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Edition 26th August 2019
By Research, Strategy and Analysis, Amundi
The week at a glance
Markets: After some rebound earlier this week, equity markets lost steam on Thursday
United States: The Michigan Consumer Sentiment index dropped to 92.1 from 98.4 in July.
Eurozone: The Flash estimate of the Eurozone’s Purchasing Managers’ Composite Index (PMI) rebounded in August to 51.8, after 51.5 in July
Fall in the MSCI World all country index over the past four weeks.
In its July meeting, the Federal Reserve decided to lower the target range for the federal funds rate to between 2 percent to 2.25 percent. From the minutes, this move is part of a recalibration of the policy stance, a mid-cycle adjustment needed in response to declining investment spending and manufacturing output, coupled with persistent uncertainties and downside risks not expected to fade any time soon. Monetary policy is not on a pre-set course and is expected to remain flexible and focused on the implications of incoming data. The minutes of the FOMC (Federal Open Market Committee) meeting addressed a few relevant themes to frame its next policy actions:
1) Monetary policy framework, a continuing discussion – better understanding of how forward guidance and asset purchases operate, acquired through experience, could allow the FOMC to proceed more confidently and preemptively in using these tools in the future if economic circumstances warranted.
2) Economic assessment – resilient overall but persistent risks: strong labour market based on a sustained expansion of economic activity and limited inflationary pressures is the base case. Yet, a challenging global environment is expected to persist (disappointing global economic growth, trade policy uncertainty weighing on business confidence and firms’ capital expenditure plans; limited policy space for other policy actions to support aggregate demand in case of a downturn).
3) Monetary policy decision – not a unanimous decision, with all but two members agreeing to the cut. During the discussion, however, it emerged that only “a couple” of participants preferred a 50bp cut because of low inflation, while “several” participants favoured maintaining rates unchanged due to the still resilient economy. On the back of recent developments, the deterioration in trade disputes, the persistent global slowdown in the manufacturing sector and risks to financial conditions make an additional rate cut likely before year-end, followed by a further cut in the first quarter of 2020
15th July 2019
8th July 2019
24th June 2019