In today’s market review we are going to focus on Fed Chair Jerome Powell speech at Jackson Hole, just 9 minutes in length but enough to move the markets down significantly.
For the Fed’s monetary policies to have any effect, markets must transmit them via the financial conditions to the actual economy. And the Fed needs to make sure this happens. And today was an effort by Powell to get this job done.
Speech: https://youtu.be/vhMRynjm3CI
The speech was one of the strongest ever by the Fed chief, reflecting the onerous burden borne by the central bank in curbing inflation retreating ever so slowly from four-decade highs.
First Powell said inflation needed to be controlled. That was their main mandate.
Next he signalled there will be more rate hikes in the months ahead, taking the cash rate well above the neutral rate – meaning that they intend to deliberately slow the economy.
And he acknowledged this will hurt households and businesses.
And acknowledge that the current labour market was out of wack.
So, this message cut directly across the ranks of those saying the FED will pivot – arguing the FED has really been signalling that it would soon “pause” the rate hikes or “pivot” to rate cuts, even though the Fed had raised its policy rates four times this year, including twice by 75 basis points, the biggest rate hikes in years.
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Is the US in recession or not? Well the “official figures” are unsure, and despite the inverted yield curve (2-10) you can still argue there is no recession, which gives latitude to the Fed to hike further and faster.
We may hear something about this at Jackson Hole, the Central Bankers’ love-in!
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Is the US in recession or not? Well the “official figures” are unsure, and despite the inverted yield curve (2-10) you can still argue there is no recession, which gives latitude to the Fed to hike further and faster. We may hear something about this at Jackson Hole, the Central Bankers’ love-in!
Go to the Walk The World Universe at https://walktheworld.com.au/
A quick update on the Fed moves overnight, as they lift by 75 basis points, with more to come. No, the US is not in recession Powell said, and there was a strong underlying economy, with high employment levels.
Hopium? We will see.
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We are coming to the pointy end of the action now, with the Nasdaq closing lower on Monday after a choppy session for U.S. equities ahead of a big week of technology earnings reports while oil prices rose and treasury yields edged higher as investors braced for a Federal Reserve interest rate hike.
The S&P 500 see-sawed on Monday and ended close to unchanged.
Meanwhile in Australia the head of APRA, the entity responsible for banking supervision is going, while the local bond market is in pieces.
In currencies, the dollar index, which touched a 20-year high this month, was down slightly and gold also slipped, as did bitcoin.
Concern that rising interest rates will drive the economy into a recession has been escalating as the Fed tightens monetary policy aggressively to bring down the steepest inflation in four decades. Fed Chair Jerome Powell has said that failing to restore price stability would be a “bigger mistake” than pushing the US into a recession, which he has continued to maintain the nation can avoid.
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Stocks wobbled but ultimately ended lower on Wednesday, as the fastest pace of inflation in decades stoked bets that the Federal Reserve will be forced to deliver a much larger than expected 1% rate hike later this year. The S&P 500 closed down 0.5%, the Dow Jones Industrial Average fell 0.7%, or 208 points, the Nasdaq fell 0.1%.
U.S. inflation rose 9.1% in June to hit a fresh four-decade high, topping economists’ forecast for a 9% rise, driven by an 11.2% leap in gas prices and a 1.0% increase in food prices.
This report will make for very uncomfortable reading at the Fed,” it added. US inflation roared again to a fresh four-decade high last month, likely strengthening the Federal Reserve’s resolve to aggressively raise interest rates that risks upending the economic expansion.
The widely followed inflation gauge increased 1.3% from a month earlier, the most since 2005, reflecting higher gasoline, shelter and food costs. The so-called core CPI, which strips out the more volatile food and energy components, advanced 0.7% from the prior month and 5.9% from a year ago, above forecasts.
The red-hot inflation figures reaffirm that price pressures are rampant and widespread throughout the economy and taking a bigger toll on real wages, which are down the most ever in data back to 2007. The inflation data will keep Fed officials on an aggressive policy course to rein in demand, and adds pressure to President Joe Biden and congressional Democrats whose support has slumped ahead of midterm elections.
“Rather than cooling down, inflation is heating up,” Sal Guatieri, senior economist at BMO Capital Markets, said in a note. “While a pullback in gasoline costs in July and reported retail discounting will help tamp down the flames, the broad pressure in the core rate, led by plenty of inertia in rents, suggests inflation may not peak for a while, and might remain stubbornly high for longer than anticipated.”
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Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
There was an outstanding piece from John Authers this week arguing that the Age of Credibility for Central Banks Is over as Inflation blunders have destroyed the trust that’s anchored the global financial system since the end of the gold standard.
Certainly, in Australia, the RBA has been on shaky ground for many years, including over forecasting wages growth, taking interest rates too low, and relying on household wealth to be artificially inflated by poor policy for years. But the shocking reversal from last November’s no rate rises til 2024, to todays 1.35% target cash rate, with more to come, shows just how far from credible they are – despite politicians still talking about mountains of respect. Over in New Zealand they are further up the curve, but the issues are the same. Central Bank credibility is shot.
It appears that the most likely anchor to replace central bank credibility is confidence in governments. But that is not a comforting thought.
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While the technical definition of a recession traditionally is two quarters of contraction or negative growth, I think that definition is frankly irrelevant given where we are today.
You simply have to look at the trends in consumer confidence, which are ultra-low in many western countries, from Australia, New Zealand, the UK and the US. And what is driving this is the concern about inflation – which is why central banks are jaw-boning their ability to get inflation under control. Quite simply, people’s money is disappearing fast, and they’re worried it could get a lot worse.
By the way, pause for a moment to ask why a 2-3% inflation target is used – it have become a convention, but there is little to explain why that number is correct. The truth is, that number was grabbed from thin air years ago, and has taken on a life of its own.
Note that Goldman Sachs Group Inc. economists put the risk of such a slump in the US in the next year at 30%. Others put the probability considerably higher, with the risks building beyond that time frame. But for many it already feels like it’s here.
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
If you string together recent statements from entities like the Bank For International Settlements, IMF, Federal Reserve and other non-elected entities a frightening story emerges as Central Bank Digital Currencies (CBDC) are deployed to give Central Banks even greater powers, impose cross-border solutions (some would say a global currency) and remove more freedoms from society.
This is being talked about top-down as it were, without proper local consultation and buy-in. The future they portray is frightening.
To make the point I have pulled together material from a number of relatively difficult texts, but see the summary section in the contents section to cut to the chase.
[CONTENT]
0:00 Start 0:15 Introduction 1:25 BIS Report – Digital Money 6:25 BIS New Public Policy 8:30 IMF Future Of Money 15:00 Federal Reserve on CBDC 19:23 Literary Review on CBDC and Monetary Policy 24:50 Summary and Conclusion
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This week, The U.S. Federal Reserve announced an interest rate hike of 75 basis points, its largest increase since 1994, the Swiss National Bank unexpectedly lifted rates by 50 basis points on Thursday, while the Bank of England on the same day raised its interest rates by 25 basis points, hiking for its fifth consecutive meeting. The main outlier is the Bank of Japan, which stuck with its strategy of pinning 10-year yields near zero at its policy meeting earlier Friday. However, this has done little to ease worries that inflation and rate hikes are going to curb economic growth for years to come.
And It was one of the most dramatic weeks in the short history of the cryptocurrency market, bookended by the type of announcements investors fear the most from a counterparty: We’re sorry, but we just can’t return your money right now. It all started late Sunday, when a sort of crypto shadow bank called Celsius Network suspended withdrawals from depositors who had been enticed by sky-high interest rates that, in retrospect, were likely too good to be true. By the end of the week, on the other side of the world in Hong Kong, the digital-asset lender Babel Finance also froze withdrawals.
Just as Bear Stearns’s hedge funds were among the first to reveal problems from the subprime mortgage crisis, the “cockroach theory” springs to mind: If you see one of those nasty bugs scurrying across the floor, chances are there are plenty more hiding behind the fridge or under the sink. Wealth destruction is now a thing.
[Content]
0.00 Start 0.15 Introduction 2:10 Federal Reserve Inflation Battle 3:30 GDP Forecast Down 7:25 US Markets 10:00 European Markets 11:20 Asia Pacific Markets 11:40 Japan Bond Crisis 13:05 Australian Markets 18:00 Crypto Winter 23:30 Crypto Traders Turn On Each Other 29:05 Conclusion and Close
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