Nyheter
The FED has made a policy mistake
The FED has made a policy mistake. Looking at the traditional checklist of fundamentals that the FED watches when making interest rate decisions, most suggest the FED should be hiking rates now.
The list of fundamentals and our view on them:
- Core inflation is now at 2.3%. Recent rental data and medical costs have risen whilst the downwards pressure on goods caused by the unseasonably warm winter also look to be ending suggesting there will be continued upwards pressure. Core PCE has risen to 1.7%. The greater weighting of medical costs in this measure and current general trend suggest it could rise to 2% by the end of the year. The FED expects this to occur at end-2018.
- The NAIRU range (FOMC Central Tendency), which refers to the level of unemployment below which inflation will begin to rise, was published yesterday as 4.7%-5%. The lower end of the range was downgraded again, habitual FED behaviour recently. Current unemployment of 4.9% is in the middle of this “variable” NAIRU range and suggests rising employment will soon begin having an inflationary impact on the US economy.
- Wage figures put annual growth falling to 2.2% but a recent calendar quirk accounts for this fall. Adjusting for this the true rate of wage growth it is probably closer to 2.6%.
- Payrolls data has been strong recently posting an increase of 242k. A figure above 200k typically denotes a growing economy. Furthermore the gains in employment were strong across most sectors, with weakness in manufacturing, which now represents only 9% of the US economy.
The FED has been reluctant to acknowledge the rise in core inflation, with their position being one of waiting to see more data. Historically this behaviour has been very common late in the cycle and it typically leads to the FED panicking later and having to hike rates too aggressively, potentially causing a recession.
In our view the FED has now highlighted that the traditional metrics for rate hikes are less important, and that asset price stability has a much greater importance. This implies that FED is now being dictated to by the markets. Ignoring the fundamentals and focusing on what the market says is when policy mistakes are made.
(click to enlarge)
James Butterfill, Head of Research & Investment Strategy at ETF Securities
James Butterfill joined ETF Securities as Head of Research & Investment Strategy in 2015. James is responsible for leading the strategic direction of the global research team, ensuring that clients receive up-to-date, expert insight into global macroeconomic and asset class specific developments.
James has a wealth of experience in strategy, economics and asset allocation gained at HSBC and most recently in his role as Multi- Asset Fund Manager and Global Equity Strategist at Coutts. James holds a Bachelor of Engineering from the University of Exeter and an MSc in Geophysics from Keele University.
Nytt ETC från The Royal Mint via HANetf ger tillgång till guldmarknaden med valutasäkring
Börshandlade produkter som ger exponering mot Stellar
BCFI ETF är en globalfond som hedgas till euro
Satoshi Unmasked? What’s At Stake?
Tillgång till en brett diversifierade portfölj av statsobligationer på tillväxtmarknader
Trump buys burgers with BTC, prices rebound, and Circle expands access to its USDC stablecoin
Dessa börshandlade fonder köpte investerarna i september 2024
August 24 Hashdex monthly crypto market update
Japanese power company explores mining bitcoin, UK bill on digital assets, and stablecoin payments in Singapore hit milestone
Regulatory Wins and the Quest for Simplifying Crypto’s Complexity
-
Nyheter2 veckor sedanTrump buys burgers with BTC, prices rebound, and Circle expands access to its USDC stablecoin
-
Nyheter1 vecka sedanDessa börshandlade fonder köpte investerarna i september 2024
-
Nyheter4 veckor sedanAugust 24 Hashdex monthly crypto market update
-
Nyheter3 veckor sedanJapanese power company explores mining bitcoin, UK bill on digital assets, and stablecoin payments in Singapore hit milestone
-
Nyheter3 veckor sedanRegulatory Wins and the Quest for Simplifying Crypto’s Complexity
-
Nyheter4 veckor sedanGSOV ETF investerar i hållbara gröna statsobligationer
-
Nyheter3 veckor sedanNordic ETF Conference: Drivers, Outlook & the Next Big Thing?
-
Nyheter2 veckor sedanHCAA ETF köper kinesiska A-shares
