Stock futures higher as oil prices rebound

Paterniano Del Favero
Giugno 27, 2017

"Gradually raising interest rates to bring monetary policy back to normal helps us keep the economy growing at a rate that can be sustained for a longer time".

The comments by the president of the Federal Reserve Bank of San Francisco suggest that he's lining up with Fed Chair Janet Yellen, his predecessor at the bank, in an emerging debate on how to respond to an easing in inflation during the last few months.

The US dollar hit a one-month high against the yen and rebounded against the euro on Monday after the European Central Bank chief defended the ECB's easy monetary policy, and as investors awaited Federal Reserve Chair Janet Yellen's speech on Tuesday.

Williams seemed to agree.

Thanks to Deutsche Bank economist Torsten Slok, we have this handy chart comparing the Fed's government bonds holdings as a percentage of the outstanding total to that of other countries.

Those special factors include a steep drop in the cost of mobile-phone services.

Some say steadier oil prices would help Draghi sign up behind the move toward normalizing policy being advocated by Germany's Bundesbank, but so far he has been reticent, anxious that, not for the first time since 2008, the euro zone's recent pickup may prove less durable than hoped. That helped pull down the Fed's favorite inflation gauge to 1.7 percent in April from 1.9 percent in March and 2.1 percent in February.

Forrester said the divergence between the unemployment rate and inflation is not unique to the U.S. Globally, economies face structural issues such as ageing populations and automation replacing jobs, which could increase the risks of a recession. And he sees it dropping some more.

Those worries have stoked doubts that the Fed will be able to follow through on its plan to boost interest rates one more time this year and three times next year.

Meanwhile, Mr Williams said labour markets will continue to strengthen, with the USA unemployment rate, now at a 16-year low of 4.3 per cent, likely to fall further and stay a little above 4 per cent through next year.

"We'll know more from Yellen tomorrow", said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Group Ltd in NY. "The market has essentially given up on a number of key USA plans passing through Congress within the year, so any delays to the healthcare vote should not come as a surprise", said Koji Fukaya, president of FPG Securities in Tokyo. Williams predicted that it would decline even further below 4% by next year. "Indeed, my new mantra is, 'Boring is the new exciting'".

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