Tag: Inflation target at 2%

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Global Market – Whether U.S. Fed will manage “Soft Landing”?

Global Market – Whether US Fed will manage to get “Soft Landing”?

This week we will discuss that whether US fed will manage to get “Soft Landing” of economy.  Here by we mean by “Soft Landing” is that inflation gets under control without any major downturn in economy.  U.S. economic data released so far in the month of August 2023 indicates mix view.

U.S. economic data from 1-Aug-23 to 11-Aug-23

Jobs data released in the month of August 2023 indicate stable number with no major surprises, neither positive nor negative.  U.S. Inflation data released on 10-Aug-23 came at 3.20% Vs estimate of 3.30%.  PPI & Core PPI data released on 11-Aug-23 came above estimate. 

What is “Soft Landing” of economy?

“Soft Landing” of economy here means that inflation comes under control without any major economic shock or recession.  U.S. Fed ‘s objective is to keep inflation target at 2% for long term and optimum employment, which usually can be referred to as stable economy with steady growth.

Equichain Wealth Advisors: Market View & Opinion

Current economic data from U.S. indicates mix picture and we see this as long-term positive development for U.S. economic and global stability.  We also expect some softness in economic activity and expect market to correction in next 1 – 2 months.

Looking at the data mentioned in table above, we believe this set of data does indicate moderation in economic activity at slow pace, which we assume as high probability of “Soft Landing”.   

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Global Market – Whether US Fed will manage to get “Soft Landing”?.pdf
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Global Market – U.S. inflation softening & U.S. Fed preparing for another rate hike

Global Market – Inflation softening & U.S. Fed preparing for another rate hike

This week we will discuss softening of inflation to below 4%, lowest level since April 2021.  US Fed is behind the curve in this cycle.  US CPI & Core CPI data do indicate softening, so now the focus will shift to US Fed meeting on 26-Jul-23.  

US CPI & PPI data – indicate softening

After strong jobs data in first week of July and US FOMC meeting minutes, market is now factoring in 25-bps rate hike on 26-Jul-23.  But CPI & Core CPI data released this week could trigger one more pause before US Fed could review its decision.

Equichain Wealth Advisors: Market View & Opinion

US Fed has long term inflation target of 2% and latest data released is still above U.S. Fed’s long term inflation target.   Current US interest rate is at 5.00% – 5.25%.  In year 2006 – 07, interest rate in US was at 5.25% and sustain at that level for 14-months before we have seen sub-prime crisis.

We believe, economic slowdown and inflation cooling has direct co-relation.  Corporate earnings may get impacted with leg effect as interest rate hike takes some time to show its impact on bottom of pyramid.

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Global Market – U.S. inflation softening & US Fed preparing another rate hike.pdf
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Global Market – U.S. Fed focus to shift to inflation on strong jobs data

Global Market – US Fed – focus shift to inflation on strong jobs data

This week we will discuss another part of the world where high inflation is problem will be back in focus as US Fed meeting on 26-Jul-23.  Last week, we have discussed that China’s PBOC is reducing policy rates and support growth and providing stimulus package.  

US Fed to hike to highest level seen in year 2000

US Fed current policy rates is 5.00% – 5.25%.  If US Fed increase policy rates by 25-bps on 26-Jul-23 to 5.25% – 5.50% – it will be highest policy rates in 21st Century near to rates seen in the year 2000.  Back in 2006 – 2007 policy rates in U.S. were at 5.25% before market has seen sub-prime crisis followed by recession.

US FOMC meeting minutes for June 2023 policy

Almost all members agreed for more rate hike needed and guided for at least 1 – 2 more rate hike in 2023.  Powell said at a conference in Madrid hosted by the Bank of Spain last week. “Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go.”  

Equichain Wealth Advisors: Market View & Opinion

We believe, it is time keep balance approach as globally risk-on sentiment is high despite fear of further rate hike by U.S. Fed.  We do believe that such high interest rate in U.S. could have global impact and market has not fully factored in steepest rate hike by US Fed in last 15 – 16 months.

Click on the attachment to read the full report:
Global Market – U.S. Fed focus to shift to inflation on strong jobs data.pdf
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