OPEC members have a preliminary agreement to cut oil production with the aim to support oil prices and pump up oil producer profits. We have a quick look at this to wrap our head around it...
Japan changed its monetary policy framework, aiming for a zero 10-year government bond yield and a negative short rate to get a positive-sloping yield curve, which will help big banks... It also "promises" to hit the 2% inflation target via massive purchases of stock via ETFs. What can we think of all this?
No rate change and the tone is balanced but clear:
"The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run."
This is generally USD-bearish in the near term, as the hawkish stance is lighter and the Fed specifically tells us to watch for 2 things, which are the official mandate of the Fed: 1) inflation AND inflation expectations convincingly at 2% (or even a bit higher) AND a solid and growing labor market. Anything short of this will cause the Fed to pause.
For traders, this is generally USD-bearish, so any strategies based on USD strength in the near term must be reviewed... Lots of great buy and sell opportunities right now...
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In less than one hour, the Fed will give its decision on monetary policy. Here are a few things to keep in mind and what they mean for markets going forward. Labor market conditions have worsened in August, growth is sluggish, and core inflation is roughly on-target. Based on data, there is NO hurry to increase rates, which is why the market is pricing in a very low probability of a rate change, which indeed seems like the most probable outcome. But the probability of a rate hike may be higher than we all think. Here is why...
Almost all countries of the world currently have trouble keeping their economies afloat and their government budgets under control. Many structural issues plague industrialized economies: demographics, offshoring, high-value-creation-without-job-creation growth of the technology era, high effective corporate tax rates and fiscal complexities, government and household debt.
Central banks around the world are stuck with an ongoing debate about what to do, with growing ranks of monetary policymakers saying that it is time for monetary intervention to back off and for structural aspects of growth to resurface: job creation, production, and productivity. In all this, there is a desperate quest for yield by pension funds and other major fund managers who face zero or even negative nominal returns. Let’s explore all this to get a clearer picture of what is going on.