USA

Fed-Minutes: Worries about delay of fiscal package

The FOMC minutes published yesterday evening show a positive assessment of the economic situation. However, this assessment should not hide the fact that at the time of the meeting of the Open Market Committee there was still justified hope for a further fiscal package before the US presidential election. These hopes were dashed when the negotiations on an additional aid package between Democrats and Republicans were halted. Against the backdrop of rising case numbers and unlikely fiscal stimuli, the guardians of the currency are now likely to express much greater concern. The latest speeches by various central bankers point to this. In the past few days, Powell and several other central bankers have warned that without further fiscal aid the US economy could slide back into recession. The FOMC members expressed satisfaction with the prospect of a zero interest rate policy until 2023, which is in line with the Federal…

USA: Inflation expectations remain subdued

  Corona pandemic and lockdown: As a result, the inflation rate in the USA went into decline in the spring. From over 2 percent at the beginning of 2020, it fell steeply from March onwards, only finding a halt just above the zero line in May. Over the summer, however, prices climbed back up again quite a bit. In August, consumer prices were an average of 1.3 percent higher than in the previous year. Irrespective of this, the central bank intends to maintain its ultra-expansive monetary policy for some time to come. Will the inflation rate continue its ascent in larger steps? We see no reason for this, at least in the short to medium term. First of all, the price trend over the summer months was mainly due to special effects. The price of crude oil had recovered to a considerable extent in the meantime, and some of the…

USA: Catch-up process in the labor market is still making good progress, but challenges remain

One month before the presidential elections, the latest data from the labor market underscore the strong recovery of the US economy in the third quarter. In September, the number of unemployed fell noticeably once again, by a good 1 million compared with the previous month. As a result, the unemployment rate repeatedly made a significant downward turn, falling from 8.4 to 7.9 percent. The increase in employment was also respectable at around 661,000 persons, even though many observers had expected a higher figure. The service providers in particular increased their personnel. The retail trade and companies in the accommodation and leisure sector in particular hired new employees. This is likely to continue to be primarily a „normalization“, as these sectors suffered particularly badly from the strict corona restrictions and had therefore laid off a large share of their workforce in the spring. The recovery on the labor market should continue…

Like the ECB: Fed now also with a zero interest rate policy „Forever

Overall, the Fed statement, the projections and the Fed press conference showed that monetary policy will remain ultra-expansive in the coming years. Powell assured that the monetary authorities will use all available monetary policy instruments depending on how the economy develops. In addition, he emphasized repeatedly and almost dogmatically that the new Forward Guidance is a powerful and mighty concept to manage the expectations of market participants. In our view, the commitment to raise key interest rates only once the inflation rate has reached the 2% mark on average is both far-reaching and unconditional. In particular, this commitment must be seen against the background that the guardians of the currency in their projections expect an inflation rate of just 2% in 2023 as well. According to the new forward guidance, the first key interest rate hike is likely to take place in 2025 at the earliest. Our assessment: wait and…

US Federal Reserve – First meeting with new strategy

Although no further monetary policy measures are likely to be initiated at the forthcoming meeting of the FOMC, the current orientation gives sufficient cause for discussion. The question of what else the Fed can do to ease monetary policy is also a matter of disagreement within the FOMC. Negative key interest rates or a so-called „yield curve control“ were recently rejected by a majority. Some currency watchdogs want to sharpen the forward guidance and give market participants more clarity about the future direction of monetary policy. In our opinion, the Fed should now emphasize in its press statement that key rates will only be raised once the average inflation target of 2% has been reached „sustainably“. This would enable the Fed to concretize its forward guidance and anchor a low level of key rates in the longer term. However, the guardians of the currency will not give any precise details…

Good mood on the US housing market despite Corona

The US housing market has so far come through the corona pandemic largely unscathed, despite exploding unemployment, many corona infections and already quite high real estate prices. But the mood on the housing market collapsed only briefly, only to reach a higher level immediately afterwards. House prices are currently stagnating and are at their all-time high during the pandemic. Three percent for a 30-year standard mortgage – never before have houses been financed so cheaply. The market environment is accordingly attractive for buyers with a secure job. The search for a suitable home is already more difficult. The supply of real estate is scarcer than ever before. The low interest rates will continue to support demand and stabilize the market in conjunction with the scarce supply of real estate. The danger of a noticeable price correction is also decreasing in view of the economic recovery that has begun. On the…

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