Entries filed under 'Federal Reserve'

    The Fed: "Patient" Dies, Investors' Risk Appetite Lives On

    March 27, 2015 12:50 PM by Timothy Paulson

    What’s behind the surprising market reaction to the central bank’s March 18th policy statement?

    Financial markets recently were hanging on a single word from the U.S. Federal Reserve. Investors were eager to hear whether the Fed’s policy-setting arm, the Federal Open Market Committee (FOMC), would remove the word “patient”—used since December 2014 to describe the central bank’s stance toward maintaining its current zero interest-rate policy–from the statement issued at the conclusion of its two-day policy meeting on March 18, 2015. The central bank did indeed drop the word “patient” from the post-meeting communique, moving the Fed one step closer to “liftoff”—that is, the first in a potential series of interest-rate hikes.

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    The Fed: Don't Weird Out Over Normalization

    March 11, 2015 2:53 PM by Timothy Paulson

    Investors have been spooked by the prospect that the central bank will start raising interest rates. Here’s why they should stop worrying.

    The February U.S. employment report, released on March 6, continued a year-long string of monthly job growth in excess of 200,000. The fixed-income and equity markets both sold off dramatically in its aftermath, apparently fearing accelerated timing of interest-rate hikes from the U.S. Federal Reserve (Fed) in response to a strengthening labor market.

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    Central Banks: March Madness Ahead?

    March 4, 2015 4:08 PM by Zane Brown

    The differing policy paths of the U.S. Federal Reserve and the European Central Bank could have significant effects on fixed-income markets this month.

    We have explored divergence as a dominant theme for 2015 because investment opportunities may be driven by differences in economic growth rates, currency valuations, and monetary policies among nations. And this March may mark the inflection point for monetary policy divergence as the European Central Bank (ECB) begins quantitative easing (QE) and the U.S. Federal Reserve considers further refining the language it employs to signal its policy stance. Some observers believe the Fed will delete the word “patient” from its guidance as it prepares to normalize interest rates later this year. Policymakers had used the term in previous statements to describe the Fed’s approach to the timing of a potential interest-rate hike. 

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    The Fed's Waiting Game

    January 28, 2015 5:03 PM by Zane Brown

    The central bank acknowledged a strengthening U.S. economy in its policy statement on January 28, but reiterated that it will "be patient" in making policy moves. 

    Expectations that the U.S. Federal Reserve would change its language regarding the timing and amount of potential interest-rate hikes at its first policy meeting of 2015 were almost nonexistent. And with the statement released at the conclusion of its two-day policy meeting on January 28, 2015, the Fed did not disappoint. 

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    The Fed: Just a Little Patience

    December 17, 2014 4:20 PM by Zane Brown

    Though the central bank altered the language about the timing of future policy moves in its December 17 policy statement, its projections still suggest a mid-2015 hike in interest rates. 

    The Federal Reserve executed a neat bit of linguistic jiu-jitsu in the statement released at the conclusion of its two-day policy meeting on December 17, 2014. The Fed’s policy-setting arm, the Federal Open Market Committee (FOMC), replaced the hedged language of “a considerable time” regarding how long the Fed would maintain its zero-interest rate policy, saying instead that it could be “patient” before making any changes. The FOMC essentially defined “patience” as a “considerable time,” but the change still suggests to many investors that the first interest-rate hike will begin in about six months. 

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