US Financial Markets Jolted by Rate Fears & Fed Policy Outlook
The January Employment Situation report jolted US government bond and equity markets due to signs that rising wage inflation is becoming more evident, thereby involving hawkish implications for Fed policy.
The Federal Open Market Committee (FOMC) had telegraphed after its latest policy meeting that further interest rate increases are in the offing, but rises will continue to be gradual.
Balance sheet reduction by the Fed will lower liquidity levels in the banking system and raise the competition for bank credit between financial markets and the real economy.
The compressed velocity of circulation of money has hitherto not prevented FOMC members from starting to reduce both monetary base and broad money supply growth, thereby implying that the credit creation mechanism is currently deemed far less dysfunctional than earlier in the cycle.
Since the early-1990s, yield curves have steepened prior to the onset of recession due to increases in short-term interest rate expectations, something which is currently occurring.
Higher short-term interest rate expectations held by bond investors could raise the ante on the FOMC to adopt a more hawkish policy approach, particularly with the arrival of a new Chairman.
DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the intention of delivering independent global macro investment insights and new thematic long-term ideas to investors, along with an agnostic opinion of the markets.
Said DeSaque has over 29 years of experience working as a professional economist in financial services, primarily based in London. His working role has involved extensive travel around the world, bringing him into contact with investors of different cultural backgrounds and investment requirements. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist and Investment Strategist at US banks Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he became Head of the London Economics Department in 1996. This role allowed him to engage with senior investment professionals, alongside regulators and provided a unique perspective of market intelligence at work.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.