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Relevant Headlines/Articles

Post by Bobby Francis on Wed Feb 10, 2016 5:17 pm

Post any relevant news articles you see in this thread and we can discuss what impact, if any, the content has on our forecast

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Re: Relevant Headlines/Articles

Post by Seitaro Ishihama on Thu Feb 11, 2016 3:37 pm

HD Market Turmoil Prompts Search for Answers (The wall street journal, 11 February 2016)
https //proxy library upenn edu:2067/redir/default.aspx?P=sa&an=J000000020160211ec2b00031&cat=a&ep=ASE

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Re: Relevant Headlines/Articles

Post by Seitaro Ishihama on Thu Feb 11, 2016 3:50 pm

summary of what"s in the article:
What are the primary causes of the market moves?
1. fast money
As the Federal Reserve prepared to raise short term interest rates for much of 2015, investors bet that banks would pocket an expanding difference between what they charge on loans and what they pay on deposits.

financial shares = tumbled this year, lower for longer, especially that the Bank of Japan announced to cut rates into negative territory

2. Yuan anxiety
China risk= the country has no choice but to devalue the yuan, a move that would deepen global economic woes.
after an August yuan devaluation, triggered a global selloff
= concerns about China heading for an economic reckoning

3. Soverign wealth funds
Oil-producing countries = poured billions when investments were higher
those funds are liquidating stocks bought in happier times, accelerating the U.S. market selloff

J.P. Morgan predicts:
= $75 billion selloff for sovereign-wealth funds globally in stocks
the US market weighed in at 20 trillion

oil prices will be persistently challenged, but I don't see oil-driven sovereign wealth flows being a moral threat to the US equities or equities in general

4. Worry about US

the US manufacturing sector = contracted for the  fourth month in the row
= dragged down due to the strong dollar
jobs growth slowed last month, but unemployment slipped last month and wages rose = accentuating uncertainty

5. growth isn"t growing
slump in oil supplies = attributed to oversupply
if commodity prices are as a whole generally weak, that indicates tha global demand is weak

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Re: Relevant Headlines/Articles

Post by Seitaro Ishihama on Thu Feb 11, 2016 3:54 pm

11 Feburary 2016
THE NEW YORK TIMES
Yellen Warns Global Strife Could Brake U.S. Growth

WASHINGTON -- The Republicans described the Federal Reserve as ineffective, secretive and out of touch with the economic realities of ordinary Americans.

The Democrats showered it with praise, using words like ''herculean.''

TD
And those were just the opening statements on Wednesday, as the Fed's chairwoman, Janet L. Yellen, began two days of testimony on Capitol Hill.

Ms. Yellen functions as the nation's economic weather forecaster and, on Wednesday, she sounded more worried than at her last public appearance, in December.

''Financial conditions in the United States have recently become less supportive of growth,'' she told the House Financial Services Committee. ''These developments, if they prove persistent, could weigh on the outlook for economic activity.''

She meant that convulsions in the stock markets could harm the economy. But Ms. Yellen said it was too soon to assess any damage, and she suggested it was also too soon to say whether the Fed would raise interest rates in March. ''Let's remember that the labor market is continuing to perform well,'' she said. ''We want to be careful not to jump to a conclusion about what is in store for the economy.''

The Fed raised short-term interest rates in December for the first time since the financial crisis. Low rates encourage borrowing and risk-taking and, after a seven-year stimulus campaign, the Fed said it planned to gradually curtail those incentives. It started small, raising its benchmark rate to a range from 0.25 percent to 0.5 percent, and it predicted that it would gradually increase rates by roughly an additional percentage point this year.

Even those plans, however, now look ambitious. Like predicting the weather, economic forecasting is an inexact science.

Around the world, equity markets have tumbled, erasing wealth and undermining confidence. And loans, already in short supply, are becoming even harder to come by. Investors are demanding higher rates from risky borrowers while pumping so much money into safe havens like government debt that governments are increasingly charging interest instead of paying it, a phenomenon known as negative interest rates.

Ms. Yellen argued on Wednesday that the rest of the world was to blame. She said the crucial question confronting the Fed was whether the domestic economy is strong enough to keep growing modestly even as the global economy struggles. That disconnect has raised the value of the dollar, allowing consumers to purchase imports more cheaply, but has reduced demand for American exports.

Ms. Yellen highlighted the ''solid improvement'' of the United States labor market. The unemployment rate fell to 4.9 percent in January from 5.7 percent a year ago, while the economy added an average of 222,000 jobs a month. Wages also rose more quickly.

She also suggested, ever so gently, that investors were not behaving rationally, indicating that the markets might rebound. While global economic and financial conditions have taken a turn for the worse, ''we have not seen shifts that seem significant enough to have driven the sharp moves that we have seen in markets,'' she said.

The Fed is not ready to raise rates at the moment but, as Ms. Yellen noted, ''There are a number of weeks before we meet again in March.''

Members of both parties challenged Ms. Yellen's economic assessment -- the Fed is a popular punching bag, particularly during a presidential campaign -- but political imperatives muddled their arguments. Republicans said the economy was struggling and the Fed should do less; Democrats painted a sunny picture and said the Fed should do more. Several noted the high rate of unemployment among black Americans in urging the Fed to extend its campaign.

Representative Maxine Waters of California, the committee's ranking Democrat, hailed the Fed's ''herculean efforts'' and the resulting ''tremendous progress,'' before warning against rate increases as ''a step that takes us further away from making sure that the needs of vulnerable populations are met.''

Ms. Waters directed attention to the small public gallery along one wall of the hearing room, filled by green-shirt-wearing activists from Fed Up, a coalition of community groups pressing the Fed to focus on reducing unemployment. Among them: an Atlanta child care provider, an administrative assistant from St. Louis and a fast-food worker from Wichita, Kan.

The Republican argument is that the Fed is making things worse.

''It's really disingenuous to say to the American people that these policies have contributed toward 4.9 percent unemployment,'' said Representative Robert Pittenger, Republican of North Carolina. He added, referring to the activists, ''I think that should be understood and absorbed by these wonderful people who have come, that the types of policies that have been enacted, been enforced, this last seven years, have worked against your interests.''

One sign the economy is not doing so badly is that the sharpest questions at the hearing focused mostly on other issues. Republicans once again pressed Ms. Yellen to embrace legislation increasing the transparency of the Fed's decision making, as they have done at each of her previous appearances.

The legislation would require the Fed to articulate a rule for setting interest rates and explain any deviations. Proponents claim such a rule would discourage the Fed from trying to do too much. Ms. Yellen has previously described the proposal as a ''grave mistake,'' saying it would constrain the Fed from responding appropriately to unexpected economic developments.

Representative Jeb Hensarling, Republican of Texas, on Wednesday introduced a letter in support of the legislation that had been signed by several former Fed officials and conservative economists, including three Nobel laureates. Quoting Ms. Yellen's earlier remarks, he cautioned, ''When you use such apocalyptic and hyperbolic language, you might consider whether this undercuts your credibility as Fed chair.''

Members of both parties also criticized a new tool the Fed is using to raise its benchmark rate. It is paying large banks billions of dollars not to make loans at rates below the benchmark. Congress created the power in 2006 without any objections, but banks are less popular now.

The Fed paid banks $6.9 billion in interest in 2015, and the payments will increase as it raises the benchmark rate, prompting Ms. Waters to warn, ''We're about to have some bipartisan concern on this issue.''

Ms. Yellen also struggled to answer questions about a growing trend among central banks around the world, which are experimenting with negative interest rates because they have exhausted their traditional tools for stimulating growth.

Asked whether the Fed could impose such a policy, Ms. Yellen said she was not aware of any obstacles, but she cautioned that the Fed had not carefully explored the issues.

Pressed repeatedly, she finally conceded, ''It is something we will look at, we should look at, not because we think there is any reason to use it, but to know what potentially would be available.''

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Re: Relevant Headlines/Articles

Post by Seitaro Ishihama on Thu Feb 11, 2016 3:58 pm

the wall street journal
Yields Fall After Negative-Rate Talk
11 February 2016
https //drive google com/drive/folders/0B8D0RZcTDXTEZlN5MVVuZWJFNUU

Federal Reserve Chairwoman Janet Yellen waded into fraught territory before Congress, suggesting the central bank could turn to negative interest rates in an economic downturn despite legal and other uncertainties.
Her comments Wednesday came as concerns about unsettled markets and weak global growth pushed
benchmark U.S. Treasury rates to a one-year low. The yield on the 10-year note fell to 1.706%, leaving it down more than half a percentage point so far this year.
TD
Central banks in Europe and Japan have turned to the once-radical idea of negative interest rates to spur their moribund economies. The idea that their U.S. counterpart might follow suit is unlikely but not impossible. The Fed raised interest rates in December for the first time in a decade and is weighing whether to raise them further. Ms. Yellen in her testimony said it was unlikely the central bank would need to cut rates soon, much less go negative.
When questioned about the possibility, however, she said it could be done if necessary.
"I'm not aware of anything that would prevent us from doing it," Ms. Yellen said.
That the question even comes up is a sign of the bind central banks find themselves in seven years after the financial crisis. Growth remains weak, and investors have retreated from risky assets this year, putting pressure on monetary-policy makers to find more aggressive ways to stimulate demand.
The Bank of Japan adopted negative rates in January, following the example of the European Central
Bank and policy makers elsewhere in Europe. Countries representing more than a fifth of global economic
output now are experimenting with negative rates.
Fed officials are taking the idea seriously after watching the efforts overseas. Negative rates are "working more than I could say I expected" only a few years ago, Fed Vice Chairman Stanley Fischer said this month. The Fed said in recent materials related to its annual bank "stress tests" that big financial institutions need to model how they would perform under negative borrowing costs.

The prospect would face a number of challenges. A central impediment is the law authorizing the Fed to pay interest to banks on reserves they deposit with the central bank. The Fed now is paying 0.5%, a rate it moved up from 0.25% in December in hopes the economy and job market would keep improving.

The 2006 law granting the Fed that authority says depository institutions "may receive earnings to be paid by the Federal Reserve." That language -- "to be paid" -- might prevent the Fed from charging interest on deposits without new legislation from Congress. The Fed looked at the legality of negative interest rates in 2010 but didn't reach firm conclusions, Ms. Yellen said Wednesday.

The Fed faces more practical barriers, too. Fed computer systems for calculating interest on reserves don't allow for negative rates, though they could be modified, according to an internal Fed memo from 2010 that was authorized for public release late last month. Negative rates also could pinch bank profits and the $2.7 trillion money-market fund industry that households and corporations rely on as a place to keep money readily accessible.

"We would need to see recession-like conditions before the Fed seriously considered this option," Michael Feroli, an economist with J.P. Morgan Chase, said in a recent note to clients.
Meanwhile, the yield on the 10-year U.S. government note fell after an auction of government debt
Wednesday drew strong demand from investors at home and abroad. Investors accepted a 1.73% yield on new 10-year Treasury notes, the lowest auctioned yield on that maturity since 2012.

Those results reflect investors' struggle to obtain assets that offer a good mix of safety and income.
Thanks to negative rates elsewhere around the globe, U.S. Treasury bonds offer some of the highest
yields in the developed world.

"U.S. yields are still much higher than many other peers, creating demand," said Mary Ann Hurley, vice president of trading at D.A. Davidson & Co.

Should the economy sink, some economists say the Fed will have no choice but to find a way around the impediments to engineering negative rates.

In almost any likely recession scenario, the Fed won't have been able to raise rates high enough to then lower them enough to provide real economic lift, said Scott Sumner, an economics professor with George Mason University's Mercatus research center. So to get there, the Fed will have to go under zero with its short-term rate target, he said. "When we next go into recession, we'll go negative," he said.


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Re: Relevant Headlines/Articles

Post by Seitaro Ishihama on Thu Feb 11, 2016 4:03 pm

the wall street journal
don't blame the fed's interest rate baby step
11 feburary 2016
https //drive google com/drive/folders/0B8D0RZcTDXTEZlN5MVVuZWJFNUU

The market turmoil of 2016 continues, with financial stocks getting hammered this week and markets still testing high-yield bonds and technology darlings. Some blame the Federal Reserve's decision in
December to inch the federal-funds rate up by a quarter of a percentage point. But that's not the cause.

Stock prices had been gaining faster than corporate earnings for years, earnings peaked in 2014 and GDP growth slowed to 1.8% in 2015 from about 2.5% in 2013 and 2014.

In her testimony on Wednesday, Fed Chair Janet Yellen noted that limited access to credit for some
borrowers is one factor weighing on growth. Yet the Fed isn't taking steps to increase the overall money supply enough to reach the community banks, small businesses and startups needed to create faster growth. The result has been falling prices for many goods, services and assets.

The solution is for the Fed to reduce its bank debt, which is crowding out commercial loans. The Fed's
bank liabilities take up 16% of the assets of the U.S. banking system, way too much for a healthy
economy.

The current system perpetuates deflation and dollar strength: Washington regulators micromanage
leverage and liquidity in the banking system while the Fed borrows from banks to drive bond yields lower.The result has been very low yields for bond issuers but a shortage and misallocation of credit. In the past five years, total U.S. credit grew only 20%, compared with at least a 40% increase in most previous expansions.

To make matters worse, 80% of the increase in credit went to government and corporate bonds, leaving only 20% for the rest of the economy and only a fraction of that to the small and new businesses that are so critical for growth.

In other words, the Fed is relying almost entirely on liabilities to the banking system to maintain its enlarged bond portfolio, in effect paying banks not to lend to the businesses that create jobs and real economic growth.

What can be done? A good first step would be for the Fed to lower the 0.5% interest rate it is paying for its $2.4 trillion in bank loans, shifting to other, cheaper funding sources. Loans from money-market funds are available to the Fed at 0.25%, so shifting away from bank debt would improve the fiscal deficit by lowering the Fed's interest expense.

The stimulus will come when the Fed reduces its bank debt and releases cash to the banking system.
Each bank will react differently, but many of their activities will add to growth. As their cash balances
increase, banks will make more small-business loans and unfreeze the interbank market so that banks lend to each other to meet loan demand.

To continue the normalization process, the Fed should also gradually taper its reinvestment policy as it did with its bond buying, and shorten the maturity of its bondholdings. The Fed's maturity mismatch -- borrow short, lend long -- is expected to get worse in 2016-17 due to the Fed's insistence on 100% reinvestment into long-term bonds as its bondholdings mature. It still maintains the view that superlow bond yields are stimulative, not recognizing the damage to savers, investors and the safety of the financial system.

In her testimony, Ms. Yellen said that a reduction in the Fed's assets would harm growth, but that's not taking enough account of the simultaneous reduction in the Fed's bank debt and the corresponding
increase in the banking system's lendable cash.

Adding to the problem, the Treasury Department announced last week that it would reduce its bond
issuance and rely more on short-term funding for the growing fiscal deficit. The result is that small and new businesses will have to compete even harder with the Fed and Treasury in short-term credit markets.

Yet rather than address the real problem -- excessive Fed bank debt and slow credit growth biased toward bonds -- the Fed is being pressured to reverse its recent rate increase, buy more bonds and even follow the European Central Bank and the Bank of Japan's lead and push interest rates into negative territory.That would please government bondholders but make the stagnation worse.

Japanese equities have plunged for over a week after the BOJ's Jan. 29 announcement that it was
implementing negative rates, and a dozen top Japanese money-market funds said they would stop
accepting deposits, throwing savers onto the already bloated banking system. Some had hoped the
negative rates would weaken the yen, but markets reached a different conclusion -- since no new money or credit is created, the negative rates cause deflation, not inflation, leaving the yen stronger than before.

A better course for the Fed is to reduce its bank debt, reduce its bondholdings, shorten their average
maturity, and encourage Treasury to reduce its short-term debt, creating more space for banks to make loans to businesses that innovate, grow and add jobs.


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Re: Relevant Headlines/Articles

Post by Seitaro Ishihama on Thu Feb 11, 2016 4:15 pm

Based on CME Group 30-Day Fed Fund futures prices, which have long been used to express the market’s views on the likelihood of changes in U.S. monetary policy, the CME Group fedwatch tool allows market participants to view the probability of an upcoming fed hike.
http //www cmegroup com/trading/interest-rates/countdown-to-fomc html

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Post by Seitaro Ishihama on Thu Feb 11, 2016 4:44 pm

http //money cnn com/2016/02/11/news/economy/negative-interest-rates-janet-yellen/
Janet Yellen: Negative rates possible in U.S.

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Post by Seitaro Ishihama on Thu Feb 11, 2016 5:05 pm

http //abcnews go com/Business/wireStory/yellen-early-determine-impact-global-developments-36861550
ABC news
Yellen: Too Early to Determine Impact of Global Developments
feb 11 2016
Federal Reserve Chair Janet Yellen cautioned Thursday that global economic pressures pose risks to the U.S. economy but said it's too soon to know whether those risks are severe enough to alter the Fed's interest-rate policies.

Yellen said the Fed will determine at its next meeting in March how much economic weakness and falling markets around the world have hamstrung U.S. growth. And for a second day, Yellen was asked about the possibility that the Fed would use negative interest rates as a way to give the economy more support.

She repeated that the Fed had studied the prospect of deploying negative rates in 2010 but had decided then not to use them to try to boost the economy. But she said the Fed thought it should study the issue again now that other central banks, including in Europe and Japan, are using negative rates to try to step up lending and energize growth.

"In light of the experience of European countries and others that have gone to negative rates," Yellen said, "we are taking a look at them again because we would want to be prepared in the event we needed" to nudge rates below zero to try to fuel borrowing and spending.

Yellen stressed that any Fed decision to employ negative rates in the United States was not imminent. She said that while the financial landscape has darkened since the Fed's December rate increase, reversing course from gradually raising rates to cutting rates is "not what I consider the most likely scenario."

The Fed chair acknowledged that the central bank has been surprised by how much energy prices have dropped and the U.S. dollar has risen in value since mid-2014.

"We have been surprised in part by those developments, and they have played a significant role in holding down inflation," Yellen said.

The Fed has tied further rate increases to further evidence that it's moving toward achieving its goal of having inflation rise at a rate of 2 percent annually. For nearly four years, the Fed has fallen well short of that target, in part because of sinking energy prices and a stronger dollar, which lowers the cost of imported goods.

Yellen's testimony Thursday to the Senate Banking Committee followed an appearance Wednesday before the House Financial Services Committee. On both days, Yellen cautioned that global pressures could depress the economy's growth and slow the pace of Fed rate hikes.

On Thursday, Sen. Charles Schumer, D-N.Y., challenged Yellen on the pace of future rate hikes. Schumer argued that pushing ahead too quickly with more rate hikes would be a mistake given that wage growth is just now showing signs of picking up. The senator said another concern was that rate increases could further boost the dollar's value at a time when a strong dollar has been depressing the exports of American manufacturers.

"Further movement by the Fed to raise rates could snuff out the embers of wage growth," Schumer told Yellen. "I am less worried about inflation and more worried about slow wage growth."

Yellen said that in December, when the Fed raised its key rate by a quarter-point after it had remained at a record low near zero for seven years, there were signs that wages were improving.

"We expect that wages will move up at a somewhat faster pace" now that the unemployment rate has fallen significantly from levels reached during the recession.

On other issues, Yellen on Thursday:

— Said it was premature to say whether the risks of a recession have risen in light of recent economic weakness. "We have seen global economic and financial developments that may well affect the U.S. outlook," she said. "I think it is premature at this point to decide exactly what the consequences ... will be."

— Was pressed by Sen. Elizabeth Warren, D-Massachusetts, to provide assurances that the Fed will reveal whether any of the nation's largest banks provide inadequate living wills this year to banking regulators. The living wills are required by the 2010 Dodd-Frank Act. They're intended to make sure the largest banks have adequate plans that will allow them to be shut by regulators, if necessary, without destabilizing the financial system.

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Post by Seitaro Ishihama on Thu Feb 11, 2016 5:14 pm

https //www americanexpress com/us/small-business/openforum/articles/how-the-federal-reserve-sets-interest-rates/
How the Federal Reserve Sets Interest rates

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Post by Seitaro Ishihama on Fri Feb 12, 2016 10:06 am

http //www federalreserve gov/econresdata/notes/ifdp-notes/2016/predicting-fed-forecasts-20160212.html
predicting fed forecasts

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Re: Relevant Headlines/Articles

Post by Seitaro Ishihama on Fri Feb 12, 2016 10:10 am


Table 1: Keywords in the FOMC Minutes, Their Assessment, and the Corresponding FOMC Minutes Index.
Keywords Assessment FOMCMinutesIndex(percent per annum)
Strong, robust, considerable, upbeat, brisk, surge Strong growth 4.0
Normal, solid, steady Normal growth 3.4
Modest, moderate, sustainable Modest growth 2.8
Slow, gradual, subdued, muted Slow growth 2.1
Unclear, mixed Unclear 1.5
Decelerating, stabilizing, ongoing adjustment, leveling out Decelerating growth 0.9
Continued weakness, sluggish, slack, below potential Continued weakness 0.3
Declining, deteriorating Decline -0.4
Recession, contraction, sharp and widespread decline Recession -1.0

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Post by Seitaro Ishihama on Fri Feb 12, 2016 10:11 am

http //www federalreserve gov/aboutthefed/fac-20160203.pdf
RECORD OF MEETING
Federal Advisory Council and Board of Governors
Wednesday, February 3, 2016

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Post by Seitaro Ishihama on Fri Feb 12, 2016 10:14 am

Small and Medium-Size Enterprises
) Commercial Real Estate
Construction
Corporations
Agriculture
Consumers
Homes
→ search for indexes relevant to this

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Post by Seitaro Ishihama on Fri Feb 12, 2016 10:14 am

Item 6: Monetary Policy
How would the Council assess the current stance of monetary policy?
The current stance of monetary policy continues to be accommodative and can be assessed by
comparing the outlook for the economy to the Federal Reserve’s objectives.
• Employment has progressed very well over the past two years. The “headline”
unemployment rate has fallen to 5%, and the broader unemployment rate (which adjusts
for part-time workers and those marginally attached to the labor force) has dropped by
more than 7 percentage points from its peak.
• Inflation remains below the targeted level of 2%. The inflation outlook depends critically
on the performance of currency and energy markets.
o While many economic forecasts predict a return to the 2% inflation level in the
near term, this runs counter to financial markets, which view this as unlikely.
• The December increase in short-term interest rates was well justified and well received
by markets; monetary policy remains extraordinarily accommodative and well below the
3% - 3.5% neutral funds-rate range.
o However, financial conditions have deteriorated in recent months, with the
Bloomberg Financial Conditions Index falling from 0.58 in early November to
- 0.37 presently.
• Fixed-income markets currently expect the federal funds rate to rise 0.28% to reach
0.64% over the next year.
o Previous Fed guidance indicated that it expects to increase rates by 100 basis
points over the same period, highlighting a notable disconnect between the Fed and
the markets.
o Economic growth will need to accelerate and financial markets will need to
experience lower volatility to enable the Fed to raise rates materially above current
market expectations.
• Equity markets and other risk assets can adjust to a rate rise provided the pace of increase
is generally in line with market expectations.
o While the business and financial community will likely view the rate rise as
corroboration of a healthier U.S. economy, a rate rise will also be attributed to a
view that the Fed no longer believes zero interest rates are constructive.
o The risk of collateral damage from rate hikes is higher than in prior cycles due to
the extended period of low interest rates and the resulting increase in duration and
credit risk that some investors have taken.
• We believe the Fed should continue to make its policy decisions that are informed by
economic fundamentals, avoiding undue influence from short-term market volatility and
expectations. Looking forward to 2016, we believe the Fed has four main policy paths to
consider. These are shown below in order of most to least attractive, based on the current
state of the economy. As 2016 unfolds, evolving economic conditions will influence the
appropriateness of these options.
(1) Raise rates two times in 2016, in line with market consensus
• Given current conditions, we believe this is the optimal path.
18
o However, the Fed’s future decisions must be supported by data and remain in
line with prevailing economic conditions and interest rate expectations.
• To minimize the negative impact of rate increases on financial markets, we believe
the Fed should look to adjust rates modestly above the market consensus.
• It may also be beneficial during 2016 for the Fed to continue communicating its
plans for balance sheet management.
(2) Hold rates constant
• While a better alternative than the others below, the market may interpret this to
mean the U.S. economy is weaker than the data are reflecting.
(3) Follow the “Dot Chart” – Raise four times in next eight meetings
• Given the current state of the economy and uncertainty surrounding future U.S.
and global economic events, this route may prove too aggressive and have a
meaningfully negative impact on U.S. financial markets, with a negative knockon
effect to the real economy.
(4) Lower rates
• This is the least optimal of the options, as it signals a weak U.S. economy and
extends the period of near-zero rates, which may no longer be constructive.

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Re: Relevant Headlines/Articles

Post by Seitaro Ishihama on Fri Feb 12, 2016 10:22 am

summary:
・employment = progresses "well" over the past two years
→ headline employment has fallen below 5%
→ broader unemployment rate =dropped more than 7%
・inflation = remains below the targeted level of 2%
= inflation level depends critically on currency and energy markets
=While many economic forecasts predict a return to the 2% inflation level in the
near term, this runs counter to financial markets, which view this as unlikely.
・the december increase = well justified & received
→monetary policy remains extraordinarily accommodative and well below the
3% - 3.5% neutral funds-rate range
・fixed income markets = predict that the federal rates rise by 0.28%, to 0.64% this year
=Economic growth will need to accelerate and financial markets will need to
experience lower volatility to enable the Fed to raise rates materially above current
market expectations

the most expected scenario to occur would be that they are highly uncertain about global events and therefore would not try to raise the fed rates

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Post by Seitaro Ishihama on Fri Feb 12, 2016 10:23 am

(1) Raise rates two times in 2016, in line with market consensus
• Given current conditions, we believe this is the optimal path.
18
o However, the Fed’s future decisions must be supported by data and remain in
line with prevailing economic conditions and interest rate expectations.
• To minimize the negative impact of rate increases on financial markets, we believe
the Fed should look to adjust rates modestly above the market consensus.
• It may also be beneficial during 2016 for the Fed to continue communicating its
plans for balance sheet management.

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Re: Relevant Headlines/Articles

Post by Seitaro Ishihama on Fri Feb 12, 2016 10:27 am

http //www federalreserve gov/monetarypolicy/mpr_20160210_summary.htm
monetary policy report submitted to congress on feb.10 2016
→ if we get the analysis carefully, we might be able to get granular results in the future

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Re: Relevant Headlines/Articles

Post by Seitaro Ishihama on Fri Feb 12, 2016 10:30 am

In determining the timing and size of future adjustments to the target range of the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. Stronger growth or a more rapid increase in inflation than the Committee currently anticipates would likely call for faster increases in the federal funds rate; conversely, if conditions prove weaker, a lower path of the federal funds rate would likely be appropriate.

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Re: Relevant Headlines/Articles

Post by Seitaro Ishihama on Fri Feb 12, 2016 10:32 am

Fed’s monetary policy is to keep inflation under control and keep unemployment low
inflation increase = contract money supply to cut down inflation
economy losing stream and unemployment going up
= fed expands supply of money to incentivize company to invest and consumers to spend
how does it manipulate interest rates?

target federal funds rate :

regulation of banks
in order to let banks maintain a safe margin on lending activities,
requires a certain amount of capital in a deposit -federal funds
varies based on the assets outstanding (loans) and liabilities

As a result, on any given day some banks may have excess capital on deposit at the Fed, and other banks may fall a little short. The Fed permits banks that have excess reserves on deposit to loan them to other banks that are falling short through “overnight” loans.

the fed doesn’t set a specific fund rate
the fund let their opinion be known by setting a target rate, which is 0-0.25%
if it fails to be within the range, they do an open market operations, to bring their lines on target

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Re: Relevant Headlines/Articles

Post by Seitaro Ishihama on Fri Feb 12, 2016 10:37 am

http //www cmegroup com/trading/interest-rates/countdown-to-fomc.html
base rate futures

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Re: Relevant Headlines/Articles

Post by BobbyFrancis on Wed Feb 17, 2016 2:38 pm

Fed Officials Saw Increasingly Uncertain Outlook in January

www wsj com/articles/fed-officials-in-january-saw-increased-uncertainty-for-economic-outlook-1455735891

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Re: Relevant Headlines/Articles

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