THE FED IS IN “WAIT AND SEE” MODE, BUT KEEPS THE DOOR OPEN TO ADDITIONAL MEASURES

As widely expected the FOMC does not foresee any rate increase before end-2022, or using Chair Powel words: “We are not thinking about raising rates. We are not even thinking about thinking about raising rates”

Highlights:

  • The Fed expects quite a strong rebound, but the severe disruption caused by COVID will require rates to remain at near zero until 2022. The unemployment rate will remain high for long.
  • The May employment report was a pleasant surprise, but also an indication on how unpredictable is the outlook. This warrants waiting and learning from new data before adapting the stance.
  • Anyway, Chair Powel renewed the commitment to use aggressively all the existing tools; bond purchases will continue at least at the current pace. Further instruments, like yield curve control are being discussed.

Download the full publication below

THE FED IS IN “WAIT AND SEE” MODE, BUT KEEPS THE DOOR OPEN TO ADDITIONAL MEASURES

RELATED INSIGHTS

FIRST Q2 EARNINGS RESULTS SHOW POSITIVE SURPRISES. EXPECT LIMITED NEGATIVE REVISIONS
Growth (yoy) is clearly negative but the magnitude should deteriorate further (to be in line with expectations) as more firms will report in the next few weeks: the next two weeks will see the bulk of reported results.
NO ECB SUMMER SURPRISE THIS YEAR, GOVERNING COUNCIL WANTS AGREEMENT ON RECOVERY FUND
After having augmented the volume of the Pandemic Emergency Purchase Programme (PEPP) in June, the Governing Council did neither act nor announced outright action at today’s meeting.
CHINA’S GDP SURPRISED ON THE UPSIDE BUT DEMAND STAYED RATHER WEAK
China’s GDP rose by 3.2% yoy in Q2, after a Covid-19 related drop by 6.8% in Q1, according to data published by China’s statistical office this morning.