Significant news from the Federal Reserve (FED) and The Peoples Bank Of China (PBOC) shows how divergent their two monetary policy paths are. The FED is committed to lifting rates sufficient to snuff out inflation (despite the markets continually seeking a pivot) and withdrawing stimulus while the PBOC is seeking to provide additional support for the Chinese economy, including the property sector.
This divergence is striking and will have significant impact on exchange rates and global financial flows. Both though are talking about Central Bank Digital Currencies.
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So the FED hiked again, and lifted the expected terminal rate to above 5% with the majority of board members agreeing this this projection. So, the markets and the FED are now not on the same page, with traders still betting on lower rates during 2023.
In addition, a slowing growth rate and higher unemployment means future earnings will be lower, suggesting that markets are over optimistic.
Things are as they say, complicated.
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Today’s post is brought to you by Ribbon Property Consultants.
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Fed Chair Powell gave an address overnight which set the markets running higher. The FED will lift rates further but perhaps more slowly. The markets liked that with the Dow moving into bull territory.
And in Australia, ANZ has up forecast future rates here, higher for longer.
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.
Monday ended up a down day on Wall Street ‘s main indexes ended lower on Monday, as investors digested comments from U.S. Federal Reserve officials about plans for interest rate hikes.
Losses accelerated toward the end of the up-and-down session, with focus turning to Tuesday’s producer price index report and markets highly sensitive to inflation data. real estate and discretionary sectors leading broad declines.
The Fed Outings included Christopher Waller on Sunday who said the Fed may consider slowing the pace of increases at its next meeting but that should not be seen as a “softening” in its commitment to lower inflation. Monetary policy tightening “isn’t ending in the next meeting or two”, and Fed Vice Chair Lael Brainard who signalled that the central bank would likely soon slow its interest rates hikes but added that there still was “additional work to do on raising rates.”
“There is still a sensitivity to Fed speak… One was a little hawkish, one was a little dovish,” said Eric Kuby, chief investment officer at North Star Investment Management Corp.
Today’s post is brought to you by Ribbon Property Consultants.
As Central Bank Rate Fest rolls on from the RBA on Tuesday, as expected the FED lifted the US interest rate target by 75 basis points overnight and reaffirmed continued hikes ahead. Later tonight we will get the Bank of England announcement, which is also expected to hike big.
The Fed’s unanimous decision lifted the target for the benchmark federal funds rate to a range of 3.75% to 4%, its highest level since 2008. “Slower for longer,” declared JP Morgan Chase & Co, chief US economist Michael Feroli in a note to clients. “The Fed opened the door to dialing down the size of the next hike but did so without easing up financial conditions.”
As a result, U.S. stocks ended sharply lower on Wednesday, with the S&P 500 suffering its worst rout on a Fed decision day since January 2021, as comments from Fed Chair Jerome Powell shattered initial optimism over a Fed policy statement that raised interest rates by 75 basis points but signaled that smaller rate hikes may be on the horizon.
The FED said its battle against inflation will require borrowing costs to rise further, yet signaled it may be nearing an inflection point in what has become the swiftest tightening of U.S. monetary policy in 40 years.
“It’s as if investors came to a haunted house and got candy, but once they unwrapped it, saw it was soggy broccoli,” said Max Gokhman, chief investment officer at AlphaTrAI.
The latest edition of our finance and property news digest with a distinctively Australian flavour.
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Digital Finance Analytics (DFA) Blog
Fed Signals Higher For Longer And Markets Crater! [Podcast]
To no one’s surprise the Federal Reserve delivered its third consecutive 0.75% rate increase on Wednesday as the Federal Open Market Committee raised its benchmark rate to a range of 3% to 3.25% from 2.25% to 2.5% previously. It was all pretty much as expected although his specific comments on the housing market may have shocked some. He said effectively that dropping home prices won’t stop the quest to strangle inflation. Property bulls please note.
So, after this latest rate hike, the Fed has now lifted its benchmark rate by 300 basis points, or 3% in just six months as the central bank accelerates policy to restrictive territory with the aim of slowing growth enough to make a meaningful dent in inflation.
“We can’t fail to do that,” he said, referring to the central bank’s mission against price growth. “That would be the thing that would be most painful for the people that we serve. We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t. What we need to do is get rates up to the point where we’re putting meaningful downward pressure on inflation. That’s what we’re doing. We haven’t given up the idea that we can have a relatively modest increase in unemployment.”
But critically, there were no signs of easing its push into restrictive territory as it battles to cool the embers of inflation.
“We’ve just moved into the very, very lowest level of what might be restrictive [territory],” Powell said in the press conference that followed the monetary policy statement. “In my view, there’s a ways to go.”
As a result, the Fed now sees its benchmark rate rising to 4.4% in 2022, above the 3.4% forecast in June, paving the way for further front-loading of rate hikes in the remaining two Fed meetings for the year and into 2023.
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 alongside 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 this week’s market review we explore the fragile upswing in the second half of the week, which can best be understood as a positioning by speculators, betting on a falling market, typically seen as part of a bear market rally sequence, then anything substantive.
I believe the markets are still not fully factoring the evaporation of a FED pivot at least for now, despite the intense and heightened rhetoric. Indeed, as I discussed yesterday, the current bout of inflation has predominately been caused by over stimulation thanks to ultra-low-rate settings, quantitative easing and loose fiscal measures (i.e., Government stimulus).
The truth is this is now coming undone. Thus, I do not regard the slight end of week upswing as a significant turn. As normal, we will start in the US, such a globally dominate market, then cover Europe, Asia and end in Australia.
Digital Finance Analytics (DFA) Blog
Speculators Let Rip As Central Banks Talk Up Higher Rates... [Podcast]
In this week’s market review we explore the fragile upswing in the second half of the week, which can best be understood as a positioning by speculators, betting on a falling market, typically seen as part of a bear market rally sequence, then anything substantive. I believe the markets are still not fully factoring the evaporation of a FED pivot at least for now, despite the intense and heightened rhetoric.
Indeed, as I discussed yesterday, the current bout of inflation has predominately been caused by over stimulation thanks to ultra-low-rate settings, quantitative easing and loose fiscal measures (i.e., Government stimulus). The truth is this is now coming undone. Thus, I do not regard the slight end of week upswing as a significant turn.
As normal, we will start in the US, such a globally dominate market, then cover Europe, Asia and end in Australia. Go to the Walk The World Universe at https://walktheworld.com.au/
