Tuesday, October 19

Dovish Federal Reserve raises markets ahead of Bank of England decision Business


Good morning and welcome to our continued coverage of the world economy, financial markets, the eurozone and business.

After a dovish performance from the US Federal Reserve last night, investors are looking forward to hearing views from the Bank of England on the state of the UK economy.

The Bank’s Monetary Policy Committee is not expected to change interest rates or its stimulus program at today’s meeting. However, it could express a more optimistic view on the UK economy, given the vaccine launch schedule, the latest extension of the licensing plan and a smaller-than-expected drop in GDP in January.

Jim Reid, German bank strategist, says the Bank of England is expected to “walk a tightrope between talking about the recovery and avoiding an overly aggressive message that would see an unjustified tightening of financial conditions.”

Naeem Aslam, chief market analyst at Avatrade, identifies three objectives for the bank:


First, the bank must make it clear that there will be no need for negative interests and market players must eradicate those expectations.

Second, the bank will have to accept the remarkable progress on the vaccine front and how that has improved economic health.

Finally, the governor is also likely to show his appreciation in terms of the support from the fiscal side and its influence on the economic recovery.

The Fed delivered a reassuring message to the markets last night. It raised its forecast for US growth in 2021 to 6.5% (from 4.2%) and lowered its unemployment projections, while dampening rumors that it might slow down its stimulus program soon.

Most policy makers still expect US interest rates to remain on hold beyond 2023, despite hopes for a quick recovery this year thanks to the launch of vaccines and spending. fiscal.

Fed Chairman Jerome Powell He insisted that the US economy had not yet made the substantial progress on inflation and unemployment that lawmakers seek. With a smile, he rejected the suggestion that it was time to start “talking talk about” tapering off.

Basically, the Fed wants to see an improvement in the data, not just forecast it. As Powell said:


“When we see real data coming in that suggests we are on track to make perhaps additional substantial progress, then we will say so.

And we’ll say that long before any decision to actually downsize. ”

CNBC
(@CNBC)

Now is not the time to talk about the reduction, says Fed Chairman Jerome Powell. “When we see that we are on track to make additional substantial progress, we will say so well in advance of any decision to actually downsize.” https://t.co/wkAsg7UITW pic.twitter.com/JBzrI4wltF


March 17, 2021

Powell predicted some supply chain disruptions and a rise in prices this year as the American economy reopened and people returned to restaurants and theaters. But he rejected the idea that increasing employment would be inflationary.

Wall Street got the message, sending the Dow Jones industrial average and S&P 500 to record highs last night.

Holger Zschaepitz
(@Schuldensuehner)

Wall Street rallied after the Fed’s Powell eased concerns about a preventive tightening. Dow was up 0.6% and closed> 33,000 for the first time. pic.twitter.com/lXGm7eTEqu


March 17, 2021

Yields on US Treasuries fell somewhat, having reached 13-month highs before the Fed’s decision, as concerns about inflation faded.

The agenda

  • 8 a. M. GMT: The President of the ECB, Christine Lagarde, appears before the Committee on Economic and Monetary Affairs of the European Parliament (ECON).
  • 10 a. M. GMT; Eurozone trade balance
  • Noon: Bank of England decision on UK interest rates
  • 12.30pm GMT: Weekly Unemployment Figures in the US




www.theguardian.com

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