Connect with us

World

rate cut expectations ahead of themselves

Published

on

Some Federal Reserve policymakers expressed concern at their most recent meeting that markets are expecting more rate cuts than the central bank intends to deliver, according to minutes released Wednesday.

The Federal Open Market Committee approved a quarter-point rate cut at the Sept. 17-18 meeting, putting the overnight funds rate in a target range of 1.75% to 2%.

But documents released at the meeting also showed sharp divisions among members about the future path of policy.
Minutes amplified those concerns, along with some worry that a market clamoring for easier monetary policy might be getting ahead of itself. The summary said that “a few participants” at the September meeting said prices in futures markets “were currently suggesting greater provision of accommodation at coming meetings than they saw as appropriate.”

As things stand, markets are heavily betting that the Fed will follow up its rate cuts of July and September with another in October. Markets also see more reductions on the way in 2020.

Because of the potential misunderstanding, “it might become necessary for the Committee to seek a better alignment of market expectations regarding the policy rate path with policymakers’ own expectations for that path,” the minutes stated.

What they left out of statement

In addition, the minutes note that “several” participants thought the committee, in its post-meeting statement, should provide some guidance as to how long the Fed would remain accommodative due to concerns over tariffs. The final statement did not include that type of language.

The “dot plot” of member expectations released at the meeting showed that five members favored the Fed not approving any additional cuts this year after the most recent move, five more seeing an increase ahead, and seven wanting an additional cut.

The final tally among the 10 voting members saw three dissents from Fed presidents – Eric Rosengren of Boston and Esther George of Kansas City, who favored holding the line, and James Bullard of Boston who wanted a half-point cut. That marked the most dissenters since December 2014.

In justifying the cut, Fed officials cited concerns over slowing global growth spilling over into the U.S., the ramifications from the U.S-China trade war, and persistently low inflation that had been running below the Fed’s 2% target.

Trade a concern

Minutes showed that trade was the overriding concern. The issue garnered 28 mentions in the document, with members repeatedly expressing concerns about the impact tariffs were having on business activity.

Members said that while they saw U.S. growth as generally solid, the forecast risks “were tilted to the downside.”
“Important factors in that assessment were that international trade tensions and foreign economic developments seemed more likely to move in directions that could have significant negative effects on the U.S. economy than to resolve more favorably than assumed,” the minutes said.

“In addition, softness in business investment and manufacturing so far this year was seen as pointing to the possibility of a more substantial slowing in economic growth than the staff projected. The risks to the inflation projection were also viewed as having a downward skew, in part because of the downside risks to the forecast for economic activity,” the summary continued.

Officials also noted that “a clearer picture of protracted weakness in investment spending, manufacturing production, and exports had emerged” and members also were watching the yield-curve inversion, a reliable indicator that a recession is ahead.

Still, members noted current conditions remain strong, with “robust” consumption and an employment picture that continued to improve.

Those who favored holding the line worried about financial stability risks that low interest rates posed. Others also stated concern that cutting rates now would leave the Fed little wiggle room the next time a slowdown emerged.

Repo discussion

Fed officials also discussed the recent upset in overnight lending markets that resulted in a spike in short-term rates. The central bank addressed the issue with several temporary liquidity actions aimed at stabilizing the market.
Members said future discussions about the proper size of bank reserves would be appropriate.

In a speech Tuesday, Fed Chairman Jerome Powell said the central bank likely will start repurchasing Treasury bills as part of a move to grow the balance sheet and reserves. Members also suggested looking into a standing repo facility to address funding issues.

The minutes stressed, as did Powell, the importance of distinguishing that type of balance sheet growth from the quantitative easing programs the Fed used during and after the financial crisis.

Source link

World

US warnings about China are lies, Foreign Minister Wang says

Published

on

Chinese Foreign Minister Wang Yi makes a speech during the 56th Munich Security Conference at Bayerischer Hof Hotel in Munich, Germany on February 15, 2020.

Abdulhamid Hosbas | Anadolu Agency via Getty Images

MUNICH — China’s Foreign Minister Wang Yi said Saturday that U.S. criticisms of Beijing were “lies” and blamed Washington for the tumultuous relationship between the world’s two largest economies.

“The root cause of all these problems and issues is that the U.S. does not want to see rapid development and rejuvenation of China, still less would they want to accept the success of a socialist country, but that is not fair, China has the right to develop,” Wang said during a discussion at the Munich Security Conference.

“China’s drive towards modernization is an inevitable trend of history and will not be held back or stopped by any force in the world because it represents the direction of human progress,” he added.

Wang’s comments at the Munich Security Conference followed those of Secretary of State Mike Pompeo and Secretary of Defense Mark Esper, both delivering back-to-back speeches accusing China of malign activities.

“China encroaches on the exclusive economic zones of Vietnam, the Philippines, and Indonesia. And on that point, China has had a border or maritime dispute with nearly every nation bordering it,” Pompeo told an audience at the security forum. “And let’s talk for a second about the other realm, cybersecurity. Huawei and other Chinese state-backed tech companies are Trojan horses for Chinese intelligence,” he added.

Esper said Beijing was caring out a “nefarious strategy” through telecommunications firm Huawei. “It is essential that we as an international community wake up to the challenges presented by Chinese manipulation of the long-standing international rules-based order,” he warned.

Secretary of Defense Mark Esper speaks at Munich Security Conference on February 15, 2020.

Munich Security Conference | Kuhlmann

When asked about the speeches made by Pompeo and Esper, Wang dismissed U.S. criticisms and said that Beijing would continue to seek a better relationship with Washington.

“This has become a common scenario, they say basically the same thing everywhere they go about China, and I don’t want to waste our time responding to each and every thing they’ve said. The thing I want to say is that all these accusations against China are lies and not based on facts,” Wang said of Pompeo and Esper’s comments.

“The most important task for China and the U.S. is to sit down together, have a serious dialogue and find a way for two major countries with different social systems to live in harmony and interact in peace. China is ready and we hope the U.S. will work with us in the same direction,” he added.

Source link

Continue Reading

World

Coronavirus live updates: Taiwan confirms first death

Published

on

Excited passengers disembark from the MS Westerdam, which is now docked in Sihanoukville, Cambodia. The cruise ship arrived in Cambodia on February 14, 2020 after being stranded for two weeks

Paula Bronstein | Getty Images

This is a live blog. Please check back for updates.

All times below are in U.S. Eastern Standard Time.

China’s National Health Commission reported that there were 2,009 new confirmed cases of the coronavirus and 142 additional deaths as of Feb. 15. The total number of cases in mainland China has reached 68,500, and the total deaths has reached 1,665, according the latest statistics from the commission on Sunday.

6:21 am: Taiwan confirms death of man with no known history of travel to China

Taiwan said a man in his 60s with a history of hepatitis B and diabetes has died of the virus. It’s the first death on the island. The man died Saturday after nearly two weeks in a hospital, but does not have a known history of traveling to China.

Health officials are investigating how he became infected. Taiwan has 20 confirmed cases of the virus.

3:40 am: American from cruise ship tests positive for second time in Malaysia

An 83-year-old American woman who was previously aboard the MS Westerdam cruise ship in Cambodia last week has tested positive for the virus a second time since flying back to Malaysia, officials there said on Sunday. She was one of 2,257 passengers and crew onboard at sea for nearly 14 days, and the first to test positive for the virus.

Officials said that more than 140 of the passengers on the ship traveled through Malaysia’s Kuala Lumpur airport, and all but eight traveled on to destinations in the U.S., Europe and Australia.

Source link

Continue Reading

World

Libya arms embargo a ‘joke,’ says UN official

Published

on

A fighter loyal to Libya’s U.N.-backed government (GNA) gestures during a clash with forces loyal to Khalifa Haftar at the outskirts of Tripoli, Libya May 21, 2019.

REUTERS | Goran Tomasevic

Violations of an arms embargo in Libya have become a joke and it is imperative that those who breach it are held to account, a senior U.N. official said on Sunday.

“The arms embargo has become a become a joke, we all really need to step up here,” U.N. Deputy Special Representative to Libya Stephanie Williams told a news conference in Munich.

“It’s complicated because there are violations by land, sea and air, but it needs to be monitored and there needs to be accountability.”

Source link

Continue Reading

Trending