Nyheter
The FED has made a policy mistake
The FED has made a policy mistake. Looking at the traditional checklist of fundamentals that the FED watches when making interest rate decisions, most suggest the FED should be hiking rates now.
The list of fundamentals and our view on them:
- Core inflation is now at 2.3%. Recent rental data and medical costs have risen whilst the downwards pressure on goods caused by the unseasonably warm winter also look to be ending suggesting there will be continued upwards pressure. Core PCE has risen to 1.7%. The greater weighting of medical costs in this measure and current general trend suggest it could rise to 2% by the end of the year. The FED expects this to occur at end-2018.
- The NAIRU range (FOMC Central Tendency), which refers to the level of unemployment below which inflation will begin to rise, was published yesterday as 4.7%-5%. The lower end of the range was downgraded again, habitual FED behaviour recently. Current unemployment of 4.9% is in the middle of this “variable” NAIRU range and suggests rising employment will soon begin having an inflationary impact on the US economy.
- Wage figures put annual growth falling to 2.2% but a recent calendar quirk accounts for this fall. Adjusting for this the true rate of wage growth it is probably closer to 2.6%.
- Payrolls data has been strong recently posting an increase of 242k. A figure above 200k typically denotes a growing economy. Furthermore the gains in employment were strong across most sectors, with weakness in manufacturing, which now represents only 9% of the US economy.
The FED has been reluctant to acknowledge the rise in core inflation, with their position being one of waiting to see more data. Historically this behaviour has been very common late in the cycle and it typically leads to the FED panicking later and having to hike rates too aggressively, potentially causing a recession.
In our view the FED has now highlighted that the traditional metrics for rate hikes are less important, and that asset price stability has a much greater importance. This implies that FED is now being dictated to by the markets. Ignoring the fundamentals and focusing on what the market says is when policy mistakes are made.
(click to enlarge)
James Butterfill, Head of Research & Investment Strategy at ETF Securities
James Butterfill joined ETF Securities as Head of Research & Investment Strategy in 2015. James is responsible for leading the strategic direction of the global research team, ensuring that clients receive up-to-date, expert insight into global macroeconomic and asset class specific developments.
James has a wealth of experience in strategy, economics and asset allocation gained at HSBC and most recently in his role as Multi- Asset Fund Manager and Global Equity Strategist at Coutts. James holds a Bachelor of Engineering from the University of Exeter and an MSc in Geophysics from Keele University.
FLXS ETF är ett sätt att få exponering mot Saudiarabien
HODL fyller sex år
BT27 ETF köper italienska statsobligationer med förfall 2027
WisdomTree lanserar Physical XRP ETP
ETF från Amundi erbjuder klimatvänlig exponering mot företag från Europa med valutasäkring
Börshandlade fonder med månatlig utdelning
Vilka börshandlade fonder lockade mest i oktober 2024?
Post-election recap: Three takeaways for crypto investors
JEQP ETF spårar Nasdaq-100 och ger en månadsvis utdelning
JEIP ETF spårar amerikanska aktier och ger en månadsvis utdelning
-
Nyheter3 veckor sedanBörshandlade fonder med månatlig utdelning
-
Nyheter3 veckor sedanVilka börshandlade fonder lockade mest i oktober 2024?
-
Nyheter1 vecka sedanPost-election recap: Three takeaways for crypto investors
-
Nyheter2 veckor sedanJEQP ETF spårar Nasdaq-100 och ger en månadsvis utdelning
-
Nyheter2 veckor sedanJEIP ETF spårar amerikanska aktier och ger en månadsvis utdelning
-
Nyheter2 veckor sedanNya ETFer från J.P. Morgan ger tillgång till amerikanska företag i kombination med en överlagringsstrategi
-
Nyheter3 veckor sedanKryptokorgar: Automatisk diversifiering av kryptoinvesteringar
-
Nyheter2 veckor sedanJ.P. Morgan Asset Management utökar sitt Equity Premium Income Active UCITS ETF-sortiment och listar JEPI och JEPQ i Europa
