Economy
Fed’s Restrictive Policy Hinges on Data, Outlook, Risk Balance
The Federal Reserve’s restrictive policy could face additional hikes if there’s evidence of above-trend growth or if the easing of the labor market reaches a plateau, as per the details released on Thursday. The duration and extent of further firming are closely tied to data, economic outlook, and the balance of risks.
The policy could also be influenced by higher bond yields, which may lead to tighter financial conditions. Current data indicates progress towards the inflation trajectory and employment targets set by the Federal Reserve. For a 2% inflation target to be achieved, a period of below-trend growth and further softening of the labor market might be needed.
Confidence in the inflation path necessitates sustained positive data over several months. Wage growth is gradually reducing towards 2% levels. The probability of a rate hike in November was priced at 8%, but this figure escalates to nearly 50% for January, reflecting market expectations of more restrictive monetary policy in the near future.
In terms of the Federal Reserve’s financial position, InvestingPro’s real-time metrics reveal a mixed picture. The organization’s market cap stands at 43.86M USD, with a low P/E ratio of 2.98, indicating that the shares could be undervalued. The adjusted P/E ratio for Q2 2023 is 15.15. Notably, the Federal Reserve has seen a revenue growth of 16.41% in Q2 2023, and its gross profit for the same period was 9.24M USD, which corresponds to a gross profit margin of 71.06%. This information could be crucial for investors who are considering investing in the Federal Reserve’s shares.
Two InvestingPro Tips that are particularly relevant here are: “Consistently increasing earnings per share” and “Prominent player in the Banks industry”. The Federal Reserve has been a prominent player in the banking industry, and its earnings per share have been consistently increasing, which is a positive sign for potential investors. For more insightful tips like these, consider the InvestingPro product which includes additional tips. There are 14 more tips listed in InvestingPro that can provide valuable insights for investors. You can find more information about this product here.
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© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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