The minutes of the January FOMC meeting point to a pause in the upward cycle of interest rates, as an assessment is made of risks to inflation and of the level of financial stress…..<\/p>\n
<\/p>\n
Sign up for our free newsletter to receive weekly news from BONDWorld. Click here to register for your free copy<\/strong><\/span><\/a> <\/strong><\/span><\/a><\/span><\/p>\n Intesa Sanpaolo – Research Department For professional investors and advisers only<\/strong><\/p>\n The minutes of the January FOMC meeting confirm participants’ concerns over the possible repercussions on the US scenario of financial turbulence, of the Chinese slowdown, and of downside pressures to inflation generated by the lower oil prices. The minutes outline broad consensus on the fact that uncertainty had increased, and many participants believe these developments have added to downside risks. The staff’s growth and inflation forecasts also signal greater downside risks, due to financial restriction and to the outlook for global growth.<\/p>\n The minutes reported that “most” participants would need to see increased evidence to determine whether the balance of risks had changed, whereas “others” considered downside risks to have increased, or not to have become more balanced. Furthermore, “several participants” considered the inflation scenario more uncertain, or subject to downside risks. In the past week, several FOMC members provided indications consistent with the appropriateness of a pause in the rate path, not only due to higher uncertainty and financial restriction, but also in light of the downside pressures exerted on core inflation by the oil price. Since early January, the Cleveland Fed’s financial stress index has worsened from levels associated with “normal stress” to levels indicating “moderate stress”, and is now on the verge of indicating “significant stress”. Although Yellen has not explicitly ruled out the possibility of a hike at the forthcoming March meeting, or even less so at the meetings scheduled in the second quarter of the year, a pause in the rate cycle at the next meeting is almost certain. The Committee’s rhetoric will remain cautious, and try to stick to the script of a monetary policy guided by the evolution of data and financial conditions, with no pre-set commitments. At the March meeting, a downside revision is likely of growth forecasts, inflation forecasts, and of the dot plot: however, the Fed does not seem at all likely to include a complete stop to the upward cycle on rates in its scenario, and even less so on future rate cuts.<\/p>\n The tone of the January ECB meeting minutes was accommodative and seemed to suggest quite a good level of cohesion within the Council on the assessment of the overall situation. The minutes reported “broad agreement” on the fact that “downside risks had increased again”, due to mounting uncertainty over the size of the slowdown in the emerging economies, to market volatility, and to increased geopolitical risks, as well as to the tightening of financial conditions. Furthermore, the Council generally agreed that the inflation profile was subject to downside risks not only due to the new drop in the price of oil, but also to the weakness of domestic prices. Some members of the Council believed “it would be preferable to act preemptively” without waiting for emerging risks to materialise, although “a remark was also made cautioning against adopting an explicit risk-based approach to monetary policy”. The minutes stressed that the Council agreed on the importance of adopting adequate communication, geared to reassuring the markets on the ECB’s determination to meet its mandate to secure price stability in the medium term, although “it had to be avoided, by means of appropriate communication, that markets developed undue or excessive expectations”. Some members also considered admissible a period of above-target inflation, after years below the 2% mark, to reassert the ECB’s symmetrical commitment to achieve its mandate in the medium term. Remarks on the preparatory work reassert that it is necessary “to make the full range of policy options available” to the Council already in March. On the whole, the minutes, together with Draghi’s hearing at the European Parliament, confirm openness to stepping up monetary accommodation at the next meeting of the Governing Council.<\/p>\n <\/p>\n Source: BONDWorld.ch<\/p>\n","protected":false},"excerpt":{"rendered":" The minutes of the January FOMC meeting point to a pause in the upward cycle of interest rates, as an assessment is made of risks to inflation and of the level of financial stress…..<\/p>\n","protected":false},"author":2,"featured_media":3649,"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-1905","post","type-post","status-publish","format-standard","has-post-thumbnail","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\/1905","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=1905"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1905\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media\/3649"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=1905"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=1905"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=1905"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n
\n