The Fed's median projection is now that the Fed Funds rate will be 2.9 percent at the end of 2019, instead of 3.1 percent in the September projection. US real GDP growth is expected to be 2.3 percent in 2019, down from 3 percent this year. In September, the Fed had guided for 2.5 percent US growth in 2019. The Fed's projection of the unemployment rate has been pushed up a little and its prognosis of the inflation rate has been pushed down slightly. … [Read more...] about Quick Take | US Fed Chairman refuses to play Santa to the markets
Fed funds rate
Subsequent Fed governors have continued with Greenspan’s policies. The upshot: total debt to the US non-financial sector, as a percentage of GDP, is now higher than what it was before the financial crisis. Similarly, total debt to the US non-financial corporate sector is also higher than it was during the crisis. It’s no wonder then that the markets are worried about the impact of tightening liquidity. … [Read more...] about Opinion | What spooked global markets?
But while global demand is coming off, the key question is will it slow as much as the current bearish sentiment believes it will? Currently, the market is pricing in a 64 percent probability of the US policy rate in January 2020 being at the same level as it is today, with about a 26 percent probability of a rate cut. The US Fed, on the other hand, is still pencilling in two rate hikes in 2019, apart from continuing with its balance sheet contraction, which means it believes there’s little threat to growth. So who is right about US growth and consequently US interest rate hikes -- the US central bank or the markets? The IMF and the OECD have lowered their growth forecasts for 2019, but it’s not a huge cut. … [Read more...] about Opinion | Economic outlook for 2019: Will the elephants in the room turn out to be mice?