Tag: Federal Reserve

The markets and analysts are all focussing on the potential for the FED to lift interest rates this year, perhaps 3 times, or significantly more. But actually, we think the FED’s balance sheet is where much of the action, and market attention should be. It indicated it may be ready to start raising interest rates, dial back on its bond-buying program, and engage in high-level discussions about reducing holdings of Treasuries and mortgage-backed securities. The process of reversing the trillions of dollars of pandemic bond purchases, or quantitative easing, is technical, wonky, and somewhat opaque.

“Interest rate hikes are yesterday’s news,” Morgan Stanley Managing Director Jim Caron told Yahoo Finance on Tuesday. Caron said the “main thrust” of Fed policy will come from how it undoes the stimulus coming from its balance sheet.

Because of the massive amount of buying in response to the pandemic, the Fed owns about a third of both the Treasury and mortgage markets. If the idea for higher rates is to curb inflation, long-term rates won’t really rise until the Fed’s huge footprint diminishes, rendering rate increases on their own ineffective if bond markets aren’t speaking for themselves.

The latest weekly FED Total Assets (Less Eliminations) was released on Wednesday as reported by The St Louis Fed. Total Assets were $8.788 trillion, up by 0.26% this week, yes in the week when Powell underscored inflation was the battle now to be won (over against full employment), and that balance sheet reduction was on the cards.

“We’re mindful that the balance sheet is $9 trillion. It’s far above where it needs to be,” Powell told Congress in testimony on Tuesday. The question: How should the Fed time interest rate hikes with any balance sheet unwind? Does it matter?

he latest edition of our finance and property news digest with a distinctively Australian flavour.

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The archetypal cartoon picture of a character running off a cliff, legs cycling, and hanging in mid-air, until the truth dawns, and then falls, came to mind today as U.S. stocks fell sharply on Wednesday, with the NASDAQ plunging more than 3% in its biggest one-day percentage drop since February and it also represents the steepest slide to begin the first three days of a year in 13 years, when the financial crisis gripped the globe. So much for the hopeful note at the start of the New Year.

The S&P 500 fell more than 1%, its biggest daily percentage decline since Nov. 26, the first day of trading after news of the Omicron variant of the coronavirus. The Russell 2000 index also suffered its biggest one-day drop since Nov. 26, while the S&P 500 financials index fell 1.3%, a day after it registered an all-time closing high.

The reason, the release of the U.S. Federal Reserve meeting minutes which signaled the central bank may raise interest rates sooner than markets had expected. I have said before that the markets continue to believe the FED will save them, but, what if rates do rise harder and faster?

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Today’s post is brought to you by Ribbon Property Consultants.

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The Federal Reserve has flagged one of the most hawkish policy pivots in years, saying it will double the pace at which it’s scaling back purchases of Treasuries and mortgage-backed securities to $30 billion a month, putting it on track to conclude the program in early 2022, rather than mid-year as initially planned.

“Economic developments and changes in the outlook warrant this evolution of monetary policy,” Fed Chair Jerome Powell told reporters during a post-meeting press conference. “The economy has been making rapid progress toward maximum employment.”

This marks the next turn as they intensify their battle against the hottest inflation in a generation. And not only will they end their asset-buying program earlier but they are also signaling interest rate rises in 2022 – a faster pace than expected.

It seems the run of ultra-easy policy since the beginning of the Covid pandemic is coming to a close.

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.

In today’s show we look at some the latest developments in the digital finance space against the latest economic news.

First American consumers — the U.S. economy’s main engine — showed little hesitation on spending last month despite the fastest inflation in three decades, setting up the economy for a year-end growth spurt.

Purchases of goods and services, unadjusted for changes in prices, increased 1.3%, the most since March, the Commerce Department said Wednesday. Even after accounting for higher prices, spending still exceeded projections in a sign that consumers started their holiday shopping early.

Jerome Powell of course has been renominated to lead the Fed. One factor to consider is the potential impact on digital currencies. In fact. Powell appears to deliberately avoid the central bank digital currency (CBDC) hype, despite many other central banks pushing hard for CBDCs. He consistently splashes cold water on that idea. Given the benefits the US gets from the US Dollar as global reserve currency, this perhaps symbolizes a break with globalist interests in favour of American banking interests.

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.