Federal Reserve Raise Rates Another Quarter Percent As Expected

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    Helmholtz Watson

    The Federal Reserve as expected hiked rates 25…



    Win Smart, CFA @WinfieldSmart

    Central Bank Update:
    US hikes rates by 25 bps to 2.0-2.25%.
    Czech Republic hikes rates by 25 bps to 1.5%.
    Hong Kong hikes rates by 25 bps to 2.25%.
    Saudi Arabia hikes rates by 25 bps to 2.75%.
    Philippines hikes rates by 50 bps to 4.50%.
    Indonesia hikes rates by 25 bps to 5.75%.
    New Zealand Unchanged at 1.75%


    ECB Praet Answering What Many Believe The Fed Is Raising “You don’t just raise rates as a buffer to cut again”


    Fed Powell Speaking Day After FOMC

    US economy strong, unemployment low, inflation stable
    Gradual path of interest rate rises is helping to sustain strong US economy
    Fed’s models suggest probability of recession in next two years are not elevated
    Pleased by lack of market reaction to balance sheet unwind
    I’ve lived through a lot of asset bubbles
    We’ve not been good at spotting the build up of risks
    Vulnerabilities modest overall
    Households in pretty good shape
    Student debt levels are high, watching carefully


    While markets tumble we get Atlanta Fed’s Bostic:

    I may have underestimated economic strength
    Incoming data this year has been stronger than anticipated
    May have underestimated momentum of underlying aggregate demand and if so, that would require higher rates
    See inflation rising at about a 2% pace
    Reports from his district suggest firming in labor costs
    Fed ought to get to a neutral stance


    St Louis Fed president James Bullard talking in Singapore Monday morning

    Can’t read as much into jobs data as before
    FOMC doesn’t need to do much more, data will tell us how to proceed
    Using dot plots for forecasting rate expectations isn’t ideal
    Fed keeping an eye on international developments
    Concerned in case it might feed back to the US economy


    Fed’s Kaplan Concurs With What We Have Been Saying:

    Cyclical Inflation Pressures Are Building
    – Inflationary Pressures Building Given The Tariffs, Oil Prices, And Hot Labor Market

    But believes That Structural Pressures Are More Deflationary With Technology, Globalization Limiting Pricing Power


    More from Kaplan

    Neutral Rate Could Be Lifted If There Is Higher Productivity
    -Patient And Gradual Interest Rate Hikes Is Required By The Fed Until At Least June 2019
    -Believes There Is Still Room To Run For The US Economic Cycle In The US

    via LiveSquawk @LiveSquawk


    Fed’s Evans on Bloomberg
    Inflation moving to 2.4% wouldn’t be a problem
    Doesn’t expect inflation above 2% in a meaningful way
    Inflation expectations appear to be quite fixed
    Stock market adjustments can have effect on consumption
    Neutral Fed policy would give a better balance versus risks

    Helmholtz Watson

    FOMC minutes of September 26 meeting


    Almost all policy makers considered it appropriate to remove reverences to monetary policy being accommodative in statement.
    Noted estimates of neutral rate would be only one factor in setting rates
    Number of Fed officials saw the need to hike above long-run level
    Gradual approach balances risk of going too fast and too slow
    Policymakers pointed to growth in leveraged loans, loosening of standards for loans and growth of non-bank loans as reasons to be mindful of financial stability
    Noted that rise in longer term yields made inversion of yield curve less likely
    Almost all policymakers saw little change in the economic outlook


    Fed’ beige book for October 2018

    Prepared by the Federal Reserve Bank of Richmond with data collected on or before October 15, 2018

    Economic activity expanded with growth modest to moderate
    Manufacturing cited rising costs, trade uncertainty
    Labor shortages broadly noted and linked to wage increases
    Retailers/wholesalers worried by higher costs due to tariffs
    Consumer prices rose at modest to moderate pace
    Real estate mixed, consumer spending rose at modest pace
    wage growth mostly viewed as modest to moderate
    Manufacturers raised prices due to raw materials tariffs
    Tourism up except Carolinas, due to hurricane Florence
    Firms say modest to moderate wage growth over next 6 months

    Several Fed districts said firms faced rising materials and shipping costs as well as uncertainties over trade and/or difficulties finding qualified workers
    employers across the nation cited shortages of highly skilled engineers, finance and sales professionals and construction and manufacturing workers

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