Fed Fears Slow Growth, Has Few Tools Left

Fed Fears Slow Growth, Has Few Tools Left

$DIA, $SPY, $QQQ, $VXX

US Fed’s FOMC policymakers debated last month about whether an interest rate hike would be needed in April though a consensus emerged that risks from a global economic slowdown warranted a cautious approach.

“Many participants expressed a view that the global economic and financial situation still posed appreciable downside risks,” according to the minutes from the Fed’s 15-16 March policy meeting released Wednesday.

Policymakers had signaled at the close of that meeting that they expected to raise rates 2X in Y 2016 but the timing of the hikes appear flexible and undetermined.

According to the minutes, several FOMC members said elevated risks faced by the US economy meant that raising rates in April “would signal a sense of urgency they did not think appropriate.”

“In contrast, some other participants indicated that an increase in the target range at the Committee’s next meeting might well be warranted,” the minutes stated.

“Participants generally saw global economic and financial developments as continuing to pose risks to the outlook for economic activity and the labor market in the United States,” according to the minutes.

Fed boss lady, Janet Yellen,  said on 29 March the central bank should “proceed cautiously” in raising rates, a view Fed Governor Lael Brainard pushed late last year which has been recently embraced by policymakers including St. Louis Fed President James Bullard, who had previously warned the Fed might hike too slowly.

The Fed left its target interest rate for overnight lending between banks at between 0.25 and 0.5% in March and in January after December’s hike which ended 7 years of Zero+ rates.

A inflation index closely followed by the Fed has begun to rebound, although policymakers were divided in March over whether the increase would prove lasting.

The Hawks and Doves struggled…

“Some participants saw the increase as consistent with a firming trend in inflation. Some others, however, expressed the view that the increase was unlikely to be sustained,” according to the minutes.

Wednesday the major US stock market indexes finished at: DJIA +112.73 at 17716.05, NAS Comp +76.78 at 4920.71, S&P 500 +21.49 at 2066.66

Volume: Trade was moderate with about 845-M/shares exchanged on the NYSE

• Russell 2000 -2.4% YTD
• NAS Comp -1.7% YTD
• S&P 500 +1.1% YTD
• DJIA +1.7% YTD

Stay tuned…

HeffX-LTN

Paul Ebeling

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