Economy

Right side of balance sheet

Right side of balance sheet”

The weakness among treasuries came after the Fed left interest rates unchanged as widely expected but signaled another rate hike is likely this year.

Reducing the size of the Fed's balance sheet will mean reducing the quantity of reserves in the financial system.

The reductions will begin in October with a target of $10 billion a month - comprised of about $6 billion in Treasury bonds and $4 billion in mortgage bonds - and that will increase to $50 billion a month in 2018. This approach suggests that tapering will occur at a glacial pace. Hopefully, the Fed won't do anything drastic that could spook the bond market. U.S. Fed chair Janet Yellen aims to avoid a similar financial outpouring. A new board composition could accelerate changes in policy and have unintended effects on markets.

China's markets were already closed by the time it came but it kept the pressure on metals and emerging markets stocks which were already down after the Fed meeting and as Russian Federation was forced to bail out one of its large banks.

While this is welcome added clarity on the Fed's intentions, they have once again missed an opportunity to offer a comprehensive strategy for conducting monetary policy.

In summary, despite the visible current hawkish position of the Fed, which helped Dollars yesterday, and may continue to do so in the near future, the long-term outlook for the US currency for the next 3-6 years is clearly worse than that of its competitors due to the understanding that the Central Bank is unlikely to raise interest rates as much as in previous cycles of monetary tightening.

The Fed will hike as gross domestic product (GDP) growth and inflation allow in order to create a cushion in the event the economy rolls over. The big question that forex market participants will be waiting to be answered is with respect to the Fed board's forecasts for future rate increases (the "dot plot") and the assessment of economic conditions - together with fresh forecasts about growth, inflation and unemployment.

August's year-on-year inflation increase of 1.9% is progressing toward the Fed's goal of 2%. There was a chance that the Fed would appear more dovish with respect to the prospects for tightening in 2018 and 2019 but would likely stay the course for a December hike. Gold prices fell as the USA dollar rose after the FOMC meeting. Some economists worry such a vast lake of bonds is distorting the market and is in danger of distorting it more if it gets out suddenly. For each rate hike since the crisis, the Fed has needed to raise the IOER rate as well in order to have a commensurate rise in the policy rate. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by almost a basis point at 2.234%. No forecasts can be guaranteed. There is no guarantee that the information supplied is accurate, complete, or timely, nor are there any warranties with regards to the results obtained from its use.



Like this

Latest


22 September 2017
Fowler's three hits lead Cardinals to sweep of Cincinnati
That included a Molander double in the seventh that scored Martinez and a play where Molina scored after Wong grounded out. Cincinnati tied the score 1-1 in the second when Jesse Winker doubled and later scored from third on a wild pitch.

22 September 2017
Vivo X20 and X20 Plus official, offer 18:9 Full View screen
Under the hood is the 64-bit Qualcomm Snapdragon 660 octa-core processor that uses the custom Kryo 260 cores clocked up to 2.2GHz. The X20 measures 155.85 x 75.15 x 7.2 mm, and weighs 159g, while the X20 Plus comes in at 165.32 x 80.09 x 7.45 mm and 181.5g.

22 September 2017
Nigeria Customs seize 470 firearms imported from Turkey
According to him, the importer of the cargo is Great Oil and Gas Ltd and the vessel named "MV Arkas Africa" owned by Hull Blyth. He said Customs officers discovered that the guns were concealed in a 20-foot container.

22 September 2017
Timberwolves agree to deal with veteran point guard Aaron Brooks, source says
Brooks, 32, appeared in 65 games last season with in averaging 5.0 points and 1.9 assists in 13.8 minutes. The Wolves will open training camp on Saturday in San Diego after hosting media day on Friday.

22 September 2017
President Trump to visit Puerto Rico
The island is facing flooding and unique difficulties with recovery in the coming days, according to The New York Times . Perez had hoped to raise money to buy uniforms, backpacks and school supplies for 100 children in Puerto Rico.

22 September 2017
Sydney police investigating after man allegedly stole five-carat diamond
Staff say the man first came into the store on Monday to look at their diamonds. The suspect is described as Asian, with a slim build, and short black hair.

22 September 2017
This Temple lineman got a strip-sack, recovery, and long TD, all by himself
With the win, Charlie Strong's Bulls are 4-0, with a road game against East Carolina coming up next week. Unfortunately, that's really the only positive for Temple on the night.

22 September 2017
$0.74 EPS Expected for Bank Of The Ozarks Inc (OZRK)
The value of the investment in OZRK went from $35,346,000 to $24,236,000 a change of $11,110,000 for the reporting period. The firm has "Buy" rating given on Wednesday, November 30 by Brean Capital. 84,763 stocks of the company were exchanged.

22 September 2017
Man dies in 3-vehicle crash in Van Wert County
The impact then pushed Helsel's auto into the tractor-trailer ahead of him driven by David Knight, 45, of Industry, Pennsylvania. Radio traffic indicates the accident happened just before 11 am between 2 Semis and a auto on Westbound US 30 near Richey Road.

22 September 2017
Pine County Sheriff: Hunter Found Along Minnesota-Wisconsin Border
A Pine County officer was able to exchange a few text messages with Kniefel before cell phone signal was lost again. Kniefel told authorities he had rationed the food and water he had with him, but knew that a search was on for him.



Recommended