Are global bond markets finally starting to doubt the commitment of the world’s central banks to endless stimulus?
Today financial markets are anxiously wondering if they need to rethink the assumption of an endless supply of stimulus. Besides yesterday’s non-move and rhetorical silence from the European Central Bank, today the market is reacting to remarks from the Boston Federal Reserve Bank President that waiting too long to raise interest rates would threaten the U.S economy. And to the possibility that the Bank of Japan would like to see higher long-term interest rates
European Central Bank disappoints on stimulus; holding its fire for Brexit slowdown?
I’m more concerned about the longer-term implications of the decision to do nothing than I am by the short-term disappointment. I think the bank is worried that it might need the very limited supply of ammunition it has left to fend off any larger shocks once negotiations on the terms for the United Kingdom’s departure from the European Union start in earnest in coming months.
Service sector weighs in with more economic uncertainty ahead of September Fed meeting
All this year the U.S. service sector has been making up for weakness in manufacturing. Not in August. The Institute for Supply Management’s non-manufacturing index slipped to 51.4 in the August survey. That’s down from 55.5 in July and is the lowest reading since February 2010. The ISM’s manufacturing index, released on September 1, showed that the sector contracted in August.
Weaker than expected August jobs growth lowers odds on September interest rate move by the Fed
Take a Federal Reserve interest rate increase at the central bank’s September 21 meeting off the books. Today, the Labor Department reported that the U.S. economy added only 151,000 net new jobs in August. Economists surveyed by Bloomberg had forecast the addition of 180,000 jobs.
Today’s economic news–with its worries about growth–is an anxious set up for tomorrow’s August jobs report
Manufacturing activity in the United States contracted, unexpectedly, in August, according to the Institute for Supply Management’s manufacturing index released today. The index fell to 49.4 in August from 52.6 in July. That was the biggest drop in the index since January 2014 and was enough to push the index below the 50 level that separates contraction from expansion. The median forecast among economists was for reading of 52.
Oil does indeed disappoint today
Today oil prices are down further on the EIA’s oil inventory report: Crude inventories climbed by 2.28 million barrels to 525.9 million barrels for the week that ended on August 26. That’s the highest seasonal level for crude stockpiles in more than two decades. Analysts surveyed by Bloomberg before the release of the report were looking for an increase in inventories of 1.3 million barrels
So far the market believes the Fed was just bluffing in Jackson Hole speeches on September interest rate increase
Last week Federal Reserve chair Janet Yellen tried to convince financial markets in her speech at the Fed’s annual Jackson Hole get-together that an interest rate increase at the central bank’s September 21 meeting was still a possibility. But just as the market has brushed off earlier similar comments from the heads of the Atlanta and San Francisco Federal Reserve Banks, this week has opened with financial markets saying in essence No way
Financial markets don’t take newest Fed comments on interest rates to heart
In the short term yesterday’s remarks from John Williams, head of the San Francisco Federal Reserve, were just another effort by Fed officials–including the heads of the Atlanta and New York banks, to keep the market from getting so comfortable with the idea that the Fed will stay on the sidelines that the U.S. central bank winds up with no room for an interest rate increase at any point in 2016–even in December.
Time for me to stop fighting the Fed’s uncertainties and delay, and sell Capital One
To subscribe to JAM you need to fill in some details below including, ahem, some info on how you'll pay us. A subscription is $199 (although if you're subscribing with one of our special offers it will be lower) for a year for ongoing and continuing access to the...A deeply divided Fed emerges in yesterday’s minutes from July–more delay on rates likely
It’s not just that the Federal Reserve is arguing about the timing of any interest rate increase. It’s also deeply divided on what facts should count in making that decision. That will make it hard for the Fed to move absent greater clarity on the economy–and that clarity is likely to be a long time coming.
Fed starts another round of jawboning on interest rate increase
The Federal Reserve is at it again. Today two high-profile Fed members, William Dudley, president of the New York Fed, and Dennis Lockhart, president of the Atlanta Fed, both talked up the odds for an interest rate increase as early as September and certainly sometime before the end of the year.
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