#monetary-policy

#monetary-policy

"The global economy has remained resilient, but the full effects of higher tariffs and policy uncertainty have yet to be felt. Global economic growth is projected to slow, and significant risks remain, as well as concerns about fiscal sustainability and financial stability," OECD Secretary-General Mathias Cormann said.

Donald Trump has called for US companies to abandon quarterly reporting, shift to a semi-annual model. Having to cover this stuff, I can say that's something I and many like me could get behind. On a more serious note, the idea has plenty of merit - for instance it could foster a change where management focus all their efforts not on the next quarterly target, instead taking a more measured, long-term view.

Monetary policy remains the central variable. While markets expect the Fed to cut interest rates if U.S. economic data show sufficient cooling, the European Central Bank (ECB) is inclined to keep its deposit rate steady at 2%. This divergence allows the U.S.-Eurozone real yield spread to narrow, thereby providing short-term support for the euro.

He is breaking with decades of precedent and allegedly the law to attempt to fire Lisa Cook, a Biden-era appointee to the bank's board of governors. It appears to be part of his campaign to demand lower interest rates, which is a lousy policy when inflation hasn't quite cooled. Trump has done little otherwise to bring prices down. His aggressive tariff regime, certainly, will punish many families - especially when it's not coupled with a new industrial policy or jobs program.

The USD/JPY pair is moving on a volatile path, reflecting the uncertainty that dominates global markets. The pair managed twice to approach the 149.00 level during Wednesday's trading, even briefly reaching its highest level in five weeks at 149.14, but it failed to break above the 200-day EMA near 148.22. This reveals a lack of momentum, as traders await the pivotal U.S. economic data scheduled for release this week.

There is a lot of dramatic commentary on this but I wouldn't exaggerate the 30-year bond rate, he said. It's a number that gets quoted a lot. It's quite a high number. It is actually not a number that is being used for funding at all at the moment.

Samir Dedhia, CEO of One Real Mortgage, noted in commentary last week that rates are near their lowest levels since October 2024, not long after the Federal Reserve began to implement a series of cuts to benchmark rates that totaled 100 bps. Rates have now dropped nearly half a percent from their January highs, giving homebuyers and homeowners more breathing room to explore options, Dedhia said.

From the "Love Island" villa to the Coldplay "kiss cam," it's been a summer full of interesting relationships. However, President Donald Trump and Fed Chair Jerome Powell's relationship, or lack thereof, has the biggest impact on the business world. Powell's decision to keep rates steady this summer only fueled the fire. And Trump's ire for Powell has now extended to some of his colleagues, who are also fighting back.

In the last 100 years, the average gain among 14 bull markets has been 177% over 59 months. Based on that data, the S&P has more room to run, as stocks are "only" up about 80% since the October 2022 lows. Yes, but: Of course, this is a technical indicator, looking at past performance, which is not indicative of future results. This doesn't take into account some of the market risks we've covered, ranging from valuations to concentration to macro and policy risks.

At its annual jamboree at Jackson Hole, Chair Powell signalled his apparent support for a rate cut later this month, stating that the softening labour market could offset the inflation risks from Trump's tariffs. The market had already been anticipating a 0.25% cut on 17 September but this cemented expectations and last week's crop of US data did little to change things.

Mid-cap and small-cap indexes outperformed, while the technology-heavy Nasdaq slipped as investors took profits from this year's strong run in artificial intelligence-related stocks. The Fed remains the central focus. Powell acknowledged that inflation remains a challenge but also highlighted weakening signs in the labor market. He noted that interest rates are currently at restrictive levels, and the balance of risks may be shifting toward employment. His comments raised expectations that the Fed could begin lowering rates soon.

"curious kind of balance that results from a marked slowing in both the supply of and demand for workers."