Federal Reserve Chair Jerome Powell will speak at the Kansas City Fed’s Jackson hole economic policy symposium next Friday. Powell is expected to deliver a keynote address on the financial outlook on August 23 at the three-day seminar.

Powell's Jackson hole speech looms large

Interest rates over to decades highs in the US for a year have impacted the broader economy. The Federal Reserve in its fight against surging inflation hike rates aggresively to the highest in over 20 years.

Impact of high interest rates on the US, rates weighing on economy

Federal Reserve officials are primed to start trimming borrowing costs in the coming months, with Chairman Jerome Powell potentially hinting at it the following week. The shift comes as worries increase over how to sustain a strong yet moderating labour market.

The central bankers have maintained interest rates at the highest level in more than two decades for more than a year now, and will likely leave them there again when their two-day meeting ends on Wednesday. Instead, investors see Fed officials lowering their benchmark rate in September.

Recent data has been encouraging, with more muted price increases, alongside robust economic growth. However, Fed officials are looking for more reassurance that inflation will continue to trend down toward the central bank's 2 per cent target.

The softening of price pressures, paired with an upward creep in the unemployment rate, has brought both of the Fed's dual goals—maximum employment and stable prices—into greater alignment. While the Fed would like to keep a leash on inflation, it would also not want to knock the labour market off its perch by keeping rates high for an extended period.

Much attention now turns to the July jobs report and other labour market indicators that will shed light on the question of whether the slowing in hiring is accelerating. Nonfarm payrolls are forecast to advance by 178,000 — a healthy but more moderate pace. The unemployment rate, which has climbed in each of the past three months, is seen holding at 4.1 per cent.

Hurricane Beryl, which struck Texas earlier this month, also lends an air of uncertainty and could impact hours worked. Additionally, new data on job openings and quitting, out Tuesday, will be watched closely as well.

Also out Tuesday is the Conference Board's consumer confidence index, which will give a read on how consumers are feeling. Investors will also get a better sense of the health of the manufacturing sector with the Institute for Supply Management's factory report on Thursday.

Here, the delicate balance between containing inflation and sustaining employment that the Fed would want to maintain is at stake. Indeed, Powell's forthcoming communication will be important in setting expectations regarding the Fed's policy direction in the months ahead.

Federal Reserve officials are primed to start trimming borrowing costs in the coming months, with Chairman Jerome Powell potentially hinting at it the following week.

Federal Reserve officials are primed to start trimming borrowing costs in the coming months, with Chairman Jerome Powell potentially hinting at it the following week. The shift comes as worries increase over how to sustain a strong yet moderating labour market. The central bankers have maintained interest rates at the highest level in more than two decades for more than a year now, and will likely leave them there again when their two-day meeting ends on Wednesday. Instead, investors see Fed officials lowering their benchmark rate in September. Recent data has been encouraging, with more muted price increases, alongside robust economic growth. However, Fed officials are looking for more reassurance that inflation will continue to trend down toward the central bank's 2 per cent target. The softening of price pressures, paired with an upward creep in the unemployment rate, has brought both of the Fed's dual goals—maximum employment and stable prices—into greater alignment. While the Fed would like to keep a leash on inflation, it would also not want to knock the labour market off its perch by keeping rates high for an extended period. Much attention now turns to the July jobs report and other labour market indicators that will shed light on the question of whether the slowing in hiring is accelerating. Nonfarm payrolls are forecast to advance by 178,000 — a healthy but more moderate pace. The unemployment rate, which has climbed in each of the past three months, is seen holding at 4.1 per cent. Hurricane Beryl, which struck Texas earlier this month, also lends an air of uncertainty and could impact hours worked. Additionally, new data on job openings and quitting, out Tuesday, will be watched closely as well. Also out Tuesday is the Conference Board's consumer confidence index, which will give a read on how consumers are feeling. Investors will also get a better sense of the health of the manufacturing sector with the Institute for Supply Management's factory report on Thursday. Here, the delicate balance between containing inflation and sustaining employment that the Fed would want to maintain is at stake. Indeed, Powell's forthcoming communication will be important in setting expectations regarding the Fed's policy direction in the months ahead.

US Fed poised for potential rate cut as economic indicators signal balance

Asian stocks opened higher today, buoyed by gains on Wall Street.

Japan’s Nikkei 225 rose 1 per cent, while South Korea’s Kospi climbed 0.3 per cent, driven by an increase in Samsung electronics despite ongoing union strikes.

Hong Kong’s Hang Seng index futures were slightly up, reflecting cautious optimism in the region.

In the US, the S&amp;P 500 and NASDAQ composite closed at all-time highs on Monday.

The S&amp;P 500 gained 0.1 per cent and the NASDAQ rose 0.3 per cent, driven by easing inflation pressures and investor optimism about the Federal Reserve's potential policy easing.

However, the Dow Jones industrial average dipped 0.1 per cent, indicating some market caution.

Crude oil prices fell to a one-week low this morning. Brent futures settled around 85 per dollar barrel, as Hurricane Beryl disrupted US Gulf Coast refineries and ports.

Analysts noted that hedging activities ahead of the storm were unwound, contributing to the price drop.

Additionally, hopes for a Gaza ceasefire added to the downward pressure on oil prices.

Gold prices also fell by more than 1 per cent in the previous session due to profit-taking after a previous rally and a shift towards riskier equities.

The precious metal’s decline followed investor speculation about potential US Federal Reserve interest rate cuts in September.

This week, markets will be closely monitoring Federal Reserve Chair Jerome Powell’s testimony before Congress, key inflation data with the June consumer price index on Thursday, and the producer price index on Friday.

Earnings reports from PepsiCo, Delta Air Lines, Citigroup, and JPMorgan Chase will also be pivotal in gauging market sentiment and economic health.

Asian stocks opened higher today, buoyed by gains on Wall Street. Japan’s Nikkei 225 rose 1 per cent, while South Korea’s Kospi climbed 0.3 per cent, driven by an increase in Samsung electronics despite ongoing union strikes.

Asian stocks opened higher today, buoyed by gains on Wall Street. Japan’s Nikkei 225 rose 1 per cent, while South Korea’s Kospi climbed 0.3 per cent, driven by an increase in Samsung electronics despite ongoing union strikes. Hong Kong’s Hang Seng index futures were slightly up, reflecting cautious optimism in the region. In the US, the S&P 500 and NASDAQ composite closed at all-time highs on Monday. The S&P 500 gained 0.1 per cent and the NASDAQ rose 0.3 per cent, driven by easing inflation pressures and investor optimism about the Federal Reserve's potential policy easing. However, the Dow Jones industrial average dipped 0.1 per cent, indicating some market caution. Crude oil prices fell to a one-week low this morning. Brent futures settled around 85 per dollar barrel, as Hurricane Beryl disrupted US Gulf Coast refineries and ports. Analysts noted that hedging activities ahead of the storm were unwound, contributing to the price drop. Additionally, hopes for a Gaza ceasefire added to the downward pressure on oil prices. Gold prices also fell by more than 1 per cent in the previous session due to profit-taking after a previous rally and a shift towards riskier equities. The precious metal’s decline followed investor speculation about potential US Federal Reserve interest rate cuts in September. This week, markets will be closely monitoring Federal Reserve Chair Jerome Powell’s testimony before Congress, key inflation data with the June consumer price index on Thursday, and the producer price index on Friday. Earnings reports from PepsiCo, Delta Air Lines, Citigroup, and JPMorgan Chase will also be pivotal in gauging market sentiment and economic health.

Asian stocks rise on Wall Street optimism; Eyes on Fed & economic data

The Federal Reserve together with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency are now reportedly considering a new strategy which will also reduce the steep increase in capital requirements for the largest banks in the country from the initially proposed nearly 20 per cent.

This is a change from the original policy set by the new regulation and it follows pressure from key industry players like JPMorgan Chase CEO Jamie Dimon as reported by the Wall Street Journal on Sunday.

Under the new plan, the capital increase requirements for banks such as JPMorgan Chase and Goldman Sachs would be reduced to slightly over 50 per cent of the original amounts.

These increases are meant to ensure that banks have extra capital to be able to prevent possible losses.

However the concrete establishment of the new capital rules remains far from definite; officials of the Federal Reserve, the FDIC, and the OCC continue to bargain substantive and technical modifications.

All three regulatory agencies have failed to give remarks or respond to the ongoing discussions.

They form a group of regulators known as the Basel III regulators, which are headed by the Federal Reserve, and last July proposed a significant reform in the capital rules for banks with assets of over $100 billion.

Basel proposal is one such effort in which the proposal has attempted to increase the ability of banks to cope with potential losses to minimise the failures of banks or bailouts.

However major US banks state that they are sufficiently capitalised, and the proposed changes are not essential.

The banking industry has fiercely condemned the Basel proposal, asserting that implementation would force alterations to or the end of many products and services.

For instance, Goldman Sachs has been able to deploy small business owners to express their opposition to the proposal in Washington.

They are some of the elements used in lobbying the government to revisit the strict capital rules.

&nbsp;(With inputs from Reuters)

The Federal Reserve together with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency are now reportedly considering a new strategy which will also reduce the steep increase in capital requirements for the largest banks in the country from the initially proposed nearly 20 per cent.

The Federal Reserve together with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency are now reportedly considering a new strategy which will also reduce the steep increase in capital requirements for the largest banks in the country from the initially proposed nearly 20 per cent. This is a change from the original policy set by the new regulation and it follows pressure from key industry players like JPMorgan Chase CEO Jamie Dimon as reported by the Wall Street Journal on Sunday. Under the new plan, the capital increase requirements for banks such as JPMorgan Chase and Goldman Sachs would be reduced to slightly over 50 per cent of the original amounts. These increases are meant to ensure that banks have extra capital to be able to prevent possible losses. However the concrete establishment of the new capital rules remains far from definite; officials of the Federal Reserve, the FDIC, and the OCC continue to bargain substantive and technical modifications. All three regulatory agencies have failed to give remarks or respond to the ongoing discussions. They form a group of regulators known as the Basel III regulators, which are headed by the Federal Reserve, and last July proposed a significant reform in the capital rules for banks with assets of over $100 billion. Basel proposal is one such effort in which the proposal has attempted to increase the ability of banks to cope with potential losses to minimise the failures of banks or bailouts. However major US banks state that they are sufficiently capitalised, and the proposed changes are not essential. The banking industry has fiercely condemned the Basel proposal, asserting that implementation would force alterations to or the end of many products and services. For instance, Goldman Sachs has been able to deploy small business owners to express their opposition to the proposal in Washington. They are some of the elements used in lobbying the government to revisit the strict capital rules. (With inputs from Reuters)

US regulators may cut bank capital hikes

This week's data brought excellent news for the US Federal Reserve on two fronts, with consumer prices rising more slowly than expected in April and retail expenditure holding flat. However, authorities have yet to announce a clear shift in the timetable of the rate cuts, which investors anticipate will begin this year.

Several Federal Reserve officials, including the vice chair of the rate-setting Federal Open Market Committee (FOMC), New York Fed President John Williams, praised the promising data. Despite positive data from US government agencies, there is still a cautious tone about future monetary policy.

"I don't see any indicators now telling me...there's a reason to change the stance of monetary policy now," Williams stated to Reuters. He said that he did not anticipate the criteria for a rate drop occurring "in the very near term."

Richmond Fed President Thomas Barkin reaffirmed this assessment on CNBC, stating that while April retail sales statistics indicated a "good" pace of spending, it was not "great." He emphasised that, despite declining consumer demand, the service industry will continue to raise prices. "I do believe we're on the right track. I believe inflation is falling," Barkin said, although he added that meeting the 2 per cent inflation target on a long-term basis would take longer.

Loretta Mester, president of the Cleveland Fed, offered cautious optimism, calling this year's inflation progress "disappointing." She warned that increased public expectations for near-term inflation may compel additional rate hikes if long-term expectations rise as well. "Holding the policy rate at the 5.25 per cent to 5.5 per cent range where it has been since July is prudent...as we gain clarity about the path of inflation," said Mester.

Similarly, Chicago Fed President Austan Goolsbee cited slowing shelter inflation in April as a favourable indicator. Atlanta Fed President Raphael Bostic agreed during an appearance in Jacksonville, calling the reduction in shelter inflation "a pretty significant development." However, he stated that "one data point is not a trend."

The time frame for making a case for rate decreases before the Federal Reserve’s September 17-18 meeting is constrained. Before&nbsp;the June 11-12 meeting, policymakers will receive one extra report on the Personal Consumption Expenditures price index. By the July 30-31 meeting, they will have gotten comprehensive data on the economy's performance for the first half of the year, including inflation and job figures through June.

If inflationary pressures continue to fall, the Federal Reserve’s policy pronouncements may shift, perhaps clearing the way for rate decreases. The Federal Reserve's annual research conference in Jackson Hole in August could be a critical occasion for signalling any policy changes.

In terms of global policy, the International Monetary Fund (IMF) advocated caution. "The recent inflation data are overall higher than we would like to see," IMF spokesman Julie Kozack stated. "This reinforces the need for the Fed to be cautious."

As things stand, US Federal Reserve officials remain cautiously hopeful but are yet to commit to a rate-cutting plan, preferring to keep an eye on inflation and the economy.

This week's data brought excellent news for the US Federal Reserve on two fronts, with consumer prices rising more slowly than expected in April and retail expenditure holding flat.

This week's data brought excellent news for the US Federal Reserve on two fronts, with consumer prices rising more slowly than expected in April and retail expenditure holding flat. However, authorities have yet to announce a clear shift in the timetable of the rate cuts, which investors anticipate will begin this year. Several Federal Reserve officials, including the vice chair of the rate-setting Federal Open Market Committee (FOMC), New York Fed President John Williams, praised the promising data. Despite positive data from US government agencies, there is still a cautious tone about future monetary policy. "I don't see any indicators now telling me...there's a reason to change the stance of monetary policy now," Williams stated to Reuters. He said that he did not anticipate the criteria for a rate drop occurring "in the very near term." Richmond Fed President Thomas Barkin reaffirmed this assessment on CNBC, stating that while April retail sales statistics indicated a "good" pace of spending, it was not "great." He emphasised that, despite declining consumer demand, the service industry will continue to raise prices. "I do believe we're on the right track. I believe inflation is falling," Barkin said, although he added that meeting the 2 per cent inflation target on a long-term basis would take longer. Loretta Mester, president of the Cleveland Fed, offered cautious optimism, calling this year's inflation progress "disappointing." She warned that increased public expectations for near-term inflation may compel additional rate hikes if long-term expectations rise as well. "Holding the policy rate at the 5.25 per cent to 5.5 per cent range where it has been since July is prudent...as we gain clarity about the path of inflation," said Mester. Similarly, Chicago Fed President Austan Goolsbee cited slowing shelter inflation in April as a favourable indicator. Atlanta Fed President Raphael Bostic agreed during an appearance in Jacksonville, calling the reduction in shelter inflation "a pretty significant development." However, he stated that "one data point is not a trend." The time frame for making a case for rate decreases before the Federal Reserve’s September 17-18 meeting is constrained. Before the June 11-12 meeting, policymakers will receive one extra report on the Personal Consumption Expenditures price index. By the July 30-31 meeting, they will have gotten comprehensive data on the economy's performance for the first half of the year, including inflation and job figures through June. If inflationary pressures continue to fall, the Federal Reserve’s policy pronouncements may shift, perhaps clearing the way for rate decreases. The Federal Reserve's annual research conference in Jackson Hole in August could be a critical occasion for signalling any policy changes. In terms of global policy, the International Monetary Fund (IMF) advocated caution. "The recent inflation data are overall higher than we would like to see," IMF spokesman Julie Kozack stated. "This reinforces the need for the Fed to be cautious." As things stand, US Federal Reserve officials remain cautiously hopeful but are yet to commit to a rate-cutting plan, preferring to keep an eye on inflation and the economy.

US Federal Reserve officials cautiously optimistic on inflation, rate cut uncertain

The growing divide between the haves and the have-nots is clearly visible in the United States. The Federal Reserve's indecision is not helping the cause. Watch in for more details!

Near-unprecedented pace of wealth creation in US stocks

The US Federal Reserve has opted to maintain interest rates at their current levels in its latest meeting, indicating a continued inclination towards potential future rate cuts. <o:p></o:p>

However, the central bank was apprehensive regarding recent below par inflation metrics, suggesting that such cuts might be delayed until further progress is observed. <o:p></o:p>

Federal Reserve Chair Jerome Powell noted the extended timeline required for policymakers to regain confidence in inflation trends; he said that the anticipated decline towards the targeted 2 per cent might take longer than previously expected.<o:p></o:p>

Powell elaborated on the current economic stance, noting that while the initial months of 2024 saw rapid price hikes, the anticipated decline in inflation has been slower to materialise. <o:p></o:p>

Although he affirmed that rate hikes are unlikely, Powell hinted at the possibility of an extended period of maintaining the benchmark policy rate within the 5.25-5.50 per cent range, in place since July. <o:p></o:p>

He stressed that the current policy rate continues to exert sufficient pressure on economic activity, with patience being key until signs of inflation moderation become evident.<o:p></o:p>

"Inflation is still too high," Powell stated during a post-meeting press conference. <o:p></o:p>

He expressed a lowered confidence in the previous forecast of inflation decline over the year, further highlighting the uncertainty surrounding the future trajectory of inflation. <o:p></o:p>

Powell said that the decision regarding rate cuts depends on incoming data, with various scenarios under consideration based on inflation persistence and labour market strength.<o:p></o:p>

Despite the prevailing economic uncertainties, Powell's declaration that rate hikes are improbable provided a sense of relief to investors wary of a potentially hawkish Federal Reserve stance. <o:p></o:p>

Consequently, US stock and bond prices rebounded, indicating &nbsp;optimism surrounding a delayed timeline for rate cuts. <o:p></o:p>

Analysts noted that Powell's remarks were less hawkish than anticipated.<o:p></o:p>

The Fed's policy statement repeated its cautious approach, necessitating greater confidence in sustained inflation movement towards the 2 per cent target before considering rate reductions. <o:p></o:p>

The central bank highlighted concerns over the lack of progress towards achieving this objective in recent months. <o:p></o:p>

Additionally, the Federal Reserve announced adjustments to its balance sheet reduction strategy, aiming to prevent a shortage of reserves in the financial system, a situation experienced in 2019 during the previous round of quantitative tightening.<o:p></o:p>

Responding to economic queries, Powell dismissed comparisons to the stagflation period of the late 1970s, asserting that the current economic landscape differs significantly. <o:p></o:p>

He cited solid growth rates and inflation levels below 3 per cent, indicating a contrast to the conditions prevalent during the stagflation era. <o:p></o:p>

Powell emphasised the absence of stagnant growth and hyperinflation.<o:p></o:p>

(With inputs from Reuters)<o:p></o:p>

The US Federal Reserve has opted to maintain interest rates at their current levels in its latest meeting, indicating a continued inclination towards potential future rate cuts.

The US Federal Reserve has opted to maintain interest rates at their current levels in its latest meeting, indicating a continued inclination towards potential future rate cuts. However, the central bank was apprehensive regarding recent below par inflation metrics, suggesting that such cuts might be delayed until further progress is observed. Federal Reserve Chair Jerome Powell noted the extended timeline required for policymakers to regain confidence in inflation trends; he said that the anticipated decline towards the targeted 2 per cent might take longer than previously expected. Powell elaborated on the current economic stance, noting that while the initial months of 2024 saw rapid price hikes, the anticipated decline in inflation has been slower to materialise. Although he affirmed that rate hikes are unlikely, Powell hinted at the possibility of an extended period of maintaining the benchmark policy rate within the 5.25-5.50 per cent range, in place since July. He stressed that the current policy rate continues to exert sufficient pressure on economic activity, with patience being key until signs of inflation moderation become evident. "Inflation is still too high," Powell stated during a post-meeting press conference. He expressed a lowered confidence in the previous forecast of inflation decline over the year, further highlighting the uncertainty surrounding the future trajectory of inflation. Powell said that the decision regarding rate cuts depends on incoming data, with various scenarios under consideration based on inflation persistence and labour market strength. Despite the prevailing economic uncertainties, Powell's declaration that rate hikes are improbable provided a sense of relief to investors wary of a potentially hawkish Federal Reserve stance. Consequently, US stock and bond prices rebounded, indicating optimism surrounding a delayed timeline for rate cuts. Analysts noted that Powell's remarks were less hawkish than anticipated. The Fed's policy statement repeated its cautious approach, necessitating greater confidence in sustained inflation movement towards the 2 per cent target before considering rate reductions. The central bank highlighted concerns over the lack of progress towards achieving this objective in recent months. Additionally, the Federal Reserve announced adjustments to its balance sheet reduction strategy, aiming to prevent a shortage of reserves in the financial system, a situation experienced in 2019 during the previous round of quantitative tightening. Responding to economic queries, Powell dismissed comparisons to the stagflation period of the late 1970s, asserting that the current economic landscape differs significantly. He cited solid growth rates and inflation levels below 3 per cent, indicating a contrast to the conditions prevalent during the stagflation era. Powell emphasised the absence of stagnant growth and hyperinflation. (With inputs from Reuters)

Federal Reserve holds rates steady, raises concerns over lack of inflation progress

Options traders in the Treasury market are hedging against a spectrum of scenarios, ranging from possible interest rate cuts to hikes ahead of the Federal Reserve meeting this week, Bloomberg reported.<o:p></o:p>

Despite recent inflation data surpassing expectations, casting doubts on imminent rate cuts, options activity indicates more uncertainty regarding the Federal Reserve’s monetary policy trajectory for the year. <o:p></o:p>

Traders are employing a variety of strategies, including deep out-of-the-money tail-risk hedges, to brace for extreme dovish and hawkish scenarios.<o:p></o:p>

Some are even targeting a policy rate as low as 3 per cent by December versus the current market consensus of around 5 per cent.<o:p></o:p>

Conversely, some option plays are positioning for a scenario of rates being higher for longer throughout the year, with an uptick in bets anticipating one more rate hike. <o:p></o:p>

Last Friday, a trader purchased put spreads expiring in March 2025, signalling a wager on the Fed maintaining steady rates until that period. <o:p></o:p>

Tanvir Sandhu, Bloomberg Intelligence's Chief Global Derivatives Strategist, noted that the likelihood of a rate hike has increased given the postponement of rate cuts, although data-driven evidence is necessary to validate such a move. <o:p></o:p>

Strategic positioning in the Treasury market has seen a surge in short positions over recent days, coinciding with a spike in yields to fresh yearly highs. <o:p></o:p>

Open interest in futures has expanded, particularly in the front- and middle of the yield curve, as yields breached key thresholds. <o:p></o:p>

While the market sentiment leans towards higher rates, reflecting reduced expectations for rate cuts, the surge in short positions indicates the volatility and uncertainty prevailing in the market. <o:p></o:p>

Currency markets are closely monitoring developments at both the Federal Reserve and the Bank of Japan (BOJ). <o:p></o:p>

Traders are show signs of heightened demand for options hedging against movements in the Japanese yen, with risk reversals indicating a focus on mitigating the risk of a sharp yen rally. <o:p></o:p>

Recent US inflation data, aligning with Fed Chair Jerome Powell's stance on maintaining higher rates, has exerted downward pressure on the yen, prompting concerns about potential intervention by Japanese authorities if the currency weakens further. <o:p></o:p>

The yen's volatility has surged, with one-week volatility in dollar-yen nearing its strongest level in months. <o:p></o:p>

Despite the pricing out of BOJ-meeting risks, demand for long-volatility exposure remains strong, indicative of ongoing apprehension in the market. <o:p></o:p>

Sandhu suggests that further re-pricing of options skew in major currency pairs may occur if inflation persists and the timeline for rate cuts is pushed further back, favouring the US dollar.<o:p></o:p>

(With inputs from Bloomberg)<o:p></o:p>

Options traders in the Treasury market are hedging against a spectrum of scenarios, ranging from possible interest rate cuts to hikes ahead of the Federal Reserve meeting this week, Bloomberg reported.

Options traders in the Treasury market are hedging against a spectrum of scenarios, ranging from possible interest rate cuts to hikes ahead of the Federal Reserve meeting this week, Bloomberg reported. Despite recent inflation data surpassing expectations, casting doubts on imminent rate cuts, options activity indicates more uncertainty regarding the Federal Reserve’s monetary policy trajectory for the year. Traders are employing a variety of strategies, including deep out-of-the-money tail-risk hedges, to brace for extreme dovish and hawkish scenarios. Some are even targeting a policy rate as low as 3 per cent by December versus the current market consensus of around 5 per cent. Conversely, some option plays are positioning for a scenario of rates being higher for longer throughout the year, with an uptick in bets anticipating one more rate hike. Last Friday, a trader purchased put spreads expiring in March 2025, signalling a wager on the Fed maintaining steady rates until that period. Tanvir Sandhu, Bloomberg Intelligence's Chief Global Derivatives Strategist, noted that the likelihood of a rate hike has increased given the postponement of rate cuts, although data-driven evidence is necessary to validate such a move. Strategic positioning in the Treasury market has seen a surge in short positions over recent days, coinciding with a spike in yields to fresh yearly highs. Open interest in futures has expanded, particularly in the front- and middle of the yield curve, as yields breached key thresholds. While the market sentiment leans towards higher rates, reflecting reduced expectations for rate cuts, the surge in short positions indicates the volatility and uncertainty prevailing in the market. Currency markets are closely monitoring developments at both the Federal Reserve and the Bank of Japan (BOJ). Traders are show signs of heightened demand for options hedging against movements in the Japanese yen, with risk reversals indicating a focus on mitigating the risk of a sharp yen rally. Recent US inflation data, aligning with Fed Chair Jerome Powell's stance on maintaining higher rates, has exerted downward pressure on the yen, prompting concerns about potential intervention by Japanese authorities if the currency weakens further. The yen's volatility has surged, with one-week volatility in dollar-yen nearing its strongest level in months. Despite the pricing out of BOJ-meeting risks, demand for long-volatility exposure remains strong, indicative of ongoing apprehension in the market. Sandhu suggests that further re-pricing of options skew in major currency pairs may occur if inflation persists and the timeline for rate cuts is pushed further back, favouring the US dollar. (With inputs from Bloomberg)

Options traders navigate uncertainty amid Federal Reserve rate speculation

The US economy is struggling with a fresh surge in inflation, as consumer prices rose 3.5 per cent over the 12 months leading up to March, up from 3.2 per cent in February, according to data released by the US Labour Department. <o:p></o:p>

As per reports, this unexpected rise, driven by escalating costs in fuel, housing, dining out, and clothing, is indicative of a challenging road ahead for the Federal Reserve in its battle against inflation.<o:p></o:p>

The unexpected spike in prices has caught analysts off guard, forcing them to revise their predictions on when the Federal Reserve might start lowering borrowing costs. <o:p></o:p>

The Federal Reserve's key interest rate currently stands at 5.25-5.5 per cent, the highest in over two decades. <o:p></o:p>

As per the BBC, experts had initially anticipated rate cuts to begin this year, but recent economic indicators, including strong job creation figures, have cast doubts on the timeline for these reductions.<o:p></o:p>

According to a Times of India (ToI) report, Wall Street responded sharply to the news, with the S&amp;P 500 witnessing a decline of 0.9 per cent, the Dow Jones Industrial Average dropping by 422 points (1.1 per cent), and the Nasdaq composite decreasing by 0.8 per cent. <o:p></o:p>

This downturn marks the third consecutive report suggesting that the efforts to rein in high inflation may be losing steam.<o:p></o:p>

&nbsp;“There are still embers of inflation here and there in the economy,” ToI quoted Joe Davis, Vanguard’s chief global economist as saying.<o:p></o:p>

This persistent inflationary pressure has heightened concerns among investors that the Federal Reserve might delay the anticipated interest rate cuts, which had been a major factor behind the S&amp;P 500's 20 per cent surge since Halloween.<o:p></o:p>

The bond market also felt the immediate repercussions of the inflation data. <o:p></o:p>

The yield on the 10-year Treasury jumped to 4.54 per cent from 4.36 per cent, prompting traders to drastically reduce their bets on a June rate cut, with the likelihood sharply falling from about 74 per cent a month ago to a mere 17 per cent.<o:p></o:p>

Industries sensitive to high-interest rates bore the brunt of Wednesday's market downturn. <o:p></o:p>

Real estate investment trusts and utilities, for instance, saw their stocks plummet, with real-estate stocks in the S&amp;P 500 falling by 4.1 per cent.<o:p></o:p>

Internationally, the inflation report had a varied impact. <o:p></o:p>

While stocks rose in Hong Kong, they declined in Shanghai following a downgrade in China’s financial outlook by Fitch Ratings. <o:p></o:p>

Moreover, the report contributed to a stronger dollar, pushing the yen to a 33-year low against it.<o:p></o:p>

The US economy is struggling with a fresh surge in inflation, as consumer prices rose 3.5 per cent over the 12 months leading up to March, up from 3.2 per cent in February, according to data released by the US Labour Department.

The US economy is struggling with a fresh surge in inflation, as consumer prices rose 3.5 per cent over the 12 months leading up to March, up from 3.2 per cent in February, according to data released by the US Labour Department. As per reports, this unexpected rise, driven by escalating costs in fuel, housing, dining out, and clothing, is indicative of a challenging road ahead for the Federal Reserve in its battle against inflation. The unexpected spike in prices has caught analysts off guard, forcing them to revise their predictions on when the Federal Reserve might start lowering borrowing costs. The Federal Reserve's key interest rate currently stands at 5.25-5.5 per cent, the highest in over two decades. As per the BBC, experts had initially anticipated rate cuts to begin this year, but recent economic indicators, including strong job creation figures, have cast doubts on the timeline for these reductions. According to a Times of India (ToI) report, Wall Street responded sharply to the news, with the S&P 500 witnessing a decline of 0.9 per cent, the Dow Jones Industrial Average dropping by 422 points (1.1 per cent), and the Nasdaq composite decreasing by 0.8 per cent. This downturn marks the third consecutive report suggesting that the efforts to rein in high inflation may be losing steam. “There are still embers of inflation here and there in the economy,” ToI quoted Joe Davis, Vanguard’s chief global economist as saying. This persistent inflationary pressure has heightened concerns among investors that the Federal Reserve might delay the anticipated interest rate cuts, which had been a major factor behind the S&P 500's 20 per cent surge since Halloween. The bond market also felt the immediate repercussions of the inflation data. The yield on the 10-year Treasury jumped to 4.54 per cent from 4.36 per cent, prompting traders to drastically reduce their bets on a June rate cut, with the likelihood sharply falling from about 74 per cent a month ago to a mere 17 per cent. Industries sensitive to high-interest rates bore the brunt of Wednesday's market downturn. Real estate investment trusts and utilities, for instance, saw their stocks plummet, with real-estate stocks in the S&P 500 falling by 4.1 per cent. Internationally, the inflation report had a varied impact. While stocks rose in Hong Kong, they declined in Shanghai following a downgrade in China’s financial outlook by Fitch Ratings. Moreover, the report contributed to a stronger dollar, pushing the yen to a 33-year low against it.

Inflation surges in the US, dashing hopes of rate cuts

US core CPI exceeded forecasts for the third consecutive month, rising 0.4% from February and 3.8% year-over-year, likely postponing Fed rate cuts. Watch in for more details!

US inflation comes in at 0.4% for third consecutive month

The US Federal Reserve has decided to maintain its benchmark interest rates at 5.25-5.50 per cent for the fifth consecutive meeting, according to an announcement made after the Federal Open Market Committee (FOMC) meeting on March 20. <o:p></o:p>

Despite persistent inflation concerns, the Federal Reserve remains poised for potential rate cuts in 2024. <o:p></o:p>

This decision comes amidst a backdrop of economic uncertainty and evolving projections for GDP growth and inflation. <o:p></o:p>

The Fed's decision to keep interest rates steady is an attempt to balance the objectives of maximum employment and stable inflation. <o:p></o:p>

Since July 2023, the central bank has maintained rates at their highest level in over two decades. <o:p></o:p>

The Federal Reserve foresees three potential rate cuts in 2024, signalling a shift in monetary policy amid ongoing inflationary pressures. <o:p></o:p>

This decision aligns with expectations, indicating the Fed's cautious approach towards economic stabilisation.<o:p></o:p>

Alongside its rate decision, the Federal Reserve revised its economic projections, anticipating a stronger GDP growth rate of 2.1 per cent for the year 2024, up from the previous estimate of 1.4 per cent. <o:p></o:p>

Despite maintaining the headline inflation forecast, the Fed slightly raised its projection for 'core' inflation to 2.6 per cent. <o:p></o:p>

Additionally, the unemployment rate forecast was adjusted downward to 4 per cent for 2024.<o:p></o:p>

Following the Fed's announcement, the S&amp;P 500 surpassed the historic 5,200-mark for the first time, signalling investor optimism. <o:p></o:p>

The tech-heavy Nasdaq 100 also experienced a notable uptick. <o:p></o:p>

Concurrently, bond yields exhibited a downward trend, with two-year yields declining by seven basis points and the yield on 10-year Treasuries dropping by two basis points. <o:p></o:p>

Federal Reserve Chair Jerome Powell indicated a forthcoming adjustment in the central bank's strategy regarding the reduction of its balance sheet. <o:p></o:p>

While no concrete decisions were made during the meeting, Powell emphasised intentions to slow the pace of asset sales in the near future. <o:p></o:p>

This move aims to mitigate liquidity concerns and provides the Federal Reserve with greater flexibility to address economic challenges. <o:p></o:p>

"While we did not make any decisions today, the general sense of the committee is that it will be appropriate to slow the pace of runoff fairly soon, consistent with the plans we previously issued,” a CNBC report quoted Powell as saying.<o:p></o:p>

Despite maintaining a steady stance on rates, Powell reiterated the likelihood of initiating rate cuts later in the year, contingent upon economic data. <o:p></o:p>

Market indicators suggest a 75 per cent probability of the first rate cut occurring during the June 11-12 meeting. <o:p></o:p>

The US Federal Reserve has decided to maintain its benchmark interest rates at 5.25-5.50 per cent for the fifth consecutive meeting, according to an announcement made after the Federal Open Market Committee (FOMC) meeting on March 20.

The US Federal Reserve has decided to maintain its benchmark interest rates at 5.25-5.50 per cent for the fifth consecutive meeting, according to an announcement made after the Federal Open Market Committee (FOMC) meeting on March 20. Despite persistent inflation concerns, the Federal Reserve remains poised for potential rate cuts in 2024. This decision comes amidst a backdrop of economic uncertainty and evolving projections for GDP growth and inflation. The Fed's decision to keep interest rates steady is an attempt to balance the objectives of maximum employment and stable inflation. Since July 2023, the central bank has maintained rates at their highest level in over two decades. The Federal Reserve foresees three potential rate cuts in 2024, signalling a shift in monetary policy amid ongoing inflationary pressures. This decision aligns with expectations, indicating the Fed's cautious approach towards economic stabilisation. Alongside its rate decision, the Federal Reserve revised its economic projections, anticipating a stronger GDP growth rate of 2.1 per cent for the year 2024, up from the previous estimate of 1.4 per cent. Despite maintaining the headline inflation forecast, the Fed slightly raised its projection for 'core' inflation to 2.6 per cent. Additionally, the unemployment rate forecast was adjusted downward to 4 per cent for 2024. Following the Fed's announcement, the S&P 500 surpassed the historic 5,200-mark for the first time, signalling investor optimism. The tech-heavy Nasdaq 100 also experienced a notable uptick. Concurrently, bond yields exhibited a downward trend, with two-year yields declining by seven basis points and the yield on 10-year Treasuries dropping by two basis points. Federal Reserve Chair Jerome Powell indicated a forthcoming adjustment in the central bank's strategy regarding the reduction of its balance sheet. While no concrete decisions were made during the meeting, Powell emphasised intentions to slow the pace of asset sales in the near future. This move aims to mitigate liquidity concerns and provides the Federal Reserve with greater flexibility to address economic challenges. "While we did not make any decisions today, the general sense of the committee is that it will be appropriate to slow the pace of runoff fairly soon, consistent with the plans we previously issued,” a CNBC report quoted Powell as saying. Despite maintaining a steady stance on rates, Powell reiterated the likelihood of initiating rate cuts later in the year, contingent upon economic data. Market indicators suggest a 75 per cent probability of the first rate cut occurring during the June 11-12 meeting.

Federal Reserve holds rates steady amid high projections for 2024 rate cuts

Federal Reserve Chair Jerome Powell hinted at the central bank's growing confidence in considering interest rate cuts, stating they are "not far" from the needed assurance that inflation is sustainably moving towards the 2 per cent target, Bloomberg reported on Thursday.<o:p></o:p>

Speaking before the Senate Banking Committee, Powell underlined that the timing of the rate cut remains dependent on the confidence in inflation trends. <o:p></o:p>

His remarks contributed to the anticipation of a possible rate cut in the coming months, with traders adjusting their expectations following Powell's commentary.<o:p></o:p>

Powell highlighted that inflation's sustainable movement towards the 2 per cent mark would be crucial before initiating any rate cut. <o:p></o:p>

While stating that a rate cut might be appropriate "at some point this year," Powell remains cautious. <o:p></o:p>

The Federal Reserve had raised the benchmark federal funds rate significantly since March 2022 but has maintained it at a two-decade high since July. <o:p></o:p>

Powell's comments suggest a careful approach, with the central bank currently holding interest rates in the range of 5.25 per cent to 5.5 per cent. <o:p></o:p>

In December, the Federal Reserve projected three interest rate cuts for 2024, and the committee is set to update its forecasts in the upcoming March meeting.<o:p></o:p>

Following Powell's statements, the market reacted with a decline in two-year Treasury yields, and traders adjusted their expectations, increasing bets on a rate cut in June. <o:p></o:p>

The possibility of a rate cut comes amid strong job growth and a notable rise in prices in January. <o:p></o:p>

Powell's testimony over two days reflects a delicate balance between the need for economic stimulus and a cautious approach, considering the strong&nbsp;economic backdrop. <o:p></o:p>

Christine Lagarde, Powell's European counterpart, provided additional context, saying that the European Central Bank (ECB) may be positioned to lower rates in June. <o:p></o:p>

Lagarde highlighted the need for more evidence and detail before considering rate cuts. <o:p></o:p>

The ECB president said that it was important to gain confidence in the economic trends and added that more information would be available in June. <o:p></o:p>

Lagarde's comments come as the ECB keeps the deposit rate unchanged at 4 per cent for a fourth consecutive meeting.<o:p></o:p>

(With inputs from Bloomberg)<o:p></o:p>

Federal Reserve Chair Jerome Powell hinted at the central bank's growing confidence in considering interest rate cuts, stating they are "not far" from the needed assurance that inflation is sustainably moving towards the 2 per cent target, Bloomberg reported on Thursday.

Federal Reserve Chair Jerome Powell hinted at the central bank's growing confidence in considering interest rate cuts, stating they are "not far" from the needed assurance that inflation is sustainably moving towards the 2 per cent target, Bloomberg reported on Thursday. Speaking before the Senate Banking Committee, Powell underlined that the timing of the rate cut remains dependent on the confidence in inflation trends. His remarks contributed to the anticipation of a possible rate cut in the coming months, with traders adjusting their expectations following Powell's commentary. Powell highlighted that inflation's sustainable movement towards the 2 per cent mark would be crucial before initiating any rate cut. While stating that a rate cut might be appropriate "at some point this year," Powell remains cautious. The Federal Reserve had raised the benchmark federal funds rate significantly since March 2022 but has maintained it at a two-decade high since July. Powell's comments suggest a careful approach, with the central bank currently holding interest rates in the range of 5.25 per cent to 5.5 per cent. In December, the Federal Reserve projected three interest rate cuts for 2024, and the committee is set to update its forecasts in the upcoming March meeting. Following Powell's statements, the market reacted with a decline in two-year Treasury yields, and traders adjusted their expectations, increasing bets on a rate cut in June. The possibility of a rate cut comes amid strong job growth and a notable rise in prices in January. Powell's testimony over two days reflects a delicate balance between the need for economic stimulus and a cautious approach, considering the strong economic backdrop. Christine Lagarde, Powell's European counterpart, provided additional context, saying that the European Central Bank (ECB) may be positioned to lower rates in June. Lagarde highlighted the need for more evidence and detail before considering rate cuts. The ECB president said that it was important to gain confidence in the economic trends and added that more information would be available in June. Lagarde's comments come as the ECB keeps the deposit rate unchanged at 4 per cent for a fourth consecutive meeting. (With inputs from Bloomberg)

Fed Chair Jerome Powell signals potential interest rate cuts. Here are the details

US regulators are reportedly gearing up for a huge reduction in the additional capital requirements that banks must maintain under the proposed "Basel III" rule. <o:p></o:p>

The proposal, unveiled by bank regulators led by the Federal Reserve in July, aims to overhaul how banks with assets exceeding $100 billion calculate the cash reserves needed to absorb potential losses. <o:p></o:p>

However, Wall Street has launched an aggressive pushback against the rule, prompting regulatory officials to consider significant alterations.<o:p></o:p>

Anticipated capital reduction<o:p></o:p>

Industry insiders, comprising eight executives in regular contact with regulatory agencies, revealed that discussions are underway to significantly decrease the proposed capital burden. <o:p></o:p>

The initial proposal suggested an aggregate capital increase of around 16 per cent for the affected lenders. <o:p></o:p>

However, this figure is expected to see a sharp decline as regulators delve into a comprehensive revision of the draft. <o:p></o:p>

The focus is on recalibrating the calculation of potential losses from operational risks, particularly in fee income related to lending services.<o:p></o:p>

Operational risk and mortgage adjustments<o:p></o:p>

The most highest capital savings are expected to arise from adjustments in how banks calculate potential losses from operational risks, a costly aspect of the proposal. <o:p></o:p>

Wall Street has been advocating for reduced risk weights for fee income linked to lending services. <o:p></o:p>

Additionally, regulators are contemplating the elimination or reduction of higher risk weights on mortgages for low-income borrowers and renewable energy tax credits. <o:p></o:p>

These potential changes are part of the ongoing rewriting led by Fed Vice Chair for Supervision Michael Barr, in collaboration with Fed Chair Jerome Powell.<o:p></o:p>

Regulatory response and opposition<o:p></o:p>

Regulatory discussions, still in their early stages, indicate a willingness to address concerns raised by industry players. <o:p></o:p>

Powell, during congressional testimony, acknowledged the intense opposition, stating that "broad, material" changes are anticipated in the rewritten rule. <o:p></o:p>

The unprecedented intensity of Wall Street's efforts to quash the proposal involves advertising, grassroots campaigns, lobbying, and potential legal action. <o:p></o:p>

Despite the opposition, officials have not confirmed whether the rule will be reproposed, leaving the timeline for its completion uncertain.<o:p></o:p>

Dissent and legal challenges<o:p></o:p>

The Basel III proposal, aligning with international capital standards, has encountered dissent from within the Fed's board. <o:p></o:p>

Governors Michelle Bowman and Christopher Waller, along with Vice Chair Philip Jefferson, expressed reservations about the potential adverse impact on borrowers. <o:p></o:p>

The Bank Policy Institute has even hired former Labour Secretary Eugene Scalia to explore the possibility of a lawsuit, highlighting the unexpected intensity of opposition faced by regulators. <o:p></o:p>

This dissent may play a crucial role in any legal battles, showcasing divisions among experts.<o:p></o:p>

Industry engagement and timeline concerns<o:p></o:p>

Federal Reserve officials, including Powell and Barr, have engaged in over 50 meetings or calls with hundreds of industry executives since September. <o:p></o:p>

Despite these discussions, a consensus has not been reached, and challenges remain in reaching an agreement with the FDIC, chaired by Martin Gruenberg, a known Wall Street critic. <o:p></o:p>

While some hope to finalise the rule by summer, concerns linger that the timeline may prove overly ambitious.<o:p></o:p>

(With inputs from Reuters)<o:p></o:p>

US regulators are reportedly gearing up for a huge reduction in the additional capital requirements that banks must maintain under the proposed "Basel III" rule.

US regulators are reportedly gearing up for a huge reduction in the additional capital requirements that banks must maintain under the proposed "Basel III" rule. The proposal, unveiled by bank regulators led by the Federal Reserve in July, aims to overhaul how banks with assets exceeding $100 billion calculate the cash reserves needed to absorb potential losses. However, Wall Street has launched an aggressive pushback against the rule, prompting regulatory officials to consider significant alterations. Anticipated capital reduction Industry insiders, comprising eight executives in regular contact with regulatory agencies, revealed that discussions are underway to significantly decrease the proposed capital burden. The initial proposal suggested an aggregate capital increase of around 16 per cent for the affected lenders. However, this figure is expected to see a sharp decline as regulators delve into a comprehensive revision of the draft. The focus is on recalibrating the calculation of potential losses from operational risks, particularly in fee income related to lending services. Operational risk and mortgage adjustments The most highest capital savings are expected to arise from adjustments in how banks calculate potential losses from operational risks, a costly aspect of the proposal. Wall Street has been advocating for reduced risk weights for fee income linked to lending services. Additionally, regulators are contemplating the elimination or reduction of higher risk weights on mortgages for low-income borrowers and renewable energy tax credits. These potential changes are part of the ongoing rewriting led by Fed Vice Chair for Supervision Michael Barr, in collaboration with Fed Chair Jerome Powell. Regulatory response and opposition Regulatory discussions, still in their early stages, indicate a willingness to address concerns raised by industry players. Powell, during congressional testimony, acknowledged the intense opposition, stating that "broad, material" changes are anticipated in the rewritten rule. The unprecedented intensity of Wall Street's efforts to quash the proposal involves advertising, grassroots campaigns, lobbying, and potential legal action. Despite the opposition, officials have not confirmed whether the rule will be reproposed, leaving the timeline for its completion uncertain. Dissent and legal challenges The Basel III proposal, aligning with international capital standards, has encountered dissent from within the Fed's board. Governors Michelle Bowman and Christopher Waller, along with Vice Chair Philip Jefferson, expressed reservations about the potential adverse impact on borrowers. The Bank Policy Institute has even hired former Labour Secretary Eugene Scalia to explore the possibility of a lawsuit, highlighting the unexpected intensity of opposition faced by regulators. This dissent may play a crucial role in any legal battles, showcasing divisions among experts. Industry engagement and timeline concerns Federal Reserve officials, including Powell and Barr, have engaged in over 50 meetings or calls with hundreds of industry executives since September. Despite these discussions, a consensus has not been reached, and challenges remain in reaching an agreement with the FDIC, chaired by Martin Gruenberg, a known Wall Street critic. While some hope to finalise the rule by summer, concerns linger that the timeline may prove overly ambitious. (With inputs from Reuters)

US regulators poised for significant cut in Basel capital demands amid intense Wall Street opposition

In a peek&nbsp;into the Federal Reserve's recent discussions, the minutes of the January meeting have unveiled a predominant concern among policymakers about the potential risks associated with cutting interest rates too soon. <o:p></o:p>

The minutes, released on Wednesday, indicated a broad uncertainty regarding the duration of maintaining current borrowing costs, with a focus on steering inflation back to the US central bank's target of 2 per cent.<o:p></o:p>

According to the minutes, the uncertainty revolves around the timeframe required for a restrictive monetary policy stance to bring inflation back on track. <o:p></o:p>

Most participants expressed apprehension about the risks associated with a swift easing of policy. <o:p></o:p>

While the majority was cautious about moving too quickly, a couple of participants raised concerns about the downside risks linked to an overly restrictive stance for an extended period.<o:p></o:p>

Market reactions were evident, with US stocks initially trading lower upon the release of the minutes before later recovering ground in the session. <o:p></o:p>

The US dollar remained relatively stable against a basket of currencies, and US Treasury yields experienced an uptick.<o:p></o:p>

The minutes echo recent statements from Fed policymakers, highlighting a measured approach towards anticipated rate cuts expected to begin later this year. <o:p></o:p>

Richmond Fed President Thomas Barkin, speaking on SiriusXM, highlighted concerns about persistent inflation in service industries and housing. <o:p></o:p>

He mentioned that the latest data, reflecting strong job growth and higher-than-anticipated inflation, complicates any decision on rate cuts, making it "harder".<o:p></o:p>

Federal Reserve officials, including Vice Chair Philip Jefferson and Governors Lisa Cook and Christopher Waller, are expected to delve deeper into the discussion on rate cuts in upcoming speeches on Thursday. <o:p></o:p>

The overall sentiment conveyed by the minutes and subsequent speeches is a cautious approach, with concerns about moving too quickly amid uncertainties.<o:p></o:p>

Quincy Krosby, Chief Global Strategist at LPL Financial, emphasised the Fed's valid concerns, especially given the recent uptick in prices. <o:p></o:p>

Krosby suggested that the Fed is wary of rushing decisions before confidently addressing and curbing inflation.<o:p></o:p>

The minutes also shed light on the Fed's considerations regarding the balance sheet policy. "Many participants" suggested initiating "in-depth" discussions on this matter at the March policy meeting, indicating the complexity of decisions on when and how to cease reducing the size of the Fed's balance sheet.<o:p></o:p>

As the economic landscape continues to evolve, investors in contracts tied to the Fed's benchmark overnight interest rate appear to anticipate a reduction in borrowing costs starting in June. <o:p></o:p>

The minutes acknowledged the mixed picture since the end of January, with Treasury yields rising while stocks continued their march to record highs.<o:p></o:p>

In the aftermath of the minutes, Ryan Sweet, Chief US Economist at Oxford Economics, questioned the Fed's concern about cutting rates too soon, deeming it "odd." <o:p></o:p>

Sweet suggested that risks might be tilting towards overly tight policies that could potentially weigh on the economy if signs of deterioration are not addressed promptly.<o:p></o:p>

(With inputs from Reuters)<o:p></o:p>

In a peek into the Federal Reserve's recent discussions, the minutes of the January meeting have unveiled a predominant concern among policymakers about the potential risks associated with cutting interest rates too soon.

In a peek into the Federal Reserve's recent discussions, the minutes of the January meeting have unveiled a predominant concern among policymakers about the potential risks associated with cutting interest rates too soon. The minutes, released on Wednesday, indicated a broad uncertainty regarding the duration of maintaining current borrowing costs, with a focus on steering inflation back to the US central bank's target of 2 per cent. According to the minutes, the uncertainty revolves around the timeframe required for a restrictive monetary policy stance to bring inflation back on track. Most participants expressed apprehension about the risks associated with a swift easing of policy. While the majority was cautious about moving too quickly, a couple of participants raised concerns about the downside risks linked to an overly restrictive stance for an extended period. Market reactions were evident, with US stocks initially trading lower upon the release of the minutes before later recovering ground in the session. The US dollar remained relatively stable against a basket of currencies, and US Treasury yields experienced an uptick. The minutes echo recent statements from Fed policymakers, highlighting a measured approach towards anticipated rate cuts expected to begin later this year. Richmond Fed President Thomas Barkin, speaking on SiriusXM, highlighted concerns about persistent inflation in service industries and housing. He mentioned that the latest data, reflecting strong job growth and higher-than-anticipated inflation, complicates any decision on rate cuts, making it "harder". Federal Reserve officials, including Vice Chair Philip Jefferson and Governors Lisa Cook and Christopher Waller, are expected to delve deeper into the discussion on rate cuts in upcoming speeches on Thursday. The overall sentiment conveyed by the minutes and subsequent speeches is a cautious approach, with concerns about moving too quickly amid uncertainties. Quincy Krosby, Chief Global Strategist at LPL Financial, emphasised the Fed's valid concerns, especially given the recent uptick in prices. Krosby suggested that the Fed is wary of rushing decisions before confidently addressing and curbing inflation. The minutes also shed light on the Fed's considerations regarding the balance sheet policy. "Many participants" suggested initiating "in-depth" discussions on this matter at the March policy meeting, indicating the complexity of decisions on when and how to cease reducing the size of the Fed's balance sheet. As the economic landscape continues to evolve, investors in contracts tied to the Fed's benchmark overnight interest rate appear to anticipate a reduction in borrowing costs starting in June. The minutes acknowledged the mixed picture since the end of January, with Treasury yields rising while stocks continued their march to record highs. In the aftermath of the minutes, Ryan Sweet, Chief US Economist at Oxford Economics, questioned the Fed's concern about cutting rates too soon, deeming it "odd." Sweet suggested that risks might be tilting towards overly tight policies that could potentially weigh on the economy if signs of deterioration are not addressed promptly. (With inputs from Reuters)

Federal Reserve treads cautiously on rate cuts amid economic uncertainty

The US dollar surged to three-month highs on Tuesday, propelled by robust inflation data that exceeded economists' expectations for January. <o:p></o:p>

According to Reuters, the Consumer Price Index (CPI) reported a 0.3 per cent increase on a monthly basis, surpassing the 0.2 per cent forecast. <o:p></o:p>

Year-on-year, the CPI rose by 3.1 per cent, exceeding the estimated 2.9 per cent growth. <o:p></o:p>

These figures reinforced market expectations that the Federal Reserve would maintain interest rates steady in March, boosting the dollar's strength.<o:p></o:p>

"The key message from today's CPI is that it's slowing but less than expected," Dec Mullarkey, Managing Director at SLC Management in Boston told Reuters.<o:p></o:p>

He highlighted that the reading supported the Fed's decision to await further assurance that inflation remained contained. <o:p></o:p>

As a result, the dollar index surged to a three-month high of 104.95, indicating a strong performance against a basket of major currencies. <o:p></o:p>

It was last up 0.7 per cent at 104.89, poised for its most substantial one-day gain since early February.<o:p></o:p>

The greenback's rally extended beyond inflation data, surpassing 150 yen for the first time since November. <o:p></o:p>

Analysts noted that the yen, which had depreciated over 6 per cent against the dollar this year, faced persistent pressure amid revised expectations of the Federal Reserve's monetary policy. <o:p></o:p>

The dollar's strength against the yen prompted speculation of potential intervention by Japanese officials to stabilise the currency.<o:p></o:p>

Market analysts emphasised the market's response to the inflation data, with Federal funds futures indicating no rate cut in March and a lower than 50 per cent probability of easing in May. <o:p></o:p>

Expectations aligned with the Fed's projections, suggesting around three rate cuts this year, as reflected in the "dot plot" released in December. <o:p></o:p>

Analysts anticipate reduced volatility in the market as expectations align with the Fed's forecasts.<o:p></o:p>

In addition to the dollar's surge, the euro depreciated by 0.6 per cent to $1.0707, reaching its lowest level since mid-November. <o:p></o:p>

Meanwhile, in the cryptocurrency market, bitcoin touched $50,383, its highest level since December 2021, before dipping below $50,000 following the CPI data release. <o:p></o:p>

Despite this, bitcoin has experienced an 18 per cent increase this year, supported by regulatory approvals for US-listed exchange-traded funds.<o:p></o:p>

Looking ahead, economists anticipate the US retail sales report, scheduled for Thursday. <o:p></o:p>

Recent forecasts suggest a potential decline of 0.1 per cent for January, following a 0.6 per cent rise in December. <o:p></o:p>

(With inputs from Reuters)<o:p></o:p>

The US dollar surged to three-month highs on Tuesday, propelled by robust inflation data that exceeded economists' expectations for January. According to Reuters, the Consumer Price Index (CPI) reported a 0.

The US dollar surged to three-month highs on Tuesday, propelled by robust inflation data that exceeded economists' expectations for January. According to Reuters, the Consumer Price Index (CPI) reported a 0.3 per cent increase on a monthly basis, surpassing the 0.2 per cent forecast. Year-on-year, the CPI rose by 3.1 per cent, exceeding the estimated 2.9 per cent growth. These figures reinforced market expectations that the Federal Reserve would maintain interest rates steady in March, boosting the dollar's strength. "The key message from today's CPI is that it's slowing but less than expected," Dec Mullarkey, Managing Director at SLC Management in Boston told Reuters. He highlighted that the reading supported the Fed's decision to await further assurance that inflation remained contained. As a result, the dollar index surged to a three-month high of 104.95, indicating a strong performance against a basket of major currencies. It was last up 0.7 per cent at 104.89, poised for its most substantial one-day gain since early February. The greenback's rally extended beyond inflation data, surpassing 150 yen for the first time since November. Analysts noted that the yen, which had depreciated over 6 per cent against the dollar this year, faced persistent pressure amid revised expectations of the Federal Reserve's monetary policy. The dollar's strength against the yen prompted speculation of potential intervention by Japanese officials to stabilise the currency. Market analysts emphasised the market's response to the inflation data, with Federal funds futures indicating no rate cut in March and a lower than 50 per cent probability of easing in May. Expectations aligned with the Fed's projections, suggesting around three rate cuts this year, as reflected in the "dot plot" released in December. Analysts anticipate reduced volatility in the market as expectations align with the Fed's forecasts. In addition to the dollar's surge, the euro depreciated by 0.6 per cent to $1.0707, reaching its lowest level since mid-November. Meanwhile, in the cryptocurrency market, bitcoin touched $50,383, its highest level since December 2021, before dipping below $50,000 following the CPI data release. Despite this, bitcoin has experienced an 18 per cent increase this year, supported by regulatory approvals for US-listed exchange-traded funds. Looking ahead, economists anticipate the US retail sales report, scheduled for Thursday. Recent forecasts suggest a potential decline of 0.1 per cent for January, following a 0.6 per cent rise in December. (With inputs from Reuters)

US dollar hits 3-month high on strong inflation data, surpasses 150 yen mark

After recent strong jobs and growth data saw markets push back bets on the timing of federal reserve interest rate cuts, all eyes will be on Tuesday's US inflation report for January.

US January inflation data expected this week

In a twist for the fixed-income market, uncertainty is making a comeback after the Federal Reserve's recent statements and robust economic data threw a curveball into expectations.<o:p></o:p>

According to a Reuters report, investors who rode the explosive rally that elevated bond prices at the close of 2023 are now facing heightened risks as they reassess their bets on when the Federal Reserve might cut interest rates this year.<o:p></o:p>

Late last year, a surge in Treasury investments was fuelled by the anticipation of a first-quarter rate cut by the Fed. <o:p></o:p>

However, the landscape is shifting following a blowout US jobs report and a cautious Federal Reserve message, warning that premature rate cuts could trigger an inflationary rebound.<o:p></o:p>

Yields on the 10-year Treasury, inversely related to prices, have surged by 20 basis points from December's lows, prompting investors to reconsider their strategies.<o:p></o:p>

Reuters quoted Robert Tipp, the chief investment strategist at PGIM Fixed Income, managing $794 billion in assets, who said, "The combination of the jobs numbers and the Fed press conference has really caused a splintering in the potential outcomes."<o:p></o:p>

Tipp suggests that 10-year yields could approach last year's high of approximately 5 per cent this year, up from the current level of around 4.1 per cent.<o:p></o:p>

The uncertainty reflects in the futures market as well, with investors now assigning only a 20 per cent chance of a Federal Reserve rate cut in March, down from 64 per cent a month ago. <o:p></o:p>

Federal Reserve Chair Jerome Powell, dismissing expectations of a March cut, emphasised the need for greater confidence in inflation moving towards its 2 per cent target.<o:p></o:p>

John Madziyire, head of US Treasuries and TIPS at Vanguard, expressed a shift in strategy, stating, "Now maybe we'll start scaling in at 4.25 per cent on the view that we could potentially go to 4.5 per cent, pricing a ... higher-for-longer scenario."<o:p></o:p>

The uncertainty is prompting some investors to reconsider their positions. <o:p></o:p>

Spencer Hakimian, CEO of Tolou Capital Management, has been reducing exposure to long-term Treasuries and adding shorter-term ones, anticipating elevated rates for a longer duration. <o:p></o:p>

The risk of higher interest rates impacting the value of long-duration bonds is a concern for many investors.<o:p></o:p>

The looming uncertainty is also fuelled by expectations of nearly $2 trillion in new US government bond issuance this year. <o:p></o:p>

Investors fear that rising yields may be necessary to attract buyers, given the potential fiscal impact and warnings from rating agencies Fitch and Moody's.<o:p></o:p>

Despite the rise in yields, the stock market has remained resilient. The S&amp;P 500 is up over 4 per cent for the year and near a record high.<o:p></o:p>

Matt Eagan, portfolio manager at Loomis, Sayles &amp; Company, predicts 10-year yields at 4.5 per cent, partly due to anticipated large government issuance.<o:p></o:p>

Amid the uncertainty, many still believe that the overall direction for rates is lower, contingent on inflation maintaining a cooling trend. <o:p></o:p>

Federal Reserve officials, projecting three quarter-point rate cuts this year, signal a cautious approach, adjusting the pace rather than ruling out rate cuts altogether.<o:p></o:p>

(With inputs from Reuters)<o:p></o:p>

In a twist for the fixed-income market, uncertainty is making a comeback after the Federal Reserve's recent statements and robust economic data threw a curveball into expectations.

In a twist for the fixed-income market, uncertainty is making a comeback after the Federal Reserve's recent statements and robust economic data threw a curveball into expectations. According to a Reuters report, investors who rode the explosive rally that elevated bond prices at the close of 2023 are now facing heightened risks as they reassess their bets on when the Federal Reserve might cut interest rates this year. Late last year, a surge in Treasury investments was fuelled by the anticipation of a first-quarter rate cut by the Fed. However, the landscape is shifting following a blowout US jobs report and a cautious Federal Reserve message, warning that premature rate cuts could trigger an inflationary rebound. Yields on the 10-year Treasury, inversely related to prices, have surged by 20 basis points from December's lows, prompting investors to reconsider their strategies. Reuters quoted Robert Tipp, the chief investment strategist at PGIM Fixed Income, managing $794 billion in assets, who said, "The combination of the jobs numbers and the Fed press conference has really caused a splintering in the potential outcomes." Tipp suggests that 10-year yields could approach last year's high of approximately 5 per cent this year, up from the current level of around 4.1 per cent. The uncertainty reflects in the futures market as well, with investors now assigning only a 20 per cent chance of a Federal Reserve rate cut in March, down from 64 per cent a month ago. Federal Reserve Chair Jerome Powell, dismissing expectations of a March cut, emphasised the need for greater confidence in inflation moving towards its 2 per cent target. John Madziyire, head of US Treasuries and TIPS at Vanguard, expressed a shift in strategy, stating, "Now maybe we'll start scaling in at 4.25 per cent on the view that we could potentially go to 4.5 per cent, pricing a ... higher-for-longer scenario." The uncertainty is prompting some investors to reconsider their positions. Spencer Hakimian, CEO of Tolou Capital Management, has been reducing exposure to long-term Treasuries and adding shorter-term ones, anticipating elevated rates for a longer duration. The risk of higher interest rates impacting the value of long-duration bonds is a concern for many investors. The looming uncertainty is also fuelled by expectations of nearly $2 trillion in new US government bond issuance this year. Investors fear that rising yields may be necessary to attract buyers, given the potential fiscal impact and warnings from rating agencies Fitch and Moody's. Despite the rise in yields, the stock market has remained resilient. The S&P 500 is up over 4 per cent for the year and near a record high. Matt Eagan, portfolio manager at Loomis, Sayles & Company, predicts 10-year yields at 4.5 per cent, partly due to anticipated large government issuance. Amid the uncertainty, many still believe that the overall direction for rates is lower, contingent on inflation maintaining a cooling trend. Federal Reserve officials, projecting three quarter-point rate cuts this year, signal a cautious approach, adjusting the pace rather than ruling out rate cuts altogether. (With inputs from Reuters)

Uncertainty looms over US treasury market as Fed signals caution

Federal Reserve Chair Jerome Powell conveyed a message of caution in deciding when to cut the benchmark interest rate, emphasising the importance of prudence in a Sunday night interview with CBS's "60 Minutes." <o:p></o:p>

This is based on a Reuters report.<o:p></o:p>

Powell highlighted the need to give time for the data to confirm a sustainable move toward the Federal Reserve's 2 per cent inflation target.<o:p></o:p>

&nbsp;"The prudent thing to do is...to just give it some time and see that the data confirm that inflation is moving down to 2 per cent in a sustainable way," Reuters quoted him as saying. <o:p></o:p>

Powell emphasised the strength of the current economy, reducing the risk of recession as policymakers await conclusive data to support potential rate cuts.<o:p></o:p>

The interview, conducted on Thursday before a robust January jobs report on Friday, showcased Powell's measured approach amid a thriving US economy. <o:p></o:p>

The January jobs report revealed the addition of 353,000 new positions, robust wage growth, and a stable unemployment rate at 3.7 per cent over the past two years. <o:p></o:p>

Powell refrained from labelling the current situation as a "soft-landing" but acknowledged the unusual circumstances. <o:p></o:p>

He underlined the Federal Reserve's commitment to monitoring risks to both price stability and maximum employment, considering job growth as a factor that could influence the pace of rate cuts.<o:p></o:p>

Powell, addressing the widely watched "60 Minutes," emphasised the Federal Reserve's focus on the real economy and making decisions for the medium and long term. <o:p></o:p>

He expressed the need to strike a balance between the risk of moving too soon or too late in adjusting interest rates. <o:p></o:p>

Powell used the platform to communicate a positive outlook, stating, "We think the economy's in a good place. We think inflation is coming down." <o:p></o:p>

The Federal Reserve Chair reiterated the importance of gaining confidence in the sustainable decline of inflation toward the 2 per cent goal.<o:p></o:p>

In the wide-ranging conversation, Powell reiterated comments made during the press conference after the recent Federal Reserve meeting, where the benchmark interest rate was held steady. <o:p></o:p>

He indicated that the next meeting in March might be too soon for rate cuts to commence. <o:p></o:p>

Powell acknowledged the potential impact of outside shocks, including geopolitical crises globally. <o:p></o:p>

However, he downplayed some economic trouble spots, suggesting that issues like China's real estate problems and slowing growth might have less impact on the US than anticipated.<o:p></o:p>

(With inputs from Reuters)<o:p></o:p>

Federal Reserve Chair Jerome Powell conveyed a message of caution in deciding when to cut the benchmark interest rate, emphasising the importance of prudence in a Sunday night interview with CBS's "60 Minutes.

Federal Reserve Chair Jerome Powell conveyed a message of caution in deciding when to cut the benchmark interest rate, emphasising the importance of prudence in a Sunday night interview with CBS's "60 Minutes." This is based on a Reuters report. Powell highlighted the need to give time for the data to confirm a sustainable move toward the Federal Reserve's 2 per cent inflation target. "The prudent thing to do is...to just give it some time and see that the data confirm that inflation is moving down to 2 per cent in a sustainable way," Reuters quoted him as saying. Powell emphasised the strength of the current economy, reducing the risk of recession as policymakers await conclusive data to support potential rate cuts. The interview, conducted on Thursday before a robust January jobs report on Friday, showcased Powell's measured approach amid a thriving US economy. The January jobs report revealed the addition of 353,000 new positions, robust wage growth, and a stable unemployment rate at 3.7 per cent over the past two years. Powell refrained from labelling the current situation as a "soft-landing" but acknowledged the unusual circumstances. He underlined the Federal Reserve's commitment to monitoring risks to both price stability and maximum employment, considering job growth as a factor that could influence the pace of rate cuts. Powell, addressing the widely watched "60 Minutes," emphasised the Federal Reserve's focus on the real economy and making decisions for the medium and long term. He expressed the need to strike a balance between the risk of moving too soon or too late in adjusting interest rates. Powell used the platform to communicate a positive outlook, stating, "We think the economy's in a good place. We think inflation is coming down." The Federal Reserve Chair reiterated the importance of gaining confidence in the sustainable decline of inflation toward the 2 per cent goal. In the wide-ranging conversation, Powell reiterated comments made during the press conference after the recent Federal Reserve meeting, where the benchmark interest rate was held steady. He indicated that the next meeting in March might be too soon for rate cuts to commence. Powell acknowledged the potential impact of outside shocks, including geopolitical crises globally. However, he downplayed some economic trouble spots, suggesting that issues like China's real estate problems and slowing growth might have less impact on the US than anticipated. (With inputs from Reuters)

Federal Reserve Chair Powell signals prudence in considering rate cuts amid strong economy

Monday brought a uncertain start for Asian shares as China's central bank surprised markets by abstaining from a rate cut, leaving investors on edge ahead of crucial economic data, Reuters reported.<o:p></o:p>

With China set to report fourth-quarter economic growth figures and monthly data this week, apprehension looms over the fragile state of its economic recovery. <o:p></o:p>

Chinese blue chips dipped 0.5 per cent, hitting their lowest since early 2019. <o:p></o:p>

"For now, we think China is still focused on engineering economic stability," Reuters quoted Damien Boey, Chief Macro Strategist at Barrenjoey in Sydney as saying.<o:p></o:p>

While Asian shares faced headwinds, Japan's Nikkei bucked the trend, rising 0.6 per cent to a fresh 34-year peak after stellar gains last week. <o:p></o:p>

However, MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.2 per cent, following a 0.8 per cent loss the previous week. <o:p></o:p>

Geopolitical tensions, highlighted by the victory of Taiwan's ruling Democratic Progressive Party, served as a reminder that global elections and Middle East conflicts could impact markets throughout the year.<o:p></o:p>

The thin trading due to a US holiday added to the cautious mood, with progress on a stopgap spending bill providing a glimmer of stability.<o:p></o:p>

Amid global uncertainties, the focus shifted to central bank actions. Futures pointed to a 75 per cent chance that the US Federal Reserve would lower interest rates as early as March, with weak producer price data countering a disappointing consumer price report.<o:p></o:p>

Barclays analysts adjusted their expectations for the first Fed cut from June to March, citing core personal consumption price index data running at or below 0.2 per cent m/m. <o:p></o:p>

The dovish outlook prompted speculation that Fed Governor Christopher Waller could pave the way for easing in a speech on Tuesday.<o:p></o:p>

As the World Economic Forum unfolded in Davos, European Central Bank speakers, including President Christine Lagarde, took centre stage. <o:p></o:p>

ECB Chief Economist Philip Lane suggested there would be enough data by June to decide on the first of a potential series of interest rate cuts. <o:p></o:p>

Markets, fully priced for an easing in April, implied a substantial 154 basis points of cuts over 2024. <o:p></o:p>

This dovish sentiment, coupled with global economic concerns, has limited the euro's gains against the dollar, which idled at $1.0950 on Monday.<o:p></o:p>

In the currency markets, the dollar held its ground against the yen, supported by subdued Japanese data keeping the Bank of Japan committed to its accommodative policies. <o:p></o:p>

The dollar edged up to 145.08 yen, moving closer to last week's peak of 146.41. <o:p></o:p>

Meanwhile, non-yielding gold stood firm at $2,050 an ounce, backed by the prospect of lower global interest rates. <o:p></o:p>

Oil prices experienced some volatility due to disruptions in the Red Sea but faced pressure from demand concerns.<o:p></o:p>

Brent eased to $78.10 a barrel, while US crude fell to $72.45 per barrel.<o:p></o:p>

(With inputs from Reuters)<o:p></o:p>

Monday brought a uncertain start for Asian shares as China's central bank surprised markets by abstaining from a rate cut, leaving investors on edge ahead of crucial economic data, Reuters reported.

Monday brought a uncertain start for Asian shares as China's central bank surprised markets by abstaining from a rate cut, leaving investors on edge ahead of crucial economic data, Reuters reported. With China set to report fourth-quarter economic growth figures and monthly data this week, apprehension looms over the fragile state of its economic recovery. Chinese blue chips dipped 0.5 per cent, hitting their lowest since early 2019. "For now, we think China is still focused on engineering economic stability," Reuters quoted Damien Boey, Chief Macro Strategist at Barrenjoey in Sydney as saying. While Asian shares faced headwinds, Japan's Nikkei bucked the trend, rising 0.6 per cent to a fresh 34-year peak after stellar gains last week. However, MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.2 per cent, following a 0.8 per cent loss the previous week. Geopolitical tensions, highlighted by the victory of Taiwan's ruling Democratic Progressive Party, served as a reminder that global elections and Middle East conflicts could impact markets throughout the year. The thin trading due to a US holiday added to the cautious mood, with progress on a stopgap spending bill providing a glimmer of stability. Amid global uncertainties, the focus shifted to central bank actions. Futures pointed to a 75 per cent chance that the US Federal Reserve would lower interest rates as early as March, with weak producer price data countering a disappointing consumer price report. Barclays analysts adjusted their expectations for the first Fed cut from June to March, citing core personal consumption price index data running at or below 0.2 per cent m/m. The dovish outlook prompted speculation that Fed Governor Christopher Waller could pave the way for easing in a speech on Tuesday. As the World Economic Forum unfolded in Davos, European Central Bank speakers, including President Christine Lagarde, took centre stage. ECB Chief Economist Philip Lane suggested there would be enough data by June to decide on the first of a potential series of interest rate cuts. Markets, fully priced for an easing in April, implied a substantial 154 basis points of cuts over 2024. This dovish sentiment, coupled with global economic concerns, has limited the euro's gains against the dollar, which idled at $1.0950 on Monday. In the currency markets, the dollar held its ground against the yen, supported by subdued Japanese data keeping the Bank of Japan committed to its accommodative policies. The dollar edged up to 145.08 yen, moving closer to last week's peak of 146.41. Meanwhile, non-yielding gold stood firm at $2,050 an ounce, backed by the prospect of lower global interest rates. Oil prices experienced some volatility due to disruptions in the Red Sea but faced pressure from demand concerns. Brent eased to $78.10 a barrel, while US crude fell to $72.45 per barrel. (With inputs from Reuters)

Asia stocks waver as China opts against rate cut: Report

The US dollar hit a five-month low against the euro and a basket of currencies on Wednesday, driven by expectations that the Federal Reserve might consider cutting interest rates. &nbsp;

The dollar index, measuring the U.S. currency against six others, fell 0.48 per cent to 100.98, the lowest since July 27. Despite the holiday season resulting in reduced trading activity and heightened volatility due to low liquidity, the dollar is set for a 2.45 per cent drop in 2023, marking a shift from two years of robust gains driven by anticipated and actual interest rate hikes by the Fed to combat inflation.&nbsp;

The Federal Reserve is currently perceived as adopting a dovish stance relative to other major central banks, contributing to market expectations of potential rate cuts. The shift in sentiment occurred after Fed Chairman Jerome Powell unexpectedly expressed a dovish outlook at the central bank's December meeting. &nbsp;

Policymakers projected a 75-basis-point easing in 2024. In contrast, central banks like the European Central Bank (ECB) have maintained a "higher for longer" stance, while the Bank of Japan has signalled a potential end to its negative rate policy. &nbsp;

The euro saw a 0.54 per cent increase to $1.1102, reaching its highest level since July 27. For the year, the single currency is poised to gain 3.61 per cent. Similarly, the British pound rose by 0.56 per cent to $1.2793, hitting $1.2802 earlier in the session, the highest since August 10. Sterling is on track for a 5.79 per cent return in 2023. &nbsp;

The Japanese yen experienced a 0.35 per cent decline to 141.89 against the dollar, but the dollar is set for an 8.22 per cent gain for the year. The Bank of Japan's recent announcement included a reduction in the amount of bonds purchased in the January-March quarter, and policymakers emphasized the need to maintain the current policy while hinting at future discussions on an exit from massive stimulus.&nbsp;

Meanwhile, the Australian and New Zealand dollars reached more than five-month highs during the session, with the Australian dollar rising 0.21 per cent to $0.6841, and the kiwi gaining 0.10 per cent at $0.6335. &nbsp;

(With inputs from Reuters)&nbsp;

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The US dollar hit a five-month low against the euro and a basket of currencies on Wednesday, driven by expectations that the Federal Reserve might consider cutting interest rates.

The US dollar hit a five-month low against the euro and a basket of currencies on Wednesday, driven by expectations that the Federal Reserve might consider cutting interest rates. The dollar index, measuring the U.S. currency against six others, fell 0.48 per cent to 100.98, the lowest since July 27. Despite the holiday season resulting in reduced trading activity and heightened volatility due to low liquidity, the dollar is set for a 2.45 per cent drop in 2023, marking a shift from two years of robust gains driven by anticipated and actual interest rate hikes by the Fed to combat inflation. The Federal Reserve is currently perceived as adopting a dovish stance relative to other major central banks, contributing to market expectations of potential rate cuts. The shift in sentiment occurred after Fed Chairman Jerome Powell unexpectedly expressed a dovish outlook at the central bank's December meeting. Policymakers projected a 75-basis-point easing in 2024. In contrast, central banks like the European Central Bank (ECB) have maintained a "higher for longer" stance, while the Bank of Japan has signalled a potential end to its negative rate policy. The euro saw a 0.54 per cent increase to $1.1102, reaching its highest level since July 27. For the year, the single currency is poised to gain 3.61 per cent. Similarly, the British pound rose by 0.56 per cent to $1.2793, hitting $1.2802 earlier in the session, the highest since August 10. Sterling is on track for a 5.79 per cent return in 2023. The Japanese yen experienced a 0.35 per cent decline to 141.89 against the dollar, but the dollar is set for an 8.22 per cent gain for the year. The Bank of Japan's recent announcement included a reduction in the amount of bonds purchased in the January-March quarter, and policymakers emphasized the need to maintain the current policy while hinting at future discussions on an exit from massive stimulus. Meanwhile, the Australian and New Zealand dollars reached more than five-month highs during the session, with the Australian dollar rising 0.21 per cent to $0.6841, and the kiwi gaining 0.10 per cent at $0.6335. (With inputs from Reuters) WATCH WION LIVE HERE

Dollar slides to 5-month low against Euro as Fed signals possible rate cuts

In World Business Watch insights on Inflation took a favourable turn in 2023, major central banks shut the books on rate hikes in 2023, and watch the video to know more!

2024 View: Hope for interest rate cuts

Foreign investors are set to channel significant capital into Taiwan stocks in November, creating a record-setting inflow of $8.2 billion on a net basis, Bloomberg reported on Thursday.<o:p></o:p>

This surge being the largest monthly inflow since at least 2000, is attributed to growing optimism surrounding technology shares, fuelled by the belief that the Federal Reserve has concluded its interest-rate hikes.<o:p></o:p>

The Taiwan Stock Exchange (TWSE) Index has surged by an impressive 8.6 per cent in November, positioning itself as one of the top-performing indices in the Asia Pacific region. This rally aligns with a global trend as investors re-evaluate tech valuations amid expectations of a peak in borrowing costs.<o:p></o:p>

Bloomberg cited Caroline Yu Maurer, Head of China and Specialised Asia Strategies at HSBC Asset Management, who emphasised the close correlation between Taiwan's market and the U.S. cycle, particularly the AI-related cycle. She noted that Taiwan's leading stocks do not exhibit extreme valuations, providing an attractive proposition for investors. Maurer remarked that Taiwan “is very much geared toward the US cycle, essentially the AI-related cycle. (The leading stocks) are not really extreme on valuations, they’re not as expensive."<o:p></o:p>

As the tech-heavy market in Taiwan experiences this financial influx, its neighbour, South Korea, also attracted substantial inflows amounting to $3.1 billion. In contrast, Indian equities, while increasingly becoming a structural bet for many foreigners, saw relatively lower popularity, gathering $614 million in inflows. <o:p></o:p>

(With inputs from Bloomberg)<o:p></o:p>

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Foreign investors are set to channel significant capital into Taiwan stocks in November, creating a record-setting inflow of $8.2 billion on a net basis, Bloomberg reported on Thursday.

Foreign investors are set to channel significant capital into Taiwan stocks in November, creating a record-setting inflow of $8.2 billion on a net basis, Bloomberg reported on Thursday. This surge being the largest monthly inflow since at least 2000, is attributed to growing optimism surrounding technology shares, fuelled by the belief that the Federal Reserve has concluded its interest-rate hikes. The Taiwan Stock Exchange (TWSE) Index has surged by an impressive 8.6 per cent in November, positioning itself as one of the top-performing indices in the Asia Pacific region. This rally aligns with a global trend as investors re-evaluate tech valuations amid expectations of a peak in borrowing costs. Bloomberg cited Caroline Yu Maurer, Head of China and Specialised Asia Strategies at HSBC Asset Management, who emphasised the close correlation between Taiwan's market and the U.S. cycle, particularly the AI-related cycle. She noted that Taiwan's leading stocks do not exhibit extreme valuations, providing an attractive proposition for investors. Maurer remarked that Taiwan “is very much geared toward the US cycle, essentially the AI-related cycle. (The leading stocks) are not really extreme on valuations, they’re not as expensive." As the tech-heavy market in Taiwan experiences this financial influx, its neighbour, South Korea, also attracted substantial inflows amounting to $3.1 billion. In contrast, Indian equities, while increasingly becoming a structural bet for many foreigners, saw relatively lower popularity, gathering $614 million in inflows. (With inputs from Bloomberg) WATCH WION LIVE HERE

Taiwan stocks ride high with record inflows as tech optimism surges

WION's Business Desk brings you this daily round up of global stories from the world of business and economy.&nbsp;

Instagram reels reshape beauty, fashion shopping landscape in India: Meta GWI Beauty Report

According to a new Meta GWI Beauty Report for 2023, Instagram Reels have a significant influence on Indian consumers' decisions about beauty products. Over 80 per cent&nbsp;of customers prefer to purchase beauty goods online, according to data, with Meta's Facebook and Instagram ranking first for beauty product searches.&nbsp;

<a href="https://www.wionews.com/business-economy/instagram-reels-reshape-beauty-fashion-shopping-landscape-in-india-meta-gwi-beauty-report-660623">Read more here</a>&nbsp;

OpenAI's $86 bn valuation in limbo after the firing of CEO Sam Altman

The unexpected sacking of CEO Sam Altman and the exit of numerous key executives have put OpenAI's planned share sale, which valued the business at over $86 billion, in risk.

<a href="https://www.wionews.com/business-economy/openais-86-bn-valuation-in-limbo-after-the-firing-of-ceo-sam-altman-660630">Read more here&nbsp;</a>

France mulls real estate sales and senior unemployment benefit to tackle budget deficit

France is considering selling real estate and cutting back on government spending on office space in an effort to reduce the country's budget deficit, according to a statement made by Budget Minister Thomas Cazenave.

<a href="https://www.wionews.com/business-economy/france-mulls-real-estate-sales-and-senior-unemployment-benefit-to-tackle-budget-deficit-660658">Read more here</a>&nbsp;

Global Central Banks Navigate Rate Hike Dilemma: Nordic nations take centre stage

Key decision-makers for their counterparts in northern Europe are faced with uncertain times as major central banks in the US, euro zone, and the UK temporarily halt rate hikes.&nbsp;

<a href="https://www.wionews.com/business-economy/global-central-banks-navigate-rate-hike-dilemma-nordic-nations-take-centre-stage-660676">Read more here&nbsp;</a>

Indo-Pacific trade pillar stumbles, US faces setback in countering China

An important component of the Biden administration's effort to confront China, the Indo-Pacific Economic Framework (IPEF), was about to reach a much-anticipated milestone when discussions on the trade pillar encountered resistance, putting the initiative at risk.

<a href="https://www.wionews.com/business-economy/indo-pacific-trade-pillar-stumbles-us-faces-setback-in-countering-china-660684">Read more here&nbsp;</a>

Australia: Optus CEO Kelly Bayer Rosmarin quits after network-wide outage

Following one of Australia's biggest data breaches last year and a significant network-wide outage earlier this month, the CEO of Optus, the country's second-largest telecom provider, announced his resignation on Monday, Nov. 20.

<a href="https://www.wionews.com/business-economy/australia-optus-ceo-kelly-bayer-rosmarin-quits-after-network-wide-outage-660680">Read more here&nbsp;</a>

Amazon's Promotion Dilemma: Return to office or risk career growth

Amazon is putting more pressure on its corporate workers to follow its policy of returning to the workplace, threatening to withhold promotions from those who do not. The requirement that workers show up to work three days a week has caused friction with some of Amazon's 350,000 corporate employees.

<a href="https://www.wionews.com/business-economy/amazons-promotion-dilemma-return-to-office-or-risk-career-growth-660693">Read more here&nbsp;</a>

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WION's Business Desk brings you this daily round up of global stories from the world of business and economy. Instagram reels reshape beauty, fashion shopping landscape in India: Meta GWI Beauty Report According to a new Meta GWI Beauty Report for 2023, Instagram Reels have a significant influence on Indian consumers' decisions about beauty products.

WION's Business Desk brings you this daily round up of global stories from the world of business and economy. Instagram reels reshape beauty, fashion shopping landscape in India: Meta GWI Beauty Report According to a new Meta GWI Beauty Report for 2023, Instagram Reels have a significant influence on Indian consumers' decisions about beauty products. Over 80 per cent of customers prefer to purchase beauty goods online, according to data, with Meta's Facebook and Instagram ranking first for beauty product searches. Read more here OpenAI's $86 bn valuation in limbo after the firing of CEO Sam Altman The unexpected sacking of CEO Sam Altman and the exit of numerous key executives have put OpenAI's planned share sale, which valued the business at over $86 billion, in risk. Read more here France mulls real estate sales and senior unemployment benefit to tackle budget deficit France is considering selling real estate and cutting back on government spending on office space in an effort to reduce the country's budget deficit, according to a statement made by Budget Minister Thomas Cazenave. Read more here Global Central Banks Navigate Rate Hike Dilemma: Nordic nations take centre stage Key decision-makers for their counterparts in northern Europe are faced with uncertain times as major central banks in the US, euro zone, and the UK temporarily halt rate hikes. Read more here Indo-Pacific trade pillar stumbles, US faces setback in countering China An important component of the Biden administration's effort to confront China, the Indo-Pacific Economic Framework (IPEF), was about to reach a much-anticipated milestone when discussions on the trade pillar encountered resistance, putting the initiative at risk. Read more here Australia: Optus CEO Kelly Bayer Rosmarin quits after network-wide outage Following one of Australia's biggest data breaches last year and a significant network-wide outage earlier this month, the CEO of Optus, the country's second-largest telecom provider, announced his resignation on Monday, Nov. 20. Read more here Amazon's Promotion Dilemma: Return to office or risk career growth Amazon is putting more pressure on its corporate workers to follow its policy of returning to the workplace, threatening to withhold promotions from those who do not. The requirement that workers show up to work three days a week has caused friction with some of Amazon's 350,000 corporate employees. Read more here WATCH WION LIVE HERE

Wion Business Wrap | Instagram reels reshape beauty, OpenAI's $86 bn valuation in limbo & more

As we kick off the busy trading week, here's a sneak peek into what could trigger markets this week.

Focus intensifies on the U.S. Federal Reserve, set to release the minutes of its late October meeting a day earlier due to Thanksgiving. Investors eagerly seek insights into the central bank's stance on interest rates, especially with recent signs of inflation cooling adding intrigue to the analysis.

Retail sales during the thanksgiving holiday week

As the holiday season starts, U.S. retailers gear up for Black Friday, marking the beginning of a crucial shopping period. However, this year's backdrop is different, featuring elevated interest rates and inflation above the Fed's 2% target. October's retail sales dip suggests a potential slowdown in consumer demand.

Retail giant Walmart, sheds light on consumer behavior, noting a more prudent approach to spending. Despite caution, the company raises its sales and profit forecast for the year, reflecting a mix of optimism and wariness in the retail landscape.

Nvidia reports its 3rd quarter results

Adding to the mix, major chip maker Nvidia, steps into the earnings spotlight this week. As the final member of the Magnificent Seven megacap companies to report this season, Nvidia's performance will be closely watched given substantial share gains.

Eurozone's purchasing manager index for November

Across the pond, the Eurozone is set to reveal its purchasing manager indexes data for November on Thursday. Economists, however, are cautious, not expecting a significant uptick in activity.

In essence, this week is a delicate balancing act for markets. Investors scrutinize the Fed minutes for clues, retailers brace for a nuanced holiday season, and chip giant Nvidia steps into the earnings arena. The Eurozone's data could offer further insights into the global economic landscape.

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As we kick off the busy trading week, here's a sneak peek into what could trigger markets this week. Focus intensifies on the U.S. Federal Reserve, set to release the minutes of its late October meeting a day earlier due to Thanksgiving.

As we kick off the busy trading week, here's a sneak peek into what could trigger markets this week. Focus intensifies on the U.S. Federal Reserve, set to release the minutes of its late October meeting a day earlier due to Thanksgiving. Investors eagerly seek insights into the central bank's stance on interest rates, especially with recent signs of inflation cooling adding intrigue to the analysis. Retail sales during the thanksgiving holiday week As the holiday season starts, U.S. retailers gear up for Black Friday, marking the beginning of a crucial shopping period. However, this year's backdrop is different, featuring elevated interest rates and inflation above the Fed's 2% target. October's retail sales dip suggests a potential slowdown in consumer demand. Retail giant Walmart, sheds light on consumer behavior, noting a more prudent approach to spending. Despite caution, the company raises its sales and profit forecast for the year, reflecting a mix of optimism and wariness in the retail landscape. Nvidia reports its 3rd quarter results Adding to the mix, major chip maker Nvidia, steps into the earnings spotlight this week. As the final member of the Magnificent Seven megacap companies to report this season, Nvidia's performance will be closely watched given substantial share gains. Eurozone's purchasing manager index for November Across the pond, the Eurozone is set to reveal its purchasing manager indexes data for November on Thursday. Economists, however, are cautious, not expecting a significant uptick in activity. In essence, this week is a delicate balancing act for markets. Investors scrutinize the Fed minutes for clues, retailers brace for a nuanced holiday season, and chip giant Nvidia steps into the earnings arena. The Eurozone's data could offer further insights into the global economic landscape. WATCH WION LIVE HERE

Traders' Diary | Cues to watch this week (Nov 20-24)

U.S. consumer prices remained unchanged in October, signalling a potential easing of concerns over rising inflation and leading to renewed hopes that the Federal Reserve might halt further interest rate hikes. According to Reuters, the data, released by the Labour Department's Bureau of Labour Statistics, revealed that the annual increase in underlying inflation was the smallest in two years, marking a pivotal moment in the ongoing economic narrative.

The report showed a notable decline in gasoline prices, contributing to the stagnant Consumer Price Index (CPI), a shift from the 0.4 per cent rise observed in September. The unexpected softness in inflation figures prompted a positive reaction in financial markets, with U.S. Treasury yields dipping and a subsequent rally in the stock market.

The development, combined with recent data indicating a slowdown in job and wage growth, is seen as reinforcing the notion that the economy might evade a potential recession.

Christopher Rupkey, Chief Economist at FWDBONDS, told Reuters, "The Fed always wants to see more progress, but it is looking like the inflation battle has rounded the corner." Rupkey further expressed optimism that the economy could navigate away from a recession while experiencing lower inflation. The encouraging signs in the CPI, including a 5.0 per cent drop in gasoline prices, highlight the potential impact on broader economic dynamics.

Despite a year-on-year consumer price rise of 3.2 per cent in October, down from 3.7 per cent in September, concerns persist as inflation continues to surpass the Fed's 2 per cent target. Analysts suggest that the recent disinflationary trend might not be sustained indefinitely, given the strong economy and a relatively tight labour market.

While expectations of an imminent end to the Fed's monetary policy tightening campaign have gained traction, Fed Chair Jerome Powell remains according to Reuters. He said, "if it becomes appropriate to tighten policy further, we will not hesitate to do so."

Financial markets are seemingly anticipating a rate cut as early as May, according to CME Group's FedWatch tool. The Federal Reserve has implemented a robust monetary tightening campaign since March 2022, resulting in a 525 basis points increase to the current 5.25 per cent -5.50 per cent range. The prospect of a shift in monetary policy has driven Treasury prices higher, with the yield on the two-year note reaching a two-week low. The dollar has depreciated against a basket of currencies, and Wall Street stocks are trading notably higher.

The CPI report also shed light on specific sectors, including a 0.3 per cent increase in food prices, driven by higher costs for meat, fish, and eggs. However, the overall encouraging inflation data, coupled with slowing rent increases and subdued goods deflation, suggests a potential positive trajectory for the U.S. economy.

(With inputs from Reuters)

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U.S. consumer prices remained unchanged in October, signalling a potential easing of concerns over rising inflation and leading to renewed hopes that the Federal Reserve might halt further interest rate hikes.

U.S. consumer prices remained unchanged in October, signalling a potential easing of concerns over rising inflation and leading to renewed hopes that the Federal Reserve might halt further interest rate hikes. According to Reuters, the data, released by the Labour Department's Bureau of Labour Statistics, revealed that the annual increase in underlying inflation was the smallest in two years, marking a pivotal moment in the ongoing economic narrative. The report showed a notable decline in gasoline prices, contributing to the stagnant Consumer Price Index (CPI), a shift from the 0.4 per cent rise observed in September. The unexpected softness in inflation figures prompted a positive reaction in financial markets, with U.S. Treasury yields dipping and a subsequent rally in the stock market. The development, combined with recent data indicating a slowdown in job and wage growth, is seen as reinforcing the notion that the economy might evade a potential recession. Christopher Rupkey, Chief Economist at FWDBONDS, told Reuters, "The Fed always wants to see more progress, but it is looking like the inflation battle has rounded the corner." Rupkey further expressed optimism that the economy could navigate away from a recession while experiencing lower inflation. The encouraging signs in the CPI, including a 5.0 per cent drop in gasoline prices, highlight the potential impact on broader economic dynamics. Despite a year-on-year consumer price rise of 3.2 per cent in October, down from 3.7 per cent in September, concerns persist as inflation continues to surpass the Fed's 2 per cent target. Analysts suggest that the recent disinflationary trend might not be sustained indefinitely, given the strong economy and a relatively tight labour market. While expectations of an imminent end to the Fed's monetary policy tightening campaign have gained traction, Fed Chair Jerome Powell remains according to Reuters. He said, "if it becomes appropriate to tighten policy further, we will not hesitate to do so." Financial markets are seemingly anticipating a rate cut as early as May, according to CME Group's FedWatch tool. The Federal Reserve has implemented a robust monetary tightening campaign since March 2022, resulting in a 525 basis points increase to the current 5.25 per cent -5.50 per cent range. The prospect of a shift in monetary policy has driven Treasury prices higher, with the yield on the two-year note reaching a two-week low. The dollar has depreciated against a basket of currencies, and Wall Street stocks are trading notably higher. The CPI report also shed light on specific sectors, including a 0.3 per cent increase in food prices, driven by higher costs for meat, fish, and eggs. However, the overall encouraging inflation data, coupled with slowing rent increases and subdued goods deflation, suggests a potential positive trajectory for the U.S. economy. (With inputs from Reuters) WATCH WION LIVE HERE

Slowing US inflation fuels optimism as Fed rate hike concerns subside: Report

The US Economy has embarked on a new phase in the last two weeks, prompting a closer look at data to validate this narrative. The Federal Reserve's potential completion of its rate-hiking cycle is gaining momentum, with the upcoming week expected to provide more confirming data. Notably, there's a growing likelihood of rate reductions in 2024, marking a crucial aspect to watch.

Five key points to monitor this week in US economy

The United States is witnessing the most substantial economic expansion in nearly two years, fuelled by a resilient job market, increasing wealth, and easing inflation. Gross domestic product (GDP) is anticipated to have surged at an annual rate of 4.5 per cent in the third quarter, more than doubling the pace of the prior period, Bloomberg reported. This news comes as a surprise, particularly due to the Federal Reserve's expectations of a slowing consumer demand.

Bloomberg quoted Elie Maalouf, CEO of InterContinental Hotels Group, as saying, "The US consumer has been surprising most predictions, including the Federal Reserve predictions, which is almost looking for the US consumer to soften, and yet they don't."

For President Joe Biden, this economic boom is welcome news, demonstrating the success of his economic policies. However, it also presents a dilemma for the Federal Reserve. Since March 2022, the central bank has been aggressively raising interest rates to combat inflation while avoiding a recession. While inflation has eased with improvements in global supply chains and a decrease in disruptions due to the war in Ukraine, domestic demand in the US remains strong, defying the Fed's efforts.

Federal Reserve Chair Jerome Powell has indicated that policymakers are likely to maintain interest rates at their current levels during the upcoming meeting. Still, the door is open to future increases if strong growth continues. According to Bloomberg, JPMorgan Chase &amp; Co. chief economist Bruce Kasman remarked, "He may not have a lot of patience if the growth numbers don't cool pretty quickly here."

Powell acknowledges that growth is expected to slow in the fourth quarter and into the next year, with economists projecting GDP to expand at an annual rate of just 0.7 per cent in the current quarter. The challenge is that the economy's resilience has taken many, including the Fed, by surprise.

Consumer spending experienced a significant boost in the third quarter, driven by solid wage gains and receding inflation. The surge in household wealth, stemming from increases in home and equity prices, likely also played a role in boosting consumption. However, some experts consider this surge to be temporary. Bloomberg cited Yelena Shulyatyeva, a senior US economist at BNP Paribas SA, who said that the boost could be temporary.

There are factors that may not repeat in the final quarter of 2023, such as a projected decline in imports and a rise in inventories. Additionally, an upswing in mortgage rates and other headwinds could dampen the economy's performance in the near future. As Mark Zandi, chief economist at Moody's Analytics, pointed out, growth may slow to around 1 per cent this quarter, after a strong performance of 3.8 per cent in the third. A more stable unemployment rate would be favourable for the Federal Reserve.

(Inputs from Bloomberg)

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The United States is witnessing the most substantial economic expansion in nearly two years, fuelled by a resilient job market, increasing wealth, and easing inflation.

The United States is witnessing the most substantial economic expansion in nearly two years, fuelled by a resilient job market, increasing wealth, and easing inflation. Gross domestic product (GDP) is anticipated to have surged at an annual rate of 4.5 per cent in the third quarter, more than doubling the pace of the prior period, Bloomberg reported. This news comes as a surprise, particularly due to the Federal Reserve's expectations of a slowing consumer demand. Bloomberg quoted Elie Maalouf, CEO of InterContinental Hotels Group, as saying, "The US consumer has been surprising most predictions, including the Federal Reserve predictions, which is almost looking for the US consumer to soften, and yet they don't." For President Joe Biden, this economic boom is welcome news, demonstrating the success of his economic policies. However, it also presents a dilemma for the Federal Reserve. Since March 2022, the central bank has been aggressively raising interest rates to combat inflation while avoiding a recession. While inflation has eased with improvements in global supply chains and a decrease in disruptions due to the war in Ukraine, domestic demand in the US remains strong, defying the Fed's efforts. Federal Reserve Chair Jerome Powell has indicated that policymakers are likely to maintain interest rates at their current levels during the upcoming meeting. Still, the door is open to future increases if strong growth continues. According to Bloomberg, JPMorgan Chase & Co. chief economist Bruce Kasman remarked, "He may not have a lot of patience if the growth numbers don't cool pretty quickly here." Powell acknowledges that growth is expected to slow in the fourth quarter and into the next year, with economists projecting GDP to expand at an annual rate of just 0.7 per cent in the current quarter. The challenge is that the economy's resilience has taken many, including the Fed, by surprise. Consumer spending experienced a significant boost in the third quarter, driven by solid wage gains and receding inflation. The surge in household wealth, stemming from increases in home and equity prices, likely also played a role in boosting consumption. However, some experts consider this surge to be temporary. Bloomberg cited Yelena Shulyatyeva, a senior US economist at BNP Paribas SA, who said that the boost could be temporary. There are factors that may not repeat in the final quarter of 2023, such as a projected decline in imports and a rise in inventories. Additionally, an upswing in mortgage rates and other headwinds could dampen the economy's performance in the near future. As Mark Zandi, chief economist at Moody's Analytics, pointed out, growth may slow to around 1 per cent this quarter, after a strong performance of 3.8 per cent in the third. A more stable unemployment rate would be favourable for the Federal Reserve. (Inputs from Bloomberg) WATCH WION LIVE HERE

Robust US economic growth presents dilemma for Federal Reserve: Report

Austan Goolsbee, President of the Federal Reserve Bank of Chicago, has expressed optimism about the possibility of the United States avoiding a recession, even as the central bank continues to raise interest rates in an effort to combat inflation.

In a recent interview with CNBC, Goolsbee referred to this optimistic scenario as the "golden path," although he acknowledged that it comes with its share of risks and uncertainties.

"I've been calling that the golden path, and I think it's possible, but there are a lot of risks and the path is long and winding," Bloomberg quoted Goolsbee as saying, emphasising the complexities of the current economic landscape.

Goolsbee drew attention to the unemployment rate, which was at &nbsp;3.8 per cent last month and remained remarkably close to its level from the previous year when inflation was significantly higher than it is presently. This comparison underscores the Federal Reserve's challenge of achieving both full employment and price stability.

According to a report by Bloomberg, the Federal Reserve officials recently decided to maintain their benchmark lending rate at a 22-year high, with the expectation of one more rate hike for the present fiscal year. Additionally, policymakers signalled a more positive outlook for a "soft landing" for the U.S. economy but acknowledged that interest rates are likely to remain elevated for an extended period.

The report cited Chair Jerome Powell reassured that policymakers would approach the end of the rate-hiking cycle with caution while maintaining their commitment to bringing inflation back to the 2 per cent target. In July, the preferred inflation gauge for Fed officials saw a 0.2 per cent increase for the second consecutive month, marking the smallest consecutive gains since late 2020.

Goolsbee, who had previously noted progress in monthly core inflation data, reiterated that the time is rapidly approaching for discussions to shift from how high to raise rates to how long they should be held at elevated levels. The Federal Reserve will be closely monitoring fresh inflation data for August, set to be released on Friday, to inform their ongoing policy decisions.

(With inputs from Bloomberg)

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Austan Goolsbee, President of the Federal Reserve Bank of Chicago, has expressed optimism about the possibility of the United States avoiding a recession, even as the central bank continues to raise interest rates in an effort to combat inflation.

Austan Goolsbee, President of the Federal Reserve Bank of Chicago, has expressed optimism about the possibility of the United States avoiding a recession, even as the central bank continues to raise interest rates in an effort to combat inflation. In a recent interview with CNBC, Goolsbee referred to this optimistic scenario as the "golden path," although he acknowledged that it comes with its share of risks and uncertainties. "I've been calling that the golden path, and I think it's possible, but there are a lot of risks and the path is long and winding," Bloomberg quoted Goolsbee as saying, emphasising the complexities of the current economic landscape. Goolsbee drew attention to the unemployment rate, which was at 3.8 per cent last month and remained remarkably close to its level from the previous year when inflation was significantly higher than it is presently. This comparison underscores the Federal Reserve's challenge of achieving both full employment and price stability. According to a report by Bloomberg, the Federal Reserve officials recently decided to maintain their benchmark lending rate at a 22-year high, with the expectation of one more rate hike for the present fiscal year. Additionally, policymakers signalled a more positive outlook for a "soft landing" for the U.S. economy but acknowledged that interest rates are likely to remain elevated for an extended period. The report cited Chair Jerome Powell reassured that policymakers would approach the end of the rate-hiking cycle with caution while maintaining their commitment to bringing inflation back to the 2 per cent target. In July, the preferred inflation gauge for Fed officials saw a 0.2 per cent increase for the second consecutive month, marking the smallest consecutive gains since late 2020. Goolsbee, who had previously noted progress in monthly core inflation data, reiterated that the time is rapidly approaching for discussions to shift from how high to raise rates to how long they should be held at elevated levels. The Federal Reserve will be closely monitoring fresh inflation data for August, set to be released on Friday, to inform their ongoing policy decisions. (With inputs from Bloomberg) WATCH WION LIVE HERE

Federal Reserve official highlights "golden path" to avert recession amidst rate hikes

The Institute of International Finance (IIF) said on September 19 that markets like the United States and Japan were driving the hike in global debt, which reached a record high of $307 trillion in the second quarter of the year despite rising interest rates restricting bank credit, Moneycontrol reported.

According to a research by the trade association for financial services, the amount of global debt in dollars increased by $10 trillion in the first half of 2023 and by $100 trillion over the previous ten years.

It claimed that the most recent increase has increased the global debt-to-GDP ratio to 336 per cent for the second consecutive quarter. The debt ratio had been decreasing up until 2023 for seven quarters.

The research indicated that, the increase in debt ratio was caused by slower growth combined with a slowdown in price rises.

The IIF stated that “the sudden rise in inflation was the main factor behind the sharp decline in debt ratio over the past two years,” and that they anticipate the debt to output ratio to surpass 337 per cent by year's end due to wage and price pressures lessening, even if not to their targets.

With the United States, Japan, Britain, and France seeing the greatest rises, the developed world accounted for more than 80 per cent of the most recent debt accumulation. The biggest increases in developing markets were seen in the world's three biggest economies: China, India, and Brazil.

According to the analysis, China, Korea, and Thailand are mostly to blame for the fact that household debt-to-GDP in emerging markets is still higher than it was before COVID-19. However, in the first half of the year, the same ratio in mature markets fell to its lowest point in twenty years.

“Should inflationary pressures persist in mature markets, the health of household balance sheets, particularly in the U.S., would provide a cushion against further rate hikes,” Moneycontrol quoted the report.

The target rate of between 5.25 per cent and 5.5 per cent is now anticipated to stay in place until May of next year, according to the CME FedWatch tool, but markets are not currently pricing in a rate increase by the U.S. Federal Reserve in the near future.

Rates in the United States are anticipated to stay high for a considerable amount of time, which might put pressure on emerging countries as necessary investment is directed to the less-risky developed world.

At the conclusion of its meeting on Wednesday, the Federal Reserve is anticipated to hold rates steady but may hint that it is open to additional rate increases.

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The Institute of International Finance (IIF) said on September 19 that markets like the United States and Japan were driving the hike in global debt, which reached a record high of $307 trillion in the second quarter of the year despite rising interest rates restricting bank credit, Moneycontrol reported.

The Institute of International Finance (IIF) said on September 19 that markets like the United States and Japan were driving the hike in global debt, which reached a record high of $307 trillion in the second quarter of the year despite rising interest rates restricting bank credit, Moneycontrol reported. According to a research by the trade association for financial services, the amount of global debt in dollars increased by $10 trillion in the first half of 2023 and by $100 trillion over the previous ten years. It claimed that the most recent increase has increased the global debt-to-GDP ratio to 336 per cent for the second consecutive quarter. The debt ratio had been decreasing up until 2023 for seven quarters. The research indicated that, the increase in debt ratio was caused by slower growth combined with a slowdown in price rises. The IIF stated that “the sudden rise in inflation was the main factor behind the sharp decline in debt ratio over the past two years,” and that they anticipate the debt to output ratio to surpass 337 per cent by year's end due to wage and price pressures lessening, even if not to their targets. With the United States, Japan, Britain, and France seeing the greatest rises, the developed world accounted for more than 80 per cent of the most recent debt accumulation. The biggest increases in developing markets were seen in the world's three biggest economies: China, India, and Brazil. According to the analysis, China, Korea, and Thailand are mostly to blame for the fact that household debt-to-GDP in emerging markets is still higher than it was before COVID-19. However, in the first half of the year, the same ratio in mature markets fell to its lowest point in twenty years. “Should inflationary pressures persist in mature markets, the health of household balance sheets, particularly in the U.S., would provide a cushion against further rate hikes,” Moneycontrol quoted the report. The target rate of between 5.25 per cent and 5.5 per cent is now anticipated to stay in place until May of next year, according to the CME FedWatch tool, but markets are not currently pricing in a rate increase by the U.S. Federal Reserve in the near future. Rates in the United States are anticipated to stay high for a considerable amount of time, which might put pressure on emerging countries as necessary investment is directed to the less-risky developed world. At the conclusion of its meeting on Wednesday, the Federal Reserve is anticipated to hold rates steady but may hint that it is open to additional rate increases. WATCH WION LIVE HERE

Global debt reaches record high of $307 trillion, as debt ratios are rising: IIF

Despite more than five percentage points in interest rate hikes, the Federal Reserve has seen little evidence of a downturn in US demand. Central banks need to consider the effects of their policies on the supply side of the economy, an idea that has recently gained traction among policymakers and fed observers.

The Fed's policy paradox: Balancing interest rates and demand

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