EDITORS John Gillin Greg Diamond Scott Garliss
GLOBAL CENTRAL BANKSWEIGH IN...
that “risks have been tilted to the downside on the whole amid heightening uncertainties and a prevailing view that such a situation will be protracted.” The European Central Bank (ECB) agreed with the BoJ’s outlook when ECB chief Mario Draghi stated that the ECB was prepared to fight an unexpected economic slowdown, despite Draghi’s belief in the unlikelihood of a 2019 eurozone recession. China was also worried about the growth picture. People’s Bank of China (PBOC) policy director, Sun Guofeng, told reporters the bank would be “more forward-looking, flexible, and targeted.” He stated that PBOC monetary policy will remain prudent and that the bank stands ready to tighten or ease policy as needed. It appears that the Fed and other central banks are getting the message. If the S&P 500 and global markets
In the U.S., markets were caught off guard (again) by the Federal Reserve. Chairman Jerome Powell continued his hawkish message that the economy was strong and that rate hikes would continue. This garnered the ire President Donald Trump, who accused the Fed of driving market volatility and curbing future growth. After raising the federal funds rate another quarter of a percent at the December meeting, Powell said rates were now just below neutral and future hikes would be more data dependent. Unfortunately, this was not enough to placate the skeptics and rate-hike fears were a catalyst for the massive sell-off seen throughout the month. What began with the Fed’s policy announcement in mid-December has permeated global central bank commentary ever since.... Overall, the banks are inclined to ease policy and become more
accommodative rather than move in a policy tightening direction. In December, the Bank of Japan (BoJ) expressed concern over the deteriorating global growth outlook, noting
are going to continue to rally, the markets need to get a sense that policy makers will back away or let-up on policy tightening measures. For now, central banks appear to be on board.
It was a perfect storm for the worst monthly loss since the Great Depression, and investors fear a recession is already taking hold...
American Consequences 13
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