The Federal Reserve presents for its final meeting before the election



What is happening: Fed officials call for their final meeting before the elections to be held on November 15 and 16. The central bank is expected to make new economic and interest rate projections running until 2023. This could put more meat on the bones of a new strategy, unveiled last month, under which it could let inflation run higher to help the economy recover.

Andrew Smith, chief investment strategist at Delos Capital Advisors, believes this is a “seismic shift” in the Fed’s approach to inflation that the market is not paying enough attention to. “We believe it is important for the Fed to provide clear and solid guidance on this new approach given the increasing monetary policy within the financial system,” he told CNN Business.

The central bank has already sidelined the economy, and with it the prospects of President Donald Trump’s reintegration by reducing interest rates near zero and buying trillions of dollars of bonds.

Now, there is not a whole lot more Fed that can get the help of those who need it most (and who will vote in November).

This could be a problem for Trump, who would prefer to avoid rising stock markets and jobless claims during the final weeks of the campaign.

Already, the effectiveness of government spending is showing as insolvency, and US jobs recovery is stagnating.

See here: Of the 860 small business owners surveyed by Goldman Sachs, nearly 90% have exhausted their funding from the Paycheck Protection Program and want to lay more workers in the coming months.

But, back to the central bank policy: The Fed published an updated strategy late last month that was thinner in detail, but suggested that it would be easier to run inflation slightly above the 2% target, noting that it had been consistently below that level for some time. Used to be.

It also changed the way it defined its congressional mandate to promote employment, making it more inclusive and therefore beneficial to the lower and middle-income groups. According to the Brookings Institution, “Research shows that these groups receive disproportionate benefits from very low unemployment rates.”

Laura Weldkamp, ​​a finance professor at Columbia University’s Graduate School of Business, said these changes are the first time the central bank is wondering whether monetary policy can be used as a tool to tackle inequality.

This week we will get a first glimpse of how changes in behavior will occur, including how important inequality can be in the monetary policy debate relative to traditional factors such as inflationary conditions and the threat of economic weakness.

Market watcher: While the market is not expecting any changes to interest rates or major new fiscal stimulus, investors will still be looking for how the Fed plans to run the economy.

“In a situation where you know so little, new pieces of information are really valuable and you really react strongly to them,” Weldkamp said.

Jerome H., President of the Federal Reserve.  Powell testifies before the House Financial Services Committee on June 30, 2020.

How strong is coronovirus recovery?

It promises to be another important week for the global economy, with a string of data releases that will realize the speed and size of the recovery.

Market participants are struggling to predict how trade and consumers will return to normal, with signs that the summer uprising may lose momentum. In many countries cases of coronovirus are increasing across Europe to impose new restrictions on travel and celebrations.

early warning: The Organization for Economic Cooperation and Development warned of a second wave in June when it published the worst forecast among multilateral institutions, leading to a contraction of 6% in global GDP this year. The Paris-based agency will publish a new approach to the global economy on Wednesday.

Oil demand may provide some insight into recovery. The International Energy Agency will release its monthly oil market report for August on Tuesday. The agency last month lowered demand forecasts for this year and beyond, mainly due to weakness in the aviation sector.

Any signs of weak demand could affect Brent crude, which fell below $ 40 a barrel for the first time since June this week.

The Bank of England and Bank of Japan will also hold policy meetings this week, although economists expect very little action in this round.

A point of interest: This will be BoJ’s first meeting since Prime Minister Shinzo Abe’s resignation announcement at the end of last month.

ING’s regional head of Asia Pacific Research, Robert Cornell, said, “With a big job still to work to get Japan out of the Kovid-19-induced recession, this is obviously a difficult time for change in the Prime Minister.” is.” “But we will warn against ideas that will introduce a somewhat easier policy from the Bank of Japan.”

next

Monday: Lennar (LEN) Earnings

Tuesday: US Industrial Production; UK unemployment; Adobe and FedEx earnings; China Industrial Production and Retail Sales

Wednesday: Federal Reserve meeting; American retailing; OECD Interim Outlook; Japan trade data

Thursday: Bank of England and Bank of Japan meetings; Reyner AGM

Friday: Uk retailing

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