The results of the meeting of the Federal reserve system has brought a number of surprises, hence the violent reaction of the markets. However, reacted positively not only risky assets.
The fed not only lowered the forecasts on growth rates, but also interest rate that was expected. Another question that the decline was stronger than expected experts. Moreover, even the debt market, which initially did not believe in past projections of Federal reserve, and he did not put in pictures of such a decision of the regulator.
Now this is how market participants estimate the probability of raising rates this year:
Even at the end of the year the rate hike is only 74%, although up to this point, the market was almost sure.
In General, it is worth noting that the fed has once again undermined its own credibility and gave the market to understand that the forecasts of the regulator absolutely nothing. Incidentally, talking of even the largest market participants, including PIMCO and BlackRock.
Has appreciated by almost all currencies, especially the currencies of developing countries. However, it was observed in the gold, which usually is in demand as a defensive asset. Moreover, the gold became the main beneficiary of the “pigeon” rhetoric of the fed. On the chart immediately formed a green candle 2.5%.
It can only speak about what investors look into the future with little optimism. For them it is obvious that the situation both in the world and in the American economy is very, very complicated, and many even speak of the impasse of the current model, but the new one does not already exist, and for a complete reboot of the current system need a very serious disasters.
In addition, changing the usual model of the world economy implies a change of the leader, i.e. the United States, and to lose the world domination hardly anyone wants.
If we talk about more mundane things, it is worth mentioning negative interest rates, which can be observed already in many countries. This is a brand new phenomenon in the world economy. This has never happened and, with a realistic attitude, many experts conclude that nothing good will come of it. Exactly the same as comes out from the super soft monetary policy of the largest Central banks of the world. While about any concrete benefits from it.
Just look at the fresh macroeconomic statistics from the USA. Yes, indeed, applications for unemployment benefits are at the lowest level in 42 years, however, that these figures are hiding?
Labour force participation in recent times has grown a little bit, but it is a statistical error, because in reality the figure is low for many, many years.
And most importantly – the growth rate of real wages. Now they are at the lowest level since August 2014, but most importantly, that huge cash infusion clearly has not had any effect on them.
The text of the fed statement
In the published text accompanying statements of Federal open market Committee (FOMC) the fed is growing worse downside risks in the global economy in recent months:
“Information received since the last meeting of the Federal open market Committee in January, shows the continuation of the development of economic activity at a moderate pace, despite trends in the global economy and financial markets in recent months.
In the Committee’s view, trends in the global economy and financial markets will continue to present certain risks. It is expected that in the short term, inflation will remain low, partly due to the past decline in energy prices. In the medium term, the temporary impact of reduced energy prices and import prices will come to naught, and the situation on the labour market continue to improve.”