{"id":988,"date":"2012-04-27T13:00:00","date_gmt":"2012-04-27T13:00:00","guid":{"rendered":"http:\/\/starthostunlimiteddmffassi-ss.stackstaging.com\/bondworld.ch\/home\/sites\/20b\/7\/760c69a11c\/public_html\/investmentworld.ch\/index.php\/2012\/04\/27\/viewpoint-fed-in-pause-boj-in-action\/"},"modified":"2012-04-27T13:00:00","modified_gmt":"2012-04-27T13:00:00","slug":"viewpoint-fed-in-pause-boj-in-action","status":"publish","type":"post","link":"https:\/\/www.investmentworld.eu\/ch\/viewpoint-fed-in-pause-boj-in-action\/","title":{"rendered":"Viewpoint: Fed in pause, BoJ in action"},"content":{"rendered":"

<\/span><\/span>The FOMC meeting ended with no policy changes and a cautious statement, despite brighter macroeconomic forecasts for 2012. The Fed signals that risks from global financial markets are again on the rise and remain \u201csignificant\u201d. Policy guidelines were as expected: the forecast of stable rates \u201cat least until late 2014\u201d was confirmed, as was the \u201centire\u201d commitment \u201cto do more\u201d if necessary. There were no indications or specific references to new monetary stimulus programmes. As before, Lacker dissented on the guideline of unchanged rates until 2014….. <\/strong><\/p>\n

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For professional investors and advisers only<\/strong><\/p>\n

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Economic projections for 2012 were stepped up compared to those released in January (2.4-2.9% from 2.2-2.7%), but revised down for 2013 and 2014, while still above long-term growth. The unemployment rate was revised down markedly, to 7.8-8% from 8.2-8.5% in 2012, although the end rate for the three-year period was left broadly unchanged at 6.7-7.4% in 2014. Inflation was revised upwards this year, to 1.9-2% from 1.4-1.8% in January, in light of higher energy prices. Rate projections include marginal changes from 2014 onwards, with a forecast rate at the end of 2014 of 1% instead of 0.75%, while all participants expect the first rate increase by the end of 2015 (previously 2 participants expected this to happen in 2016).<\/div>\n
Despite the apparently more optimistic projections, the assessment of the scenario, as outlined by the statement and Mr. Bernanke\u2019s press conference, shows mounting concerns. The press release says the labour market has \u201cimproved in recent months\u201d (in March the unemployment rate \u201cimproved further\u201d, dropping \u201csignificantly\u201d). Growth is seen as \u201cmoderate in the coming quarters\u201d and a gradual pick-up is expected later. Also, the international financial markets are a source of \u201csignificant\u201d downside risks to the economic scenario (in March, risks had \u201ceased\u201d). <\/p>\n

Bernanke went into greater detail on the assessment of the labour market: the recent improvement could be the result of a \u201cone-off\u201d adjustment after the huge corrections caused by the recession; also, it is still possible that, as GDP grows, the participation rate may start rising. Interrupting downward trend of the unemployment rate. Bernanke also noted that mild weather conditions at the start of the year may have artificially improved economic data in several sectors.<\/p>\n

As regards the monetary policy strategy, Bernanke said that the end of the maturity extension program should have only \u201cmoderate\u201d effects on yields, as the market reacts to the stock of securities rather that to flows. No explicit reference was made to new programmes, even though it was repeated that the Fed is ready to do more if necessary. Clearly, monetary policy will be guided over the next few quarters by macroeconomic data: a weakening of growth and\/or of the employment trend could trigger new interventions. Our forecast for weakness in the months ahead could increase the chances of a new purchase programme. An extension of the \u201cOperation Twist\u201d is unlikely, as the share of short term securities in the Fed\u2019s balance sheet has dropped significantly.<\/p>\n

As expected, the BoJ meeting ended with new stimulus, along two dimensions. 1) The total size of the purchase programme was raised by 5 trillion yen, to 70 trillion, and will end in June 2013 (previous expiration: end of 2012). 2) The composition of the programme was changed, with reduced emphasis on credit easing (loans -5 trillion yen) as opposed to increased purchases (+10 trillion yen to 29 trillion, ETF + 200 billion, J-REIT +10 billion). JGB purchases will be on the 1-3 year maturity segment, as opposed to the current 1-2 years. The central bank confirmed that it will continue to implement \u201cpowerful\u201d monetary easing to achieve its medium-long term inflation target of 1%. The main effect of the BoJ\u2019s actions is the signal that, with growing amounts of available liquidity, the exchange rate will remain on the current depreciation path, supporting demand through exports and contributing to reduce deflationary pressures.<\/p><\/div>\n

Appendix
<\/strong> <\/p>\n

Analyst Certification<\/strong>
The financial analysts who prepared this report, and whose names and roles appear on the first page, certify that: (1) The views expressed on companies mentioned herein accurately reflect independent, fair and balanced personal views; (2) No direct or indirect compensation has been or will be received in exchange for any views expressed. Specific disclosures: The analysts who prepared this report do not receive bonuses, salaries, or any other form of compensation that is based upon specific investment banking transactions.<\/p>\n

Important Disclosures<\/strong>
This research has been prepared by Intesa Sanpaolo S.p.A. and distributed by Banca IMI S.p.A. Milan, Banca IMI SpA-London Branch (a member of the London Stock Exchange) and Banca IMI Securities Corp (a member of the NYSE and NASD). Intesa Sanpaolo S.p.A. accepts full responsibility for the contents of this report. Please also note that Intesa Sanpaolo S.p.A. reserves the right to issue this document to its own clients. Banca IMI S.p.A. and Intesa Sanpaolo S.p.A. are both part of the Gruppo Intesa Sanpaolo. Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. are both authorised by the Banca d’Italia, are both regulated by the Financial Services Authority in the conduct of designated investment business in the UK and by the SEC for the conduct of US business.
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Valuation Methodology<\/strong>
Trading Ideas are based on the market\u2019s expectations, investors\u2019 positioning and technical, quantitative or qualitative aspects. They take into account the key macro and market events and to what extent they have already been discounted in yields and\/or market spreads. They are also based on events which are expected to affect the market trend in terms of yields and\/or spreads in the short-medium term. The Trading Ideas may refer to both cash and derivative instruments and indicate a precise target or yield range or a yield spread between different market curves or different maturities on the same curve. The relative valuations may be in terms of yield, asset swap spreads or benchmark spreads.

Coverage Policy And Frequency Of Research Reports<\/strong>
Intesa Sanpaolo S.p.A. trading ideas are made in both a very short time horizon (the current day or subsequent days) or in a horizon ranging from one week to three months, in conjunction with any exceptional event that affects the issuer\u2019s operations. In the case of a short note, we advise investors to refer to the most recent report published by Intesa Sanpaolo S.p.A\u2019s Research Department for a full analysis of valuation methodology, earnings assumptions and risks. Research is available on IMI\u2019s web site (www.bancaimi.com) or by contacting your sales representative.<\/p>\n

Source: BONDWorld – Intesa Sanpaolo \u2013 Research Department<\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"

The FOMC meeting ended with no policy changes and a cautious statement, despite brighter macroeconomic forecasts for 2012. The Fed signals that risks from global financial markets are again on the rise and remain \u201csignificant\u201d. Policy guidelines were as expected: the forecast of stable rates \u201cat least until late 2014\u201d was confirmed, as was the […]<\/p>\n","protected":false},"author":2,"featured_media":3455,"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-988","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\/988","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=988"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/988\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media\/3455"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=988"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=988"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=988"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}