will not devalue its Yuan or Reminbi currency (CNY).

A partial deal in the ongoing negotiations could be an outcome that markets have to prepare for.

Yes, that sounds a little bit like Brexit.

On that point, UK Prime Minister Theresa May is off to Brussels for further discussions. If there is a delay to the exit, May would have to negotiate with another set of EU Presidents.

The prime minister is trying to get a legally binding change to the Irish problem. Without this, it seems very unlikely that the UK Parliament would agree to the government’s withdrawal agreement, and if the UK Parliament does not agree to the government’s withdrawal agreement then there is no real prospect of passing any other deal before March 29. That would mean either the UK exit with no deal or more likely that March 29 is not a deadline at all but just another day in the office, the BBC reported.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
HansParisis
Economists and investors will look for more information or clarity from what the FOMC members actually said during their discussions at their January 29-30 meeting when was decided to keep interest rates on hold after hiking four times in 2018.
investors, fed, china, trade
746
2019-19-20
Wednesday, 20 February 2019 10:19 AM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved