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Daily Blog

Tuesday, September 25, 2018
The Fed funds target rate and Treasury yields remain historically low, even though the Fed increased the target rate in December 2016.

The Federal Reserve meets tomorrow and forecasts for a rate increase are close to 100% certain. The market will be looking at the commentary and language of Fed Chair Jerome Powell for clues as to the Fed’s future actions. The word “accommodative” is important because it implies that the Fed funds rate is still below the “neutral rate,” i.e., the rate consistent with full employment, trend growth and stable prices. An economy in this state presumably doesn’t need to be either stimulated or slowed by monetary policy. As of now, Fed rates are still accommodative. If Powell discusses tariffs, trade tensions or emerging markets it could be perceived as dovish – the Fed is willing to stay accommodative longer. If Powell focuses on the labor market and inflation, investors may deem his comments hawkish and more willing to raise rates. The strength of the economy has also increased the likelihood of a December rate hike, with odds currently at 75%. The picture becomes less clear moving into 2019, but consensus is currently for two more hikes next year. While the Fed has expressed willingness to remain neutral for a time, it also wants to make sure it has some ammunition ready for the next economic downturn.

Please follow the Fed funds rate on page 34 of the Global Perspectives book.

Weekly Commentary & Statistics

Monday, September 24, 2018

Stock markets across the globe advanced as investors bet the U.S. economy would keep the rally afloat.

Monthly Commentary & Outlook

July 2018

Strong economic news punctuated the first half of the year, yet markets remained mired in struggle. Main Street has been celebrating as the economy has quietly amassed record highs in U.S. wealth, employment and spending.

  • The economy is quietly enjoying a “stealth” economic boom driven by pro-business tax cuts
  • Small business optimism on a “stratospheric trajectory” resulting in robust expansion plans
  • Trade tariff retaliation, rising inflation and a rising U.S. dollar spike global market volatility
  • Strength amidst uncertainty argues for broad global diversification

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