US Economic News

[thor666]

Some of the US economic figures are also fudged lah, their "real" unemployment rate would be super high if they included those drop out of workforce and gave up looking for work.

In Sg, the same applies for those who give up searching for work. I even remember reading this as a typical definition on economic textbook in my university years.

In that sense, can't find fault if everyone does it.


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[greengiraffe]

Now the world appears to be a safer place as policy makers explore new methods to keep global economies on life support...

• Sep 19 2015 at 12:15 AM 
   
  
  
•  Updated Sep 19 2015 at 12:15 AM 
  

Time to forget about the US Fed

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NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/p/f/j/m/image.related.afrArticleLead.620x350.gjm3u1.png/1442568314112.jpg[/img]The sharemarket went nowhere as the Fed yet again stayed its hand. Bloomberg
[Image: 1426050253275.png]

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by Patrick Commins
As much as it pains me to write this, and as you assuredly already know, the US Fed failed to announce a "lift-off" from its zero interest rate policy that has dragged on for close to seven years. Instead, with the tune of The NeverEnding Story ringing in our ears, chair Janet Yellen now looks even less likely to lift rates at all in 2015. If you, like me, are dreading the thought of ploughing through thousands of words examining what this momentous non-event means for you and your investments, here are the three, and only, things you need to know:
1. THE SHAREMARKET DIDN'T LIKE IT MUCH.
Neither did the Australian dollar, for that matter. A decision to not raise rates, accompanied with a more "dovish" tone to the accompanying statement, should be a straightforward "win" for both of those assets.
Lower rates make shares look better value against alternatives such as bonds and cash, and it also reassures investors that the central bank is committed to supporting the economy through loose monetary policy and easy credit conditions.

That playbook failed to play out Friday morning on Wall St. After initially spiking on the 4am AEST announcement, the S&P 500 index then reversed all those gains to close the down for the day.
The differential between rates here and abroad is a key determinant of our currency's strength, so news that the US hadn't tightened policy, and indeed was looking less likely to do so in the short term, should have added to the allure of our dollar. And, yes, the Aussie jumped by more than 1 US cent to approach 72.8 US cents, but then it gave up all those gains in rapid order to be pretty much where it was 24 hours earlier.
Why, you ask? Well that brings us on to number two, which is …
THE FED HAS DISCOVERED THE WORLD.


And it doesn't like what it sees. The US central bank lowered its collective inflation forecast for next year, but only by a little, and it also reduced its unemployment rate expectations. So what was more notable was the fact the central bank revealed in its statement that it was "monitoring developments abroad".
At the press conference, chair Janet Yellen referred to "heightened concern about growth in China and other emerging market economies" and said those have "led to volatility in financial markets". Just stating the obvious, you might think, but one respected economist pointed out that the last time the Fed focused so heavily on foreign developments was in September 1998. Depressingly, back then it didn't hike for another 10 months.
So it's likely comments in this vein are what spooked investors. Does the Fed know something about China that we don't? Not the kind of question that makes overseas types want to snap up Aussie dollars, or shares for that matter.
The Fed's line is that global growth concerns and emerging market volatility tend to strengthen the greenback and weaken the oil price, both of which have flowed through to lower US inflation and stayed the central bank's hand.

That argument starts becoming circular, however, as NAB currency strategist Emma Lawson has pointed out. It goes something like this: the Fed doesn't hike because emerging markets (EM) are under pressure. But EM is under pressure because the Fed is going to hike, so when the Fed doesn't hike, EM rallies, and the Fed turns hawkish again. But hold on, that leads EM to come off the boil again, and we're back where we started.
To escape this negative feedback loop we need a circuit breaker, reckons Lawson, and "hopefully one to the upside, not the downside of the risk spectrum". The number one contender for this, as confirmed by the Fed on Friday morning, is China and how it manages its economic transition.
And that, neatly, brings us to number three, which is …
3. IT'S TIME TO FORGET THE FED.

"Gasp!" That's right, I said it. The US Fed has done all it can for us. It has pumped more than $US4 trillion ($5.6 trillion) into global financial markets via its now defunct bond purchasing programs. It has sparked one of the longest bull runs in US sharemarket history and kept the world's largest economy on a reasonably steady path of recovery. That's helped us all. When it raises rates – tomorrow or in six months' time – it will be the first, small step on a long and gradual path towards more normal monetary settings. All that stimulus isn't about to be sucked back out of the market overnight.
Imagine that Yellen had called you ahead of this morning's announcement and told you whether rates would be higher or on hold. After you got over the inevitable "How did she get my number?" and, "Really, at this hour?"  – ask yourself this: what would you have changed about your portfolio?
That's not an idle question. The local head State Street Global Advisor's investment solutions group, Mark Wills, asked himself that same question.
"How would that change our behaviour? We have no idea," he said Thursday afternoon amid the frenzied US Fed conjecture. "We're happy with our current positioning, and we can't see anything out of a decision that would dramatically move markets either way."
Well, he was right. Worry about Greece and Middle-East conflict, if you must. Read all you can about China. Try to find pockets of growth and stay defensive. But, for now, forget the Fed.

[greengiraffe]

• OPINION
   
  
  
•  Sep 20 2015 at 4:27 PM 
   
  
  
•  Updated Sep 20 2015 at 7:36 PM 
  

Janet Yellen hasn't helped her fellow central bankers

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NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/q/v/b/3/image.related.afrArticleLead.620x350.gjqnqq.png/1442741786399.jpg[/img]Mario Draghi and Glenn Stevens might have a few pointed messages for Janet Yellen. Dominic Lorrimer
[Image: 1435478719294.png]

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by Karen Maley
Just as well Janet Yellen is not scheduled to meet her fellow central bank chiefs any time soon, because it's likely they'd have some harsh words of criticism for the US Federal Reserve boss.
Glenn Stevens, the scrupulously polite Reserve Bank chief, gave a hint of the exasperation felt by central bankers around the world after the US central bank decided not to raise its key interest rate last week.
Appearing before a parliamentary committee on Friday, Stevens appeared to urge Yellen to show a bit more courage when it came to raising US interest rates, which have been stuck close to zero since December 2008.
Although there were always reasons for delaying a rate rise, he said, "one day you are just going to have to do it".

But while Stevens took an impartial position, arguing that the Fed should raise rates "for the US's sake", his counterparts in Europe and Japan are likely to feel much more directly threatened by the US central bank's decision not to move rates higher.
After all, with interest rates close to zero in most of the advanced economies, central banks in Europe and Japan have pinned their hopes on lower currencies to help drive their exports, and boost their moribund economies.
They're like to see Yellen's decision not to raise rates as sending an important signal to markets that the US central bank does not want to see a further strengthening in the US dollar, and may even want the greenback to fall against other major currencies.
This is likely to cause a great deal of irritation to the suave Mario Draghi, the head of the European Central Bank. The ECB has been buying huge amounts of European bonds, boosting the quantity of euros in circulation, with the hope of driving the currency lower


Draghi's strategy worked well while financial markets still expected that the US Fed would raise rates this year. The prospect of higher US yields encouraged investors to increase their demand for US dollars, and the euro to its lowest level in 12 years in March. The lower euro provided a big earnings boost for European companies in the first half of the year.
STRATEGY STARTS UNWIND
But the strategy started unwinding as soon as investors began to question whether that Yellen would raise US interest rates this year. As a result, the euro has climbed 8 per cent against the US dollar since hitting its March lows. Even more worrying for Draghi, Yellen's decision last week to postpone a rate rise is likely to cause the euro to strengthen even further.
This leaves the ECB with little choice but to ramp up its bond-buying program even more in an effort to stem the euro's rise because the stronger euro not only makes European exports more expensive in global markets, it also fuels deflationary pressures in the euro zone by driving down the price of imports.

As a result, many analysts believe that it's only a matter of time before the ECB decides either to increase its monthly bond purchases from €60 billion ($94 billion) to €80 billion, or to extend its bond buying program beyond its expected expiry date of September 2016.
On Friday, ECB board member Benoit Coeure emphasised the central bank's "capacity to react" in the face of weakening growth an inflation.
The ECB, he said, was determined to protect the eurozone from rising "external financial shocks", regardless of whether these stemmed from financial market turbulence, slowing growth in the emerging markets, or from the decisions taken by other major central banks.
Similarly, Bank of Japan governor Haruhiko Kuroda is likely to be keeping an anxious watch see whether the yen pushes higher in the wake of the US central bank's decision to keep interest rates on hold.

Last week, the Bank of Japan decided against ramping up its monetary stimulus, under which it buys ¥80 trillion yen ($926 billion) of bonds each year in order to rid the country of deflationary pressures.
MONETARY STIMULUS NEEDED
But even though this monetary stimulus has boosted exporters' profits by weakening the yen, big Japanese firms have not responded by raising wages and increasing investment.
As a result, a growing number of analysts are predicting the Bank of Japan will need to boost its monetary stimulus in order to push its currency even lower.
But there are also concerns as to how much longer the Bank of Japan's bond buying can continue. Already, the Japanese central bank holds about ¼ of Japanese government bonds in the market, and this is expected to rise to close to 40 per cent at the end of next year, at the current rate of buying.
The risk is that the Bank of Japan eventually runs out of willing sellers, because Japanese banks need to hold a certain amount of bonds in their portfolio. If that were to happen, the Bank of Japan would be forced to experiment with even more unorthodox strategies for boosting economic activity.

[greengiraffe]

The Fed has met criteria for rate rise: US official

• VICTORIA THIEBERGER
  
• THE AUSTRALIAN
  
• SEPTEMBER 25, 2015 12:00AM
  

0

[Image: 768147-64a92b6a-629a-11e5-8a5b-5d1516c8bd1c.jpg]
Cleveland Federal Reserve president Loretta Mester. Picture: Bloomberg. Source: Bloomberg
[b]The US economy has already met the preconditions for a rise in interest rates and the slowdown in China does not pose a significant risk to US growth, a top Federal Reserve official has told The Australian.[/b]
The dramatic reaction to last week’s decision by the US Federal Reserve to delay a historic move to end the era of zero interest rates may have been overdone, as a rate rise there remains firmly on the cards. Contrary to some commentary, the central bank has not added global growth to its domestic economic mandates and remains focused on steady improvement in the US labour market and signs of firming ­inflation.
Cleveland Federal Reserve president Loretta Mester says the risks of delaying a small lift in interest rates need to be considered carefully along with the criteria the policy-setting Federal Open Market Committee set for a rate rise, namely further improvement in the labour market and reasonable confidence that inflation will return to 2 per cent.
“When I think of the criteria the FOMC has set for lift-off — I am pretty confident that we have met those criteria,” Ms Mester said in an exclusive interview with The Australian.
“We have to be forward looking when we set policy. We will still have a lot of accommodation even if we were to move up the interest rate from zero to 25 basis points.”
The combination of a steady fall in the US unemployment rate to a seven-year low of 5.1 per cent in August and an annualised economic growth rate of 3.7 per cent in the June quarter has convinced many economists the Fed will soon end its nine-year policy of zero interest rates.
Ms Mester’s comments following a growing split over the direction of interest rates globally, with senior Bank of England official Andrew Haldane recently canvassing lower interest rates in a speech.
Meanwhile, ANZ yesterday became the first of the big four banks to forecast a cut in the Reserve Bank’s cash rate below the record low level of 2 per cent, pencilling in the first act in February.
Indeed, ANZ argues a stubbornly high jobless rate in Australia will force the RBA to cut rates to as low as 1.5 per cent, despite recent concerns over the pace of price growth in housing.
The US Federal Reserve had been widely expected to raise rates at its September meeting, until sharp falls in equity markets in August triggered by weak economic news out of China raised worries about the global recovery.
Last week, the Fed said it wanted a little more time to make sure that global developments did not throw the US recovery off track.
Ms Mester suggested concerns about a rapid slowdown in China were overdone, noting the government was taking action and working through economic reforms. “I think some of the rhetoric has been overblown about how big a risk that is. It’s a risk but not a significant risk at this point.”
Mining companies and Australian shares suffered another bout of weakness yesterday when a reading on Chinese manufacturing shrank to a 6-year low.
Because the Federal Reserve needs to assess both upside and downside risks to growth, a little more patience is needed. Ms Mester still expects US GDP growth to be above trend over the next year, meaning above 2.3 per cent growth, and says various measures suggest the labour market is at or close to full employment.
“We are very, very accommodative, and we have been very accommodative as the economy has improved. So we have already taken out some insurance against the downside risks,” she says.
“If we delay too much, we are probably not going to be able to raise rates at a gradual pace,” Ms Mester says.
Although broad wage measures have been soft, that could be changing. The Cleveland Fed’s contacts in the business community suggest that higher wages are spreading from in-demand sectors like construction and IT to lower-skilled occupations such as restaurant workers.
Fed policymakers set a lot of store in the 12 regional Federal Reserve banks’ liaison with businesses because it can precede trends in the official data.
Last week’s meeting showed an unusually wide spread in views of committee members, with 13 of 17 expecting a rate rise this year and a wide range in forecasts for growth and the path of rates next year.
Ms Mester sees the diversity of opinion as productive. “I would be more concerned if everyone had exactly the same view. That could mean we were totally missing something.”
Ms Mester is considered to be slightly on the hawkish side of centre within the Fed. She took up the Cleveland Fed presidency in 2014 after 14 years as head of research at the Philadelphia Fed.
One of the key risks facing the Fed after seven years of extraordinary monetary policy and nine years since the last rate increase is that excessive leverage or risk-taking in markets threatens financial stability, and Ms Mester is cautious.
“One of the lessons of the financial crisis is you have to be very forward looking ... and for financial stability you have to start even earlier.
“I don’t see financial stability as a current risk, but I do think the longer we stay at very, very emergency levels of accommodation, the more those risks could grow. It behoves us not to ignore that side of the ledger either.”
Additional reporting: Adam Creighton

[CityFarmer]

The rate will rise, either in Oct or Dec, based on the suggestion...

Asian shares rise, dollar gains as Yellen revives rate talk

TOKYO - The dollar jumped and U.S. interest rate futures price briefly dropped after Federal Reserve Chair Janet Yellen suggested the central bank is still on track to raise interest rates later this year.
...
http://www.todayonline.com/business/asia...rns-linger

[CityFarmer]

She has added one more uncertainty into the global economy i.e. her health condition...

Yellen resumes schedule after struggling to finish speech

AMHERST, Mass. - Federal Reserve Chair Janet Yellen received medical attention on Thursday after struggling to finish a speech at the University of Massachusetts, Amherst, coughing and pausing to recompose herself a few times before walking off stage.

As head of the central bank of the world's largest economy, Yellen, 69, plays a major role in the global economy.
...
http://www.todayonline.com/business/fed-...s-official

[swakoo]

The rate will rise, either in Oct or Dec, based on the suggestion...

Asian shares rise, dollar gains as Yellen revives rate talk

TOKYO - The dollar jumped and U.S. interest rate futures price briefly dropped after Federal Reserve Chair Janet Yellen suggested the central bank is still on track to raise interest rates later this year.
...
http://www.todayonline.com/business/asia...rns-linger

This report missed out another part of her speech:

Keeping in her even-handed style, Yellen said that if the economic outlook worsens later this year, the Fed could push back a rate hike until 2016.

"If the economy surprises us, our judgments about appropriate monetary policy will change," Yellen said, ending her speech.

http://money.cnn.com/2015/09/24/news/eco...ey_markets

Reckon it's still going to be data dependent.....

[BlueKelah]

Since Obama took office their debt has continued to go up. Despite some shrinkage of budget deficit initially, since early this year the budget deficit has started increasing again and latest is around 149billion. If they don't do austerity soon, US is gonna end up just like greece, only a much bigger version. 

Short term fix, long term pain.

[cfa]

USA will always have money , if no money just another round of QE .

[greengiraffe]

USA will always have  money , if no money just another round of QE .

I absolutely agree with your observations... printing $ or new way of surviving is the way to convincingly move forward.

Big brothers have little worries as its always the small guys that are being sacrificed...

The world is aging and bankrupt... is there anything new?