Is the road to inflation taking us back to the 1960s?

The 1960s are remembered for radical social reform, political upheaval and war. Often forgotten is that they were also a time of rising inflation – and in this they may hold disquieting lessons for us today.   One of our key calls for 2018 is that consumer price inflation in the US will become an … Continue reading “Is the road to inflation taking us back to the 1960s?”

New Fed chair Powell raises rates, growth and inflation forecasts

As expected the Federal Reserve (Fed) raised interest rates by 25 basis points at the March Federal Open Market Committee (FOMC) meeting. The move increases the target range for the federal funds rate from 1.25%-1.5% to 1.5-1.75%. At his first FOMC meeting, new Fed chair Jerome Powell also announced that the committee is pushing up … Continue reading “New Fed chair Powell raises rates, growth and inflation forecasts”

After the melt up

In January we saw shares rising rapidly, in what some called a melt up. In the last few days they have come back down again very quickly. The year’s gains were rapidly erased. Should we worry? Last week before the fall I wrote that “There will be bad times from time to time. Worrying about … Continue reading “After the melt up”

One year of Trump

January 20th marked Donald Trump’s one-year anniversary as US President.  So far, his tenure has proved controversial and divisive, both domestically and abroad. His attempts to take credit for the performance of the US economy and equity market should be taken with a pinch of salt, particularly given the considerable momentum carried over from his … Continue reading “One year of Trump”

Fed raises US rates once again

The US Federal Reserve (Fed) raised its key interest rate by 0.25 percentage points at its December meeting. It is one of Janet Yellen’s final major acts as head of the US central bank.  The Fed left its rate outlook for the coming years unchanged from its projections in September.  This is the fifth increase … Continue reading “Fed raises US rates once again”

Jay Powell nominated as next Fed Chair

President Trump has nominated Jay Powell as the next Chair of the US Federal Reserve. This was largely expected, despite Trump’s hosting of a somewhat convoluted selection process (involving a promotional video), which saw numerous candidates briefly take the role of favourite. The official changing of the guard occurs at the start of February next … Continue reading “Jay Powell nominated as next Fed Chair”

Financial Crisis Ten Years On

Ten years ago, queues quietly began forming outside branches of Northern Rock. Unsettled by press reports that the bank was asking for help from the Bank of England, anxious customers wanted out. The first run on a UK bank for over a century was underway, and Northern Rock would be nationalised within a year. In … Continue reading “Financial Crisis Ten Years On”

Brexit, North Korea and Hurricane Harvey

August is the holiday month and with many key decision makers, in particular, the politicians, away from their desks, it’s normal for things to be a little quieter. Theresa May, for example, took a three-week break for some walking in the Swiss Alps, presumably with the ‘Sound of Music’ on her iPod and ‘Climb Every … Continue reading “Brexit, North Korea and Hurricane Harvey”

The US Fed must learn from mistakes of the crisis

A decade is a long time in central banking. Ten years ago Ben Bernanke used his speech at the Jackson Hole symposium for central bankers to explain the tumult that was rippling through financial markets at the time. He explained that while there were problems in the US housing market, the global financial system was … Continue reading “The US Fed must learn from mistakes of the crisis”

Fed leaves rates on hold and balance sheet reduction is coming soon

No surprises from the US Federal Reserve (Fed) with interest rates being left unchanged at the meeting last Wednesday. The statement contained some tweaks in wording with job gains now upgraded to “solid” and inflation is noted as “running below 2%”. Meanwhile, balance sheet reduction (the unwinding of quantitative easing) is now expected to take … Continue reading “Fed leaves rates on hold and balance sheet reduction is coming soon”

Central banks spark confusion

Investors were clearly rattled by the mixed messages emanating from central banks in June, which sparked a sell-off in government bonds. The Federal Reserve at least has been fairly clear about its direction of travel. It has struck a more hawkish rhetoric recently, as policy makers become increasingly confident on the outlook for the US … Continue reading “Central banks spark confusion”

Fed policy: it’s conditional

Remarkably few economic decisions depend directly on the interest rate set by the US Federal Reserve (the Fed). Yet with this tool, the central bank is able to exert vast power over the US economy and to steer it towards the Fed’s dual mandate of full employment and 2% inflation. The key to understanding how … Continue reading “Fed policy: it’s conditional”

Increasingly hawkish language from the Federal Reserve

Although US economic growth proved somewhat disappointing during the final quarter of 2016, Fed policymakers appear ready to increase interest rates as soon as it becomes appropriate; indeed, Fed Chair Janet Yellen warned that an unnecessary delay in tightening could prove “unwise”.  Meanwhile, European investors faced fresh uncertainties surrounding Greece’s financial bailout. Leading equity markets … Continue reading “Increasingly hawkish language from the Federal Reserve”

Foreign exchange: a major contributor to portfolio returns

In recent years, subdued global inflation and weak growth have allowed the world’s major central banks to keep monetary policy at extremely accommodative levels. However, this may be changing, as global growth and inflation forecasts have risen amid a shift towards fiscal stimulus in a number of developed economies. With the Federal Reserve (Fed) simultaneously … Continue reading “Foreign exchange: a major contributor to portfolio returns”

US Presidential election takes centre stage

The imminent Presidential election continued to absorb much of the limelight in the US. On balance, investors appear to believe that Hillary Clinton will emerge victorious, although the House of Representatives is expected to remain in Republican hands, albeit with a lower majority. Nevertheless, in a close-run – and often bad-tempered – election campaign, investors … Continue reading “US Presidential election takes centre stage”