Fed president Bill Dudley gave the first official admission of a "Fed relent", aka policy error, when he made it clear "he and his fellow Fed policymakers will have to discern at their March Federal Open Market Committee meeting whether or not the plunge in stock prices and other adverse market developments cloud prospects for U.S. economic growth, employment and inflation."
Top Federal Reserve policymakers are leaving little doubt the financial turbulence and souring of the global economy could have significant implications for U.S. monetary policy, but they are loathe to draw too many conclusions about the appropriate path of interest rates at this juncture.
One thing is for certain: The tightening of financial conditions that has taken place since the Fed began raising short-term rates in mid-December is a matter of considerable concern to the Fed, New York Federal Reserve Bank President William Dudley said in an exclusive interview with MNI Tuesday....
Consequences like halting rate hikes altogether? Or outright cutting them? Here are the key quotes from the interview:
"I can give you my own interpretation," the committee's vice chairman replied. "I read that as saying we're acknowledging that things have happened in financial markets and in the flow of the economic data that may be in the process of altering the outlook for growth and the risk to the outlook for growth going forward."
"But it's a little soon to draw any firm conclusions from what we've seen," he cautioned.
The punchline: Dudley left no doubt, however, that the deterioration of financial conditions amidst intensified economic uncertainty have registered in the minds of Fed policymakers and that there could be significant policy implications.
"One thing I think we can say with more confidence is that financial conditions are considerably tighter than they were at the time of the December meeting," he said.
UBS said that as well as a rate cut, markets are pricing in an increase in the ECB's monthly bond-buying of 10-11 billion euros from 60 billion euros at present.
ECB policymaker Ewald Nowotny warned that inflation might turn negative in the months ahead, while Draghi said that inflation dynamics are tangibly weaker than the ECB had expected at the end of 2015....
"The more turbulent the market gets between now and March, the more significant the action we're likely to get from the ECB," said Chris Scicluna, head of economic research at Daiwa Capital Markets.
With no trace of empathy, or irony, Wien wrote in early 2015 about the depleted savings of “many” households:
“Among those who had savings prior to 2008, 57% said they’d used up some or all of their savings in the Great Recession and its aftermath. What’s more, only 39% of respondents reported having a ‘rainy day’ fund adequate to cover three months of expenses and only 48% of respondents said that they could not completely cover a hypothetical emergency expense costing $400 without selling something or borrowing money.
It looks to us highly unlikely that the moves are going to boost confidence of individuals and corporates to take out bank loans.
Investors aren’t the only ones running for safety as the market tumbles and the economy wobbles.
Businesses, too, are indicating an unwillingness to take on risk as loan demand declined for the first time in about four years, according to the Federal Reserve’s Senior Loan Officer Survey released this week.
Demand for commercial and industrial loans has plunged in 2016, with declines happening across business sizes. Large- and medium-sized businesses had an 11.1 percent decline, while demand from small businesses fell 12.7 percent
First, it’s not good to have a significant share of your wealth locked into a single asset,” he wrote. “Diversification is better and it’s easier to diversify with stocks. Second, unless you are renting the basement, houses don’t pay dividends. Stocks do. You can hope that your house will accumulate in value but don’t count on it. Indeed, you should expect that as an investment your house will appreciate less than does the stock market.”...
Still, Americans don’t seem to be giving up on homeownership yet. Sales of existing homes rose 14.7% in December, the biggest monthly increase ever recorded, after depressed sales in November. Sales in 2015 were the best since 2006, at 5.26 million
The Bank of Japan’s unexpected rate cuts to negative are a desperate attempt to help out the FED and to support the dollar at the expense of the aging Japanese population.
The negative market reaction to the FED’s rate hike of December shows that investors do not believe an economic recovery in the US is underway. Two reasons make central banks start to raise interest rates. The first is that economy is doing well, and central banks have to prevent an overheated economy. But it is also a signal to investors that everything is going well and so they will react in a way other than the one intended for them by central bankers in that they will increase their investments and thus cause the markets to go up.
Americans are also buying homes that are larger and pricier; average home size was 2,720 square feet in 2015, up from 2,660 square feet in 2014. And the average price of new homes for sale in 2015 was $351,000, up from $100,000 in 2009. (Still, this doesn’t necessarily reflect the housing market’s strength, as new construction has mostly happened in the high-end market.)
The US defense secretary emphasized that the shift in strategy was based on a “return to great power competition.” This required the US military to prepare to confront “a high-end enemy” with the “full spectrum” of armed power. This situation, he added, was “drastically different than the last 25 years,” referring to the period since the Moscow Stalinist bureaucracy’s dissolution of the Soviet Union.
Carter insisted that “America is still today the world’s leader” and the “underwriter of stability and security in every region across the globe, as we have been since World War II.”
The US military, he said, had to prepare for confrontation with those “who see America’s dominance and want to take that away from us… in the future so we can’t operate effectively around the globe.”
The mission spelled out by the US defense secretary is essentially a military struggle to impose US control over every corner of the planet. America’s residual military superiority is to be employed to counter the effects of the protracted decline of American capitalism and its domination of the global economy. To this end, US imperialism must confront every real or potential rival for both global and regional hegemony. The path outlined in Carter’s speech leads inexorably toward World War III.
even the Saudis don’t want to see oil prices this low, nor can they afford a prolonged period of oil prices below $50 a barrel. To say that oil is crucial to Saudi Arabia is an understatement; oil is to Saudi Arabia what gambling is to Las Vegas. The Saudi’s cannot withstand low oil prices forever, and if drastic changes don’t happen, then within two years, the world’s largest oil producer maybe facing very hard times.
It is basically happening as you are reading this post. The SAA has launched further operations in Northern Aleppo which could prove decisive in cutting off what is left of the rebel forces of NW Syria from their LOCs and bases in Turkey. This new offensive had been building up for the past few days. The only thing uncertain was which main direction it would take ...
The northern supply route from insurgency held areas in Aleppo province to Turkey has been severed....
There is now only one supply line left between the insurgents in Idleb and Aleppo province and Turkey. It leads north-west from Idleb along the M45 motorway and crosses at Bab al Hawa to the Turkish city of Reyhanli....
Russia made clear that there will be no end to the war until the border is under full Syrian government control:
"The key point for the ceasefire to work is a task of blocking illegal trafficking across the Turkish-Syrian border, which supports the militants," [Russian Foreign Minister Sergey Lavrov] said. "Without closing the border it is difficult to expect the ceasefire to take place."