The FOMC minutes indicate that if the labour market keeps improving, the FOMC may hike rates even with headline inflation is well off target, as long as core inflation stays close to its present levels, and forecasts point to a return of headline inflation towards 2%……<\/p>\n
<\/p>\n
Intesa Sanpaolo \u2013 Research Department – For professional investors and advisers only<\/strong><\/p>\n ECB \u2013 The fact that ahead of the Greek elections one of the leading parties is explicitly calling for a restructuring of debt makes the drawing up of new stimulus measures more complex.<\/p>\n The minutes of the December FOMC meeting reveal confidence in the solidity of the US recovery, as well as concerns over the weakness of the global economic picture.<\/strong> The minutes stress the negative fallout of the global economy, which is the main source of downside risks weighing on the United States. The assessment of the domestic scenario is clearly positive, with above-potential economic activity growth expected at least until 2017. Meeting participants (with widespread consensus) expect the reduction of labour market slack to continue at a moderate pace. As regards inflation, the price growth well below target so far doesn\u2019t worry the FOMC, which considers it a temporary development due to the decline in energy and import prices, and confirms its forecast for a gradual return of inflation towards 2%. There is widespread consensus over the fact that the sharp drop in oil prices is a supportive factor for growth and employment. One important development from the minutes is a shift in focus to core inflation. The FOMC acknowledges that inflation may temporarily drop into negative territory, while signalling that the rates lift-off may occur with core inflation at levels close to current ones, as long as expectations are for a subsequent return of inflation towards 2%.<\/p>\n Reference to core inflation as the key measure of prices in assessing the appropriateness of the rate shift is an important mainstay for the policy scenario, on the eve of the very likely drop of headline inflation into negative territory as of January 2015. The minutes indicate that the first rate increase is unlikey to be decided before at least a couple of meetings, as also stated by Yellen during the latest press conference, while confirming that the timing of the first hike remains data-dependent. In conclusion, the minutes indicate that a transitory deflation phase will not deter the FOMC from hiking interest rates, provided that economic data confirm that the recovery proceeds at a moderate pace. Therefore, expectations for the rate lift-off around mid-2015 have strengthened: we confirm our forecast that the first hike should occur by mid-year.<\/p>\n In the euro area, statements made by Praet and Draghi fuelled expectations that the Governing Council may make important announcements already at the Jan 22 meeting, although Praet also signalled that many unresolved issues were still on the table a few days ago. In this respect, it will be interesting to see whether ECB tones will be changed, following the council meeting on Jan 8, where the technical options must have been discussed. What is certain is that the political crisis in Greece will not make the ECB\u2019s task any simpler. On the one hand, some may argue that the financial turmoil caused by the Greek elections makes the early launch of a government bond purchase programme in the euro area even more useful: just the prospect of a purchase programme, considered very likely by the markets, has helped dampen the reactions of the bond markets to a potentially very dangerous political crisis. On the other hand, however, the risk of the elections being won by a party calling for debt restructuring complicates the definition of operational aspects of any QE programme. On the one side, the ECB may find itself with a balance sheet burdened with public debt no longer acknowledged by the issuer.<\/p>\n On the other, failure to reach an agreement on post-programme financial management would force the Eurosystem to reconsider the access of Greek banks to ECB refinancing, which in November accounted for13.8% of overall liabilities, and which could therefore make Greece\u2019s exit from the monetary union inevitable. This possibility must be considered in drawing up the programme, either by excluding Greece (or any speculativegrade issuers) from the purchases, or by introducing corrective measures limiting the risks for the other national central banks.<\/p>\n Quelle: BONDWorld.ch<\/p>\n","protected":false},"excerpt":{"rendered":" The FOMC minutes indicate that if the labour market keeps improving, the FOMC may hike rates even with headline inflation is well off target, as long as core inflation stays close to its present levels, and forecasts point to a return of headline inflation towards 2%……<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"telegram_tosend":false,"telegram_tosend_message":"","telegram_tosend_target":0,"footnotes":"","_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[50],"tags":[],"class_list":["post-1515","post","type-post","status-publish","format-standard","hentry","category-weekly-analysis"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1515","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/comments?post=1515"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1515\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=1515"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=1515"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=1515"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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