A new dual mandate for the fed?
Source: Michel A. Arouet
BREAKING: The Federal Reserve on Wednesday held interest rates steady as expected but signaled that it still plans multiple cuts before the end of the year.
FED HOLDS BENCHMARK RATE IN 5.25-5.5% TARGET RANGE - BBG *FOMC MEDIAN FORECAST SHOWS 75 BPS OF RATE CUTS IN 2024 TO 4.6% *FED REPEATS WAITING FOR GREATER CONFIDENCE ON INFLATION TO CUT As expected, the Fed kept the Federal Funds Rate unchanged. The main news is that the 2024 median rate forecast in the new Federal Reserve dot plot remains UNCHANGED! The Fed continues to expect three rate cuts (-75BPS) for 2024 ! Fed Officials median view of Fed funds rate at end of 2024 4.6% (prev 4.6%). Fed projections show only one official sees more than three 25 bp rate cuts in 2024. Fed now only sees 2 rate cuts in 2025 and fewer cuts in 2026. Fed made only one change to the FOMC statement: Thus is in January: "Job gains have moderated since early last year but..." replaced by this in March: "Job gains have remained strong and..." The projected change in real GDP for 2024 was 2.1% in the March projection, up from 1.4% in December. Core PCE inflation projections also ticked up to 2.6% from 2.4%.. Fed says inflation "has eased but remains elevated". Fed does not expect rate cuts until "greater confidence" inflation is moving to 2%. Market reaction: Equity markets are rallying after the FOMC announcement: The S&P 500 has officially broken above 5200 for the first time in history. The dollar is weakening and US Treasury yields are stable (the 10 year initially lost 5 basis points). Our take: Markets are rallying on the initial headlines from this Fed rate decision. Primarily because Fed projections for 3 rate cuts in 2024 have been reaffirmed. Indeed, the risk of a hawkish surprise (lower dot plots for 2024) was quite elevated ahead of the FOMC decision based on recent economic activity data (Atlanta Fed GDPNow currently at 2.5% for Q1 24). The fact that the Fed keeps 2024 DOTS unchanged was the best scenario for the market. The two objectives of the Fed (maximum employment and stable prices) are (almost) perfectly reached. The Fed can relax and afford to “wait-and-see” before eventually recalibrating (most likely in June). Note that Powell’s press conference will also be important for the nuances and context around the potential adjustments to dots and economic projections. In terms of portfolio positioning, we remain constructive on equities but more cautious on fixed income. We keep some allocation to Gold.
SNB cut rates against market expectations
Swiss National Bank cut the policy rate by 25 BPS to 1.50%. USDCHF and EURCHF both jumped by more than one figure to 0.8970 and 0.9780 respectively. Market was only pricing in a 35% probability of this cut.
FED holds benchmark rate, May cut remains unlikely
The US Federal reserve holds benchmark rate in 5.25-5.5% target range. Jerome Powell prepared remarks and Q&A answers were more dovish than during the January meeting. FOMC median forecast remains at 75 BPS rate cuts for 2024, but the forecast increased from 3.6% to 3.9% in 2025.
Gold reacted to Powell's dovish tone by jumping to a new record high and breaking the 2200 level.
Source: Bloomberg
SNB could surprise with a rate cut as banks turn against Franc
A handful of banks expect Switzerland’s policymakers will go against forecasts and cut interest rates in their first decision of the year.
Barclays, Citigroup, Julius Baer and others are among the few predicting the Swiss National Bank will deliver a reduction aimed at safeguarding the economy from potential currency strength.
Source: Bloomberg
BREAKING - Bank of Japan raises rates to policy range of 0% to 0.1%, the first such rate hike in over a decade 💹 and scraps yield curve control.
The central bank will also stop buying ETFs and phase out buying of corporate debt. 2 key points: 1) That was completely in line with my preview 2) The tone was dovish as the boJ will continue JGB purchases at approximately the same amount as before. It pledged to gradually reduce its purchases of commercial paper and corporate bonds, with the aim of stopping this practice in about a year. Market reaction >>> The Japanese yen weakened to as much as 149.92 against the greenback, while the Nikkei stock index swung between gains and losses following the BOJ decision. Yields on the 10-year and 30-year JGBs dipped. Source: Bloomberg
Japan’s $4 Trillion offshore funds will ignore first BOJ Hike - stocks and bonds in the US insulated from impact, survey shows
Japanese money is poised to stay offshore as the central bank creeps toward tighter policy, according to the latest Bloomberg Markets Live Pulse survey. Only about 40% of 273 respondents said the first interest-rate hike by the Bank of Japan since 2007 will prompt the nation’s investors to sell foreign assets and repatriate the proceeds back home. That’s good news for US stocks and bonds. Source: Bloomberg
Bank of Japan is expected to end its negative interest rates this week
Marking 1st rate hike since February 2007 in a turning point for hashtag#BoJ's long-running monetary easing pol. A lot' has changed globally since last ³BoJ hike 17 years ago. SRP has a great overview... (through HolgerZ)
