https://www.linkedin.com/feed/update/urn:li:activity:7140323471087005698/?originTrackingId=K1ziSPXjQJ6gdc91GsmC%2BQ%3D%3D
Q1. Fed’s Action
The current economic data is a mix bag, and we expect Fed to hold rate for now. The question investors are asking is when and how much Fed will lower interest rate next year.
On the one hand, the headline CPI & PPI have decreased recently which is encouraging evidence that the battle against inflation is almost done. Expectations of consumer inflation have also decreased. On the flip side, the applications filed for jobless claims increased. Under these mixed signals, we still expect Fed to stick to its stance of not lowering rate too soon. However, any unexpected hawkish comment can catch the investors by surprise. We should monitor comments from Fed officials closely.
Q2. Depressed China demand
China is susceptible to a debt-deflation cycle. Extended deflation has the potential to affect China for a prolonged time. GDP deflator, which includes all of a nation's products and services, is currently at minus 1.4% and has decreased for the past two quarters. As a result, China's nominal GDP growth in the third quarter was only 3.5%. Policymakers must boost aggregate demand using all of their monetary and fiscal might in order to combat the deflation problem.
Right now, promoting consumption is the best course of action for China. To be more precise, social welfare spending on public housing, healthcare, and education can be increased by policy makers, which would assist unlock the nation's substantial household savings.
Q3. BOJ & Yen's Rebound
Yen leaps to 3-month high as the Central bank governor hints that negative rates can soon expire. BOJ may be getting closer to terminating its extremely loose monetary policy, the yen surged for past few weeks. However, much of that was expected earlier. In terms of the speed of rate hike, considering the size of national debt, we expect BOJ to act cautiously and perhaps much slower than the market fear.
https://www.linkedin.com/feed/update/urn:li:activity:7140323471087005698/?originTrackingId=K1ziSPXjQJ6gdc91GsmC%2BQ%3D%3D
Q1. Fed’s Action
The current economic data is a mix bag, and we expect Fed to hold rate for now. The question investors are asking is when and how much Fed will lower interest rate next year.
On the one hand, the headline CPI & PPI have decreased recently which is encouraging evidence that the battle against inflation is almost done. Expectations of consumer inflation have also decreased. On the flip side, the applications filed for jobless claims increased. Under these mixed signals, we still expect Fed to stick to its stance of not lowering rate too soon. However, any unexpected hawkish comment can catch the investors by surprise. We should monitor comments from Fed officials closely.
Q2. Depressed China demand
China is susceptible to a debt-deflation cycle. Extended deflation has the potential to affect China for a prolonged time. GDP deflator, which includes all of a nation's products and services, is currently at minus 1.4% and has decreased for the past two quarters. As a result, China's nominal GDP growth in the third quarter was only 3.5%. Policymakers must boost aggregate demand using all of their monetary and fiscal might in order to combat the deflation problem.
Right now, promoting consumption is the best course of action for China. To be more precise, social welfare spending on public housing, healthcare, and education can be increased by policy makers, which would assist unlock the nation's substantial household savings.
Q3. BOJ & Yen's Rebound
Yen leaps to 3-month high as the Central bank governor hints that negative rates can soon expire. BOJ may be getting closer to terminating its extremely loose monetary policy, the yen surged for past few weeks. However, much of that was expected earlier. In terms of the speed of rate hike, considering the size of national debt, we expect BOJ to act cautiously and perhaps much slower than the market fear.