Thursday, 23 November, 2017

The US economy maybe slowing down

Laurie Berry | 12 May, 2017, 10:43

Fed policymakers have longed warned that low or near-zero interest rates would limit the central bank's tools to handle a financial crisis.

The Fed increased its interest rate in March and December by 25 basis points each time.

Slow economic growth during the first quarter is likely to prove "transitory" and with gradual adjustments in the stance of monetary policy inflation will stabilise around 2.0% over the medium-term, they added.

The rand has had a rough ride since at least March when it was hovering around R12.31/$ before weakening to R13.95/$ as a result of the domestic politics, which for now appear to have taken a backseat. The market interpreted the FOMC statement as being marginally hawkish, with the probability of a June hike now increasing.

US consumer spending was unchanged in March for a second straight month while a measure of inflation fell for the first time in more than a year, but some economists see the weakness as only temporary.

The economy had been a mixed bag, leading up to the Fed meeting. Accordingly, the United States central bank is not yet expected to raise interest rates by the close of the meeting, on Wednesday. About its balance sheet, the Fed only noted that it was maintaining it strategy of balance sheet reinvestment. It is discussing how to begin shrinking its US$4.5 trillion (RM19.46 trillion) in holdings, and officials have said they hope to release a plan this year. They may start unwinding by the end of 2017, though that hinges on economic conditions.

Stocks Trending Alert Range Resources Corp. (NYSE:RRC), CBS Corporation (NYSE
The High Revenue estimate is predicted as 588.2 Million, while the Low Revenue Estimate prediction stands at 500.39 Million. Last time, the company shocked Wall Street by reporting EPS of $0.25, smashing the consensus of $0.19 per share.

A string of higher inflation readings was also broken in March, a sign the economy had cooled off. What's worse is that excluding food and energy prices, core inflation (PCI) has dropped to 1,6%, that is its lowest level since 2001.

The core PCE is the Fed's preferred inflation measure and is below the central bank's 2 per cent target.

The Fed statement said while household spending has risen only modestly "the fundamentals underpinning the continued growth of consumption remained solid".

Asian stocks followed global indexes higher on Wednesday, as strong earnings and manufacturing data boosted risk appetite, while expectations that the Federal Reserve will signal a June rate increase later in the session lifted the dollar. Fed Chair Janet Yellen did not have a press conference after this meeting. The Fed is in its first tightening cycle in more than a decade. April's figures are due tomorrow from the Labour Department.

The Fed statement "makes the Friday non-farm payrolls report I think more important, because if that is disappointing then the Fed is going to backpedal", said Axel Merk, president and chief investment officer of Palo Alto, California-based Merk Investments.

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