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Banking and brokerage in pounds carries positive interest rates as does the US dollar. Doing so in the Euro or Swissie carries negative interest rates. The question is how powerful is this difference in potential going to be and how fast will it cause damage to the EU?
What's your opinion and why do you hold it?
Well negative interest rates have certainly trashed Japan.Banking and brokerage in pounds carries positive interest rates as does the US dollar. Doing so in the Euro or Swissie carries negative interest rates. The question is how powerful is this difference in potential going to be and how fast will it cause damage to the EU?
What's your opinion and why do you hold it?
It will strengthen those currencies against the dollar/pound, but ultimately it is not doing much to increase lending/borrowing or stimulate the economy in negative interest rate countries. My opinion is that it is a mixed bag, but it won't hurt or help the EU.
Well negative interest rates have certainly trashed Japan.Banking and brokerage in pounds carries positive interest rates as does the US dollar. Doing so in the Euro or Swissie carries negative interest rates. The question is how powerful is this difference in potential going to be and how fast will it cause damage to the EU?
What's your opinion and why do you hold it?
It will strengthen those currencies against the dollar/pound, but ultimately it is not doing much to increase lending/borrowing or stimulate the economy in negative interest rate countries. My opinion is that it is a mixed bag, but it won't hurt or help the EU.
Central to the debate at the Fed's July 26-27 policy meeting will be how to reconcile upbeat U.S. economic data, highlighted by strong job gains in June, with a global growth slowdown and other headwinds threatening the inflation trajectory. For San Francisco Fed President John Williams, one of the 17 members participating in the central bank's rate-setting deliberations, all that is needed is a bit more confidence that inflation is indeed headed toward the Fed's 2 percent target.
The inflation measure the Fed prefers to track is currently at 1.6 percent. With monthly job gains well above the level needed to prevent an uptick in unemployment, and no signs of a rise in productivity, some Fed policymakers are likely to argue for a quick increase in rates to avoid a surge in inflation. "That is the danger – and you can be sure that the hawks are going to be arguing that," said Alan Blinder, a Princeton University professor and a former Fed vice chairman. "I have a hunch that they will talking in July about September."
Other policymakers, like influential New York Fed President William Dudley, have signaled they would rather wait for more tangible signs of a rise in inflation before pulling the trigger on a rate increase. "There's not a lot of reason to raise rates until inflation goes up," said Kevin Logan, chief U.S. economist at HSBC in New York. The U.S. central bank is scheduled to issue its latest policy statement at 2 p.m. EDT (1800 GMT) on Wednesday.
HEADWINDS
Banking and brokerage in pounds carries positive interest rates as does the US dollar. Doing so in the Euro or Swissie carries negative interest rates. The question is how powerful is this difference in potential going to be and how fast will it cause damage to the EU?
What's your opinion and why do you hold it?
I disagree but understand.
The U.S. central bank said the economy had expanded at a moderate rate and job gains were strong in June. It added that household spending also had been "growing strongly," and pointed to an increase in labor utilization. While Fed policymakers said they continued to closely monitor inflation data and global economic and financial developments, they indicated less worry about possible shocks that could push the economy off course. "Near-term risks to the economic outlook have diminished," the Fed's policy-setting committee said in its statement following a two-day meeting in which it left its benchmark overnight interest rate in a range of 0.25 percent to 0.50 percent.
The Fed noted, however, that inflation expectations were on balance little changed in recent months, and gave no firm indication of whether it would raise rates at its next policy meeting in September. Most Fed policymakers had urged caution in raising rates until there was concrete progress in moving inflation toward the central bank's 2 percent target "It's a little bit more hawkish, but not much," said Walter Todd, chief investment officer at Greenwood Capital Associates in South Carolina. The Fed's preferred inflation rate currently stands at 1.6 percent and has been below target for more than four years.
The Federal Reserve Building stands in Washington
U.S. Treasury prices pared gains after the Fed's decision, while the U.S. dollar briefly strengthened against the euro and yen. U.S. stocks extended declines before later reversing course to trade largely flat in the session. Federal funds futures implied traders still see roughly even odds of a rate increase at the Fed's December meeting and about a 20 percent chance of such a move in September, a bit lower than before the decision, according to CME's FedWatch Group. The policy-setting committee will also meet at the beginning of November, but a rate hike at that time is generally seen as unlikely because it would occur a week before the U.S. presidential election.
A Reuters poll of economists suggested the Fed is most likely to wait until December to raise rates. "There wasn't any tip that the Fed will raise rates in September," said Mike Materasso, co-chair of Franklin Templeton's fixed income policy committee in New York. "A rate increase is warranted this year, most likely at the end of the year, but a lot has to do with a benign world arena." Kansas City Fed President Esther George was the only policymaker to dissent at this week's meeting. She has favored raising rates at three of the last four meetings.
FOCUS ON DATA, YELLEN
Policy makers had not been expected to raise rates, out of concern that a hike could stifle fragile growth. Their improving view on economic conditions left open the possibility of an increase in the benchmark federal funds rate, currently at 0.25-0.50 percent, by December. Putting behind the surprise sharp downturn in job creation in May that had raised worries about the economy, the Federal Open Market Committee, which sets the monetary policy, said employment and economic growth had grown moderately since their mid-June meeting.
They also appeared to see less threat to US growth from Britain's vote to leave the European Union, which took place a week after the last FOMC meeting. "Near-term risks to the economic outlook have diminished," the FOMC said in announcing the outcome of the closely watched two-day meeting in Washington. Inflation rate hawks and doves had been split in June over how strong the economy was, and voted unanimously to hold off on raising rates until the situation became more clear. The Fed has repeatedly said it wants to see increasing job growth and signs of stronger inflation before it raises rates.
Federal Reserve policy makers said the US economy was increasingly robust and that near-term threats to stability had lessened
While Wednesday's statement cited moderate increases in growth in employment, it said inflation was expected to remain low in the near term. As it had found in June, the committee said household spending was "growing strongly" while fixed investment from businesses remained "soft." But in a departure from its last meeting, the committee noted that payroll and other labor market data "point to some increase in labor utilization in recent months." Tim Duy, Senior Director at the Oregon Economics Forum, said a rate hike at the next FOMC meeting in September could not be ruled out. "But it seems more likely that the critical mass of data to hike will not arrive until December," he told AFP.
Following the statement, Fed funds futures traded on the CME, a kind of betting pool showing investor expectations, implied a 46.5 percent probability that the committee would increase rates before the end of the year, with the larger balance expecting the target rate to remain untouched through December. The results suggested investors had expected the Fed to produce a rosier statement than the one released on Wednesday.
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Brainard said she wanted to see a stronger trend in U.S. consumer spending and evidence of rising inflation before the Fed raises rates, and that the United States still looked vulnerable to economic weakness abroad. "Today's new normal counsels prudence in the removal of policy accommodation," Brainard, one of six permanent voters on the Fed's rate-setting committee, told the Chicago Council on Global Affairs. She said the U.S. labor market was not yet at full strength, which means "the case to tighten policy preemptively is less compelling." Brainard did not comment on the specific timing of future rate policy changes but she held firm in arguing for caution in what could be the last word from a Fed policymaker before the central bank's Sept. 20-21 meeting.
Policymakers will go into the meeting divided, with some concerned current low rates will fuel a surge in inflation while another camp, which includes Brainard, has argued that the Fed should not rush to raise rates. Many other policymakers think the U.S. job market is near full strength and Fed Chair Janet Yellen argued in July the case for rate increases has strengthened. "I think circumstances call for a lively discussion next week," said Atlanta Fed President Dennis Lockhart, who will not be a voter at next week's policy review but will participate in discussions. Brainard said on Monday the labor market might still tighten further without putting pressure on inflation. "The response of inflation to unexpected strength in demand will likely be modest and gradual, requiring a correspondingly moderate policy response," she said.
U.S. stock prices rose following Brainard's comments while the dollar weakened and yields on U.S. government debt fell. Traders trimmed their odds for a September rate hike to 15 percent from 24 percent on Friday, according to CME Group. Investors still saw just higher than 50/50 odds for a December hike. The central bank last raised borrowing costs in December, ending seven years of near-zero rates. Policymakers signaled in June they could still hike rates twice in what remained of 2016. Over the last year, Brainard has been one of the Fed's most vocal defenders of low interest rate policy, arguing the United States is vulnerable to economic troubles in Asia and Europe. She said on Monday the low interest rate policies across advanced economies could make the United States more vulnerable to spikes in the value of the dollar which could put downward pressure on inflation.
Republican Presidential candidate Donald Trump accused the Fed on Monday of keeping interest rates low because of political pressure from the Obama administration. Minneapolis Fed President Neel Kashkari said "politics does not play a part" in the Fed's deliberations and that current low U.S. inflation means there is no "huge urgency" to hike. Inflation has been below the Fed's 2 percent inflation target for the last four years. Viewed as an influential voice of caution within the Fed's Washington-based board of governors, Brainard was the U.S. Treasury's undersecretary for international affairs from 2010 to 2013.
Fed looks unlikely to hike next week after Brainard warning
