The Federal Reserve yesterday held out the prospect of reducing its quantitative measures before the end of this year. Already at the following meeting of the Federal Open Market Committee (FOMC) at the beginning of November, a reduction of the multi-billion securities purchases could be decided and then gradually stopped by mid-2022, confirmed Fed Chairman Jerome Powell. However, the pace of QE tapering would continue to depend on the course of the economy and inflation as well as the development of the pandemic. At the same time, the Fed is maintaining its loose monetary policy and left the key interest rate unchanged in a range of 0.0 to 0.25%. The record low interest rate level remains justified until full employment prevails on the labor market and the inflation target of around two percent has been reached, explained Powell. However, the reduction in securities purchases, which is now more concretely envisaged, should not be equated with a first interest rate hike. The latest forecasts of the Fed were also eagerly awaited. This year, the central bank now expects GDP growth of +5.9% (June forecast +7.0%). For 2022, however, the Fed expects stronger growth of +3.8% (previously +3.3%). Regarding inflation, an annual rate of +4.2% is now expected for 2021, compared with +3.4% in the forecast. In 2022, the Fed expects inflation of +2.2% (previously +2.1%).
Financial markets were broadly expecting this statement of the Fed . The US dollar rose noticeably as a result, while the losses in US government bonds were limited. On Wall Street, the Dow Jones Industrial rose +1% to 34'258.32 points and the market-wide S&P 500 rose +0.94% to 4'395.64 points. The technology exchange Nasdaq also went up by about +1%. Meanwhile, the concern about the struggling Chinese real estate group “Evergrande” has also subsided.
The focus today is once again on two monetary policy announcements. The Swiss National Bank (SNB) will communicate its quarterly assessment at 09:30 and at 13:00 the Bank of England will announce its interest rate decision. The SNB is likely to confirm its negative interest rate policy. On the one hand, it will not pre-empt the ECB and on the other hand, the Swiss franc has appreciated again against the euro since the last interest rate decision. The Bank of England, on the other hand, could at least think aloud about a tighter monetary policy in view of the stronger inflationary pressure and a possibly more optimistic assessment of the pandemic situation thanks to a significantly higher vaccination rate.
The troubled Chinese real estate group Evergrande has reached an agreement with domestic creditors, according to its own statements. This involves an interest payment (according to Bloomberg) of the equivalent of EUR 30 million on a bond due today, Thursday. However, Evergrande did not provide any information regarding another bond for which interest of around EUR 72 million is also due today. Next week on September 29, further interest payments of around EUR 40 million will be due. In total, Evergrande has accumulated debt of USD 300 billion or the equivalent of about EUR 257 billion. Evergrande CEO Xu Jiayin said he was confident the group could overcome its “darkest moment.” To reassure capital markets and investors, China's central bank provided 90 billion yuan to the banking system.
Japan's central bank chief Haruhiko Kuroda also commented on the “Evergrande” case yesterday. Kuroda believes that the financial problems of the Chinese real estate group need not be regarded as a systemic risk to the global economy at present.
Munich-based economic research institute Ifo lowered its growth forecast for 2021, citing global supply bottlenecks in industry. Ifo now expects GDP growth in Germany of +2.5%. Previously, +3.3% had been estimated. Next year, however, the German economy is expected to grow again strongly by +5.1% (previously +4.3%). In the following year 2023, economists still expect +1.5%. According to Ifo's head of economic research, Timo Wollmershäuser, the recovery from the corona crisis originally expected in the summer has been postponed. In particular, the rapid increase in global demand for durable consumer goods, electronic items and special medical products poses enormous logistical challenges for global supply chains because of sharply changed flows of goods.
|09:00||SP||GDP Q2 (q/q)||+2.8%|
|09:15||FR||IHS Markit PMI Composite (September)||55.9|
|09:30||SZ||Swiss National Bank monetary policy decision||-0.75%|
|09:30||GE||IHS Markit PMI Composite (September)||60.0|
|10:00||EZ||IHS Markit PMI Composite (September)||59.0|
|10:00||EZ||ECB Monthly Bulletin|
|10:30||UK||IHS Markit PMI Composite (September)||54.8|
|13:00||UK||Bank of England monetary policy decison||+0.1%|
|14:30||US||Initial Jobless Claims (weekly)||332,000|
|14:30||US||Fed Chicago National Activity Index (August)||0.53|
|15:45||US||HS Markit PMI Composite (September)||55.4|
|16:00||US||Leading Indicator (September)||+0.9%|
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