Private: U.S. leading indicators +0.1% in Feb, below expectations of +0.2%, vs -0.2% in Jan.
Private: U.S. JOLTS job openings +260k in Jan to 5,541k, near median of 5,500k, vs negative revised 5,281k in Dec.
Private: Gold climbs as Fed cuts outlook for interest rate rises
17-Mar (Reuters) — Gold climbed on Thursday, extending a 2.5 percent rally made in the previous session after the Federal Reserve cut the number of interest rate rises it forecasts for this year, sending the dollar sharply lower.
The U.S. central bank held interest rates steady and indicated that it would tighten policy this year, but fresh projections showed policymakers expect two quarter-point increases by year-end, half the number forecast in December.
…Gold has climbed nearly 20 percent since the end of last year as investors scaled back their expectations that the Fed would continue to push rates higher after December’s first increase in nearly a decade.
…”The Fed projections may only be conforming to what many in the market already assumed. This could limit further gold gains. That said, the dovish tilt in the Fed’s policy statement should be enough to reaffirm and galvanise the gold rally.”
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Private: Norges Bank cut policy rate by 25 bps to 0.5% as was expected, “may be reduced further in the course of the year” according to statement.
Private: SNB holds deposit rate steady at -0.75%, in line with expectations, maintains that the franc remains overvalued.
Private: BoE held steady on policy, in line with expectations. Repo rate has been at record low 0.5% for 7-years now.
Private: U.S. Philly Fed index rebounded to 12.4 in Mar, well above expectations of -1.1, vs -2.8 in Feb.
Private: U.S. Q4 current account gap narrowed to -$125.3 bln, outside expectations of -$116.3 bln, vs revised -$129.9 bln in Q3 (was -$124.1 bln).
Private: U.S. initial jobless claims +7k to 265k for the week ended 12-Mar, in line with expectations.
Private: Gold higher at 1266.00 (+7.13). Silver 15.68 (+0.101). Dollar lower. Euro higher. Stocks called lower. US 10yr 1.87% (-4 bps).
Private: The Fed under Yellen and the gold trade
16-Mar (CNBC) — Gold, which has been on a remarkable run so far in 2016, pulled back this week before the Fed statement, and then did an about-face.
Jitters ahead of the Wednesday statement from the Federal Reserve Open Market Committee likely sent some investors who have been lucky enough to be in on gold trade early this year to take some profits. Although no changes to rates were expected, many investors and traders were treating the Fed like a wildcard to which the market as a whole might overreact. And with a 16-percent plus run up in gold so far in 2016, why take short-term chances? In this instance, they could have. The market overreacted in a way opposite to what some gold traders were expecting.
On Wednesday afternoon in trading immediately after the Fed statement — in which it left rates unchanged and said it expected only two rate hikes this year, not four — gold and the stock market moved higher, while the dollar declined.
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PG View: Gold is making new highs into the U.S. close, poised to notch a $30+ gain on the day.
Private: Fed ‘Fiddling’ While the Economy Burns: Stephen Roach
16-Mar (Bloomberg) — Yale University Senior Fellow Stephen Roach discusses the Federal Reserve’s attempts to boost the U.S. economy through monetary policy and what steps can be taken to rebuild economic growth.
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Private: Fed Leaves Interest Rates Unchanged, Lowers Outlook for Further Increases
16-Mar (WSJ) — Federal Reserve officials reduced estimates of how much they expect to raise short-term interest rates in 2016 and beyond, nodding to lingering risks to the economic outlook posed by soft global growth and financial-market volatility.
New projections show officials expect the federal-funds rate to creep up to 0.875% by the end of 2016, according to the median projection of 17 officials. That would mean two interest-rate increases this year, compared with four projected increases when officials met in December, and implies the Fed is tentatively looking at June for its next rate increase.
For now, the Fed is keeping its benchmark lending rate steady between 0.25% and 0.50%, after raising it a quarter percentage point in December. Without committing to a timetable, officials said the next move would depend on “realized and expected economic conditions” and reiterated that it plans to move gradually.
…However, in a closely watched section of its policy statement, it added that market developments and the global outlook “continue to pose risks.” This risk assessment is important because it indicates whether the Fed is leaning toward raising rates, holding them steady or reducing them.
In January, officials declined to make an assessment of risks to the economy, a sign of their uncertainty about the impact of slow global growth and volatile financial markets. The latest statement on risks suggests officials are inclined to wait until they have a clearer picture of the outlook before moving. That makes an April move a high hurdle, though not impossible.
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Private: FOMC Statement
Release Date: March 16, 2016
For release at 2:00 p.m. EDT
Information received since the Federal Open Market Committee met in January suggests that economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months. Household spending has been increasing at a moderate rate, and the housing sector has improved further; however, business fixed investment and net exports have been soft. A range of recent indicators, including strong job gains, points to additional strengthening of the labor market. Inflation picked up in recent months; however, it continued to run below the Committee’s 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. However, global economic and financial developments continue to pose risks. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.
Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.
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Private: Gold jumps back above 1240.00 as Fed comes across more dovish than the market was expecting.
Private: Fed holds steady on policy, in line with expectations. Median forecast now sees just 2 rate hikes in 2016, versus 4 back in December.
Private: Bangladesh Bank Chief Resigns After Cyber Theft of $81 Million
16-Mar (NY Times) — A spreading scandal over the mysterious electronic theft of $81 million from Bangladesh’s official account at the Federal Reserve Bank of New York prompted the governor of that country’s central bank to resign Tuesday, and three of his subordinates were fired.
They were the first political casualties since the theft came to light this month, when news reports from the Philippines said unidentified hackers using official electronic bank messaging technology had diverted the money in early February. Most or all of the stolen money, one of the biggest electronic heists in history, is thought to have been transferred to accounts in the Philippines.
…“Such cyberattacks are happening across the world,” Mr. Rahman said…
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PG View: Mr. Rahman is correct, we hear about cyber attacks nearly everyday, but when the hackers start reaching into the NY Fed and disappearing $81 million it clearly suggests that the wealth you store in your bank or brokerage accounts is not safe. We have always advocated storing a portion of your wealth in physical gold, outside of the traditional banking and financial services realm. These days that advice is more prescient than ever.
Private: James Grant: ‘Something Is Going to Go Wrong’
01-Mar (EpochTimes) — James Grant needs no introduction. The chief editor of Grant’s Interest Rate Observer has been an eloquent observer and astute analyst of markets since he started his Barron’s column “Current Yield” in the late 1970s.
Grant recently won the Hayek Prize of the Manhattan Institute for his most recent book “The Forgotten Depression,” and the Gerald Loeb Lifetime Achievement Award.
Epoch Times spoke to Mr. Grant about the spotty track record of central bankers, deflation, gold and the gold standard, as well as negative interest rates and a ban on cash.
If interest rates were reduced to less than zero and if large denomination bills were retired, what would one do with one’s money? This one reason why the gold market is on a ferocious tear to the upside because people are thinking: “Wait a second. If that’s what they want to do to my money, if they want to tax it for it being money, and if they want to restrict my freedom to move things outside the banking system, I’m going to get outside the banking system legally in a time-tested way, and lay some of my wealth apart in gold, which cannot be created through the swift tapping of computer keyboard as can be done with currencies.”
I think this is a terrifically bullish moment for gold. I think it’s a very sad moment for the institution of fiat money. But fiat money has never worked out well in the very long run. — James Grant
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PG View: People are indeed thinking as Mr. Grant suggests and that has led to gold’s stellar performance so far in 2016. Ongoing experimentation by central banks with extraordinary measures is also driving safe-haven interest as investors fear that they can only push on the string so long before something goes wrong . . . and perhaps even horribly wrong.
Private: US inflation rears its ugly head as global cycle nears danger zone
by Ambrose Evans-Pritchard
15-Mar (Telegraph) — The trigger for the next global recession is at last coming into view after a series of loud distractions and false alarms.
The Atlanta Federal Reserve’s gauge of “sticky-price” inflation in the US soared to a post-Lehman peak of 3pc in February. This index is a ‘pure’ measure of core inflation – the underlying story once the noise is stripped out.
The Cleveland’s Fed’s ‘median consumer price index’ jumped to 2.9pc, with big rises are in medical services, housing rents, car insurance, restaurants, hotels, women’s clothing, jewelry, and car hire. This is the long-feared inflexion point we all forgot about in those halcyon days of deflation, now just a fond memory.
Expansions rarely die of old age. They are killed.
The Fed’s veteran vice-chairman Stanley Fischer is itching to tighten. “We may well at present be seeing the first stirrings of an increase in the inflation rate,” he said in a portentous speech last week.
Every major downturn since the First World War has been caused by the Fed, determined to snuff out inflation as the credit cycle matures. Expansions rarely die of old age. They are killed.
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Private: The Daily Market Report: Gold Consolidates Ahead of Fed
16-Mar (USAGOLD) — It’s Fed day! Not surprisingly gold is consolidating at the low end of the recent range after traders paired long exposure ahead of today’s important announcement.
The Fed is widely expected to hold steady on policy today, but markets are wary that the central banks may indicate that a rate hike in June is likely. FedWatchers will dissect the statement when it comes out at 2:00ET in yet another attempt to discern the Fed’s intentions moving forward.
Some seem to think that today’s slightly larger than expected 0.3% uptick in core inflation may prompt the FOMC to be a little more hawkish in the statement. However, with perhaps the exception of housing starts, the rest of today’s data is cause for continued dovishness.
The Fed will also announce their latest economic projections and then Janet Yellen will hold a press conference at 2:30ET. The ‘dot plot’ projections have already been reduced to an amusement. “Call it the Federal Reserve that cried wolf,” said the WSJ’s Steven Russolillo in an article earlier this week.
Fed forecasting has historically been terrible; overly optimistic in just about every instance. Markets don’t put much stock in them, but it is interesting to note relative shifts in that oft-unwarranted optimism.
The BoE is slated to announce policy tomorrow. Here too, ‘steady as she goes’ is anticipated. However, in announcing the latest UK budget before Parliament, Chancellor of the Exchequer George Osborne, painted a rather gloomy picture:
It wasn’t that long ago that the folks were talking seriously about rate lift-off in Britain as well. I think it will be a long-while before we hear such rumblings again.
In a low rate environment, and particularly in a negative rate environment, gold will tend to perform very well. Dips within the uptrend that has dominated this year are likely to be perceived as buying opportunities.