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Category — Interest Rates
FOMC Outlook for 2007
Will the FOMC keep a neutral outlook on the interest rate, or raise it once again?
In Chairman Ben Bernanke’s semiannual monetary policy report on February 15 he outlined several reasons for the FED not to increase or to decrease the interest rate in the near-term. First, the U.S. economy is showing potential for consistent expansion at a moderate pace over the next year, with growth strengthening, imports increasing, and the housing market becoming less of a burden. Second, the core inflationary pressures are showing signs of decreasing. The primary reason for the decline was the drop in the price of crude oil toward the end of last year, which has led to lower prices for fuel at the pump, inputs for producers, and – thus – final products that you buy at the store. Therefore, since the economic growth is continuing at a moderate pace and inflation abating, the need to increase interest rates does not appear to be there.
Now, whether or not this will hold true will be determined by the data published on key economic variables over the next several months. Based on that data, if we can see steady economic growth and a gradual increase in the core prices paid on goods and services, then the FED should be poised for one more interest hike. The sectors – and corresponding indicators – that we will want to follow are listed below.
Housing Sector: New Home Sales, Existing Home Sales, Rent Increase
Consumer Spending: Personal Consumption Expenditures (PCE)
Economic Growth: Real Gross Domestic Product
Inflation: Labor Compensation, Crude Oil Prices, and PCE
February 22, 2007 No Comments
Bank of Japan Holding Rates
As mentioned last week, the GBP/JPY did in fact make the 100 pip gain. Not only that, but this week it will close where no week has closed since late 1992, passing the highest weekly close of 1998. This is greatly due to the surprise move of the Bank of Japan to keep interest rates at .25%. Three out of nine votes however were to raise rates, where the decisions in the last six months were all unanimous.
January 19, 2007 No Comments
Turkey Likely To Keep Rates High
November inflation data was published yesterday above expectations. Although lowering from above 11% earlier this year, CPI came in at 9.9% YoY. PPI came in at 12.7%. The most likely response from the central bank will be to not lower the rates anytime soon.
December 5, 2006 No Comments
Aussie Clobbering Euro
Over the past twenty days the Australian Dollar has advanced approximately 600 pips against the euro. The market is expecting Reserve Bank of Australia Governor Glenn Stevens to raise rates above 6% compared to the the euro at 3.25%. Inflation has been higher than the 2-3% Mr. Stevens wants. Rises in commodity prices have also helped Australia as they export a great deal of metal and other raw materials.
October 23, 2006 No Comments
Kiwi hike again??
One of the highest yielding currencies may hike rates yet again. Over the the past thirty days the New Zealand Dollar has gained a whopping 500 pips against the Japanese Yen with speculation the new interest rate spread will be 7.25% ( Current yeilds: Yen .25% – NZD 7.25% with expectations to rise to 7.5%)
October 18, 2006 1 Comment
High Demand for High Yield
High yielding currencies show strength over the last few weeks as all make significant gains against their lower yielding counterparts.
South African Rand – 8% – See graphic below
Hungarian Forint – 7.5% – See graphic below
New Zealand Dollar – 7.25% – Chart
Australian Dollar- 6% – Chart
United States Dollar – 5.25% – Chart
Swiss Franc – 1.75% – Chart
Japanese Yen – 0.25% – Chart
The Hungarian Forint shows strength over the past couple weeks. The chart to the left shows it against the much lower yielding Swiss Franc. The y-axis shows the number of forints one franc buys.
Here you see a longer term chart of the South African Rand versus the Japanese Yen. The recent strength shows the one of the highest yielding currencies against the lowest.
October 16, 2006 No Comments
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