Greetings,
The United States: As widely expected, the FOMC left the fed funds target unchanged. The wording in the FOMC statement was changed from “inflation near” to “inflation returning” to the Committee’s target. In his press conference, Fed Chair Powell said that the change was meant to send “a clearer signal” that the FOMC is uneasy with inflation persistently running below target.
The Fed cut rates three times last year, which, in combination with easing trade tensions, steepened the yield curve. But the yield curve is approaching inversion again. Now what?
Emerging Markets: Many African nations have been aggressive borrowers in recent years.
Energy: US gasoline inventories are well above last year’s levels, while demand slumps.
Equities: Global airline shares are under pressure.
Rates: As expected, the Fed raised the interest rate on excess reserves to nudge the fed funds rate toward the middle of the target range (two charts).
Also, the combination of the employment-to-population ratio and inflation suggests that the fed funds rate is where it should be. The markets seem to disagree.
Food for Thought: The US proposal for a two-state solution:
Edited by Devon Lall
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