(1.02) Central Banking [New] The absence of strong wage and inflation pressures (inflation has averaged just below target over the past year, and expectations have recently softened) has allowed the US Federal Reserve to reduce the federal funds rate to guard against downside risks from the global economy. [New] With growing geopolitical risk from the US-China trade war, Asian companies could face a more challenging operating environment over 2019 and 2020, weighing in on global economy and supply chains amid already slowing growth. [New] Low interest rates and the need for public funding of urgent climate-related investments may contribute to even more aggressive fiscal initiatives, but during the foreseeable future the main responsibility for stabilisation policy will probably still rest with central banks. Federal Reserve chairman Jerome Powell on Tuesday, who signalled his openness to continue slashing interest rates to ward off global risks to the US economy. The Bank of England is expected to continue with very gradual interest rates rises over the next few years, but not until greater clarity has been provided on Brexit. The industry's focus on automating valuations means that very soon, the Federal Reserve is likely to finalize a regulation that says appraisals will no longer be required on most property sales up to $400,000. Facebook reportedly has high hopes that Libra will become the foundation for a new financial system free of control by Wall Street power brokers and central banks. In recent months, the expected paths of policy interest rates in advanced economies have shifted sharply lower, most notably in the US where an expectation of two further rate hikes over the next three years has flipped to four rate cuts by the end of next year. The Federal Reserve has cut interest rates for a second time amid fears of a global economic downturn and concerns Donald Trump's trade wars with China could risk further instability among world markets. The Federal Reserve on Wednesday cut rates for the second time this year, saying the reduction provided insurance against ongoing risks including weak world growth and resurgent trade tensions. For every quarter-point reduction, Mr Trump could save $850,000 (£692,000) in annual interest rate payments, which would mean more than $3m (£2.4m) in annual savings if the Federal Reserve dropped rates a full percentage point as Mr Trump has demanded. Citi analysts are bullish on the gold price outlook, saying prices could possibly breach $US2,000 an ounce in the next year or two, if global growth and recession fears are realised and interest rates remain lower for longer. The recent tax cuts by the government and interest rate cut by the Reserve Bank of Australia to 1% which was expected to boost expectations, saw an opposite reaction from consumers. Doubts are mounting about the sustainability of the pace of global growth and markets continue to be buoyed by expectations that central banks will act to stimulate economies by cutting interest rates. Expectations with respect to rising interest rates in the U.S. could increase debt-servicing costs for markets with significant dollar-denominated debt in the coming years. The U.S. economy could experience a mild recession next year even as the Federal Reserve is seen as increasingly likely to lower interest rates to boost growth, predicted a European investor. Unexpected positives to the US economy would come from improvements in the pace of growth rather than lower interest rates, as it is likely the Fed will continue to tighten monetary policy in 2019. Oil prices will require strong compliance from OPEC + supply cuts and accommodative monetary policy by global central banks to bolster risk appetites for 2 H 2019. Trump's move may force the Federal Reserve to cut interest rates again to protect the U.S. economy from trade-policy risks after its first rate cut in more than a decade on Wednesday. Bank of England (BoE) Governor Mark Carney took aim at the US dollar's destabilizing role in the world economy on Friday and said central banks might need to join together to create their own replacement reserve currency. There is a high probability (47%) that the rand will fall by as much as 30% or more once the US begins a new cycle of reducing rates over the next year - simply because it always does that when interest rates are falling in the US. While easier monetary conditions might help extend the current US business cycle, the Fed's concerns about inflation are also weighing on the future path of interest rates. See full forecast Last updated: 22 October 2019 Hi, Would you like a quick online demo of our service from an experienced member of our team? Yes No
