MONEY MASTER

Key Takeaway:  The Fed’s first rate cut of 2025 has fueled optimism, but Powell’s upcoming remarks could determine whether markets see it as a one-off adjustment or the start of a broader easing cycle. Federal Reserve Chair  Jerome Powell  is set to speak Tuesday at an economic luncheon hosted by the Greater Providence Chamber of Commerce in Rhode Island. Investors will be listening closely for signals on the future path of monetary policy, following last week’s highly anticipated  quarter-point rate cut  that lowered the Fed’s benchmark to  4.00%-4.25% . The move was designed to support growth as labor market data shows signs of softening. Yet Powell cautioned that the cut should not be read as the start of an aggressive easing cycle. “You could think of this in a way as a  risk management cut ,” he explained, highlighting that future moves would remain  data-dependent . The Fed’s updated “dot plot” reflects  three projected cuts in 2025 , u...

Federal Reserve Bank of Dallas president Lorie Logan indicated on Monday that she anticipates more gradual rate cuts ahead for the central bank, while also supporting further reductions to the Fed’s balance sheet . “If the economy evolves as I currently expect, a strategy of gradually lowering the policy rate toward a more normal or neutral level can help manage the risks and achieve our goals,” Logan stated during her speech at the Securities Industry and Financial Markets Association annual meeting in New York. While Logan acknowledged that the economy is strong and stable , she also highlighted ongoing risks, including uncertainties in the labor market and the Fed’s inflation targets . This calls for the Fed to remain flexible and prepared to adjust its policy if necessary. Logan also emphasized the Fed's ongoing quantitative tightening (QT) , where the central bank has been reducing its holdings of mortgage and treasury bonds since 2022. These assets, originally purchased...

Federal Reserve Bank of Chicago president Austan Goolsbee highlighted the significant cooling of inflation and the ongoing strength of the labour market in a recent interview. Speaking on Bloomberg’s Odd Lots podcast, Goolsbee acknowledged that while demand remains robust, he does not see clear signs of the economy overheating despite the stronger-than-expected September jobs report . Goolsbee noted that many labour market indicators, such as the ratio of vacancies to unemployed workers , and the hiring and quits rates , suggest the market is stabilizing at a sustainable level of full employment . He emphasized that inflation is moving closer to the Fed’s 2% target , and the personal consumption expenditures price index — the Fed’s preferred inflation gauge — will likely continue to show moderate progress. However, Goolsbee cautioned that policymakers need to remain vigilant to prevent strong demand from reigniting inflation. He added that multiple months of strong employment ...

The US Federal Reserve’s paper losses have crossed the US$200 billion (RM844 billion) mark this week, according to data released on Thursday. As of Wednesday, the Fed's earnings remittance to the Treasury Department stood at negative US$201.2 billion , reflecting significant financial strain due to the Fed’s high-interest rate policy aimed at curbing inflation. This figure represents a deferred asset , an accounting measure that the Fed must clear before resuming excess earnings transfers to the Treasury. Despite the growing losses, Fed officials have emphasized that these paper losses do not impair their ability to conduct monetary policy . The Fed’s losses stem from the high interest payments it has made to banks and money funds to manage short-term rates. This situation worsened as the Fed aggressively raised rates between March 2022 and July 2023, pushing the interest rate target from near zero to between 5.25% and 5.5% . In 2023, the Fed faced record losses, with total pay...

The Federal Reserve is expected to receive validation for its recent jumbo interest rate cut as new data on inflation and consumer demand emerge. Economists predict that the Fed's preferred price metric, the Personal Consumption Expenditures (PCE) price index , will rise by just 0.1% for the second time in three months, marking a 2.3% annual gain— the smallest increase since early 2021 , and slightly above the Fed's 2% target. This decline in inflation reflects lower energy and food prices, as well as a moderation in core costs. The PCE price gauge excluding food and fuel is expected to rise 0.2%, according to government data to be released on Friday. These easing inflationary pressures allowed the Fed to confidently implement its first rate cut in over four years , slashing rates by half a percentage point on September 18. The cut represents a pivotal shift in policy, aimed at preventing further deterioration in the job market. Bloomberg economists noted, "The Fed'...

The Thai baht and Indonesian rupiah maintained their positions on Wednesday after their respective central banks opted not to cut interest rates, as expected. This decision comes as emerging Asian currencies and stocks exhibit cautious trading, with market participants eagerly awaiting signals from the US Federal Reserve regarding potential rate cuts. Key Takeaways: Indonesian Rupiah and Bank Indonesia’s Stance : The Indonesian rupiah held its 0.4% dip, while Jakarta's stock market rose by 0.4%, nearing record highs. Bank Indonesia (BI) maintained its interest rates, citing the rupiah's strengthening due to capital inflows and potential for further appreciation. Some economists, like Fakhrul Fulvian from Trimegah Securities, suggest that BI should focus on reducing the rate of SRBI (rupiah securities) before considering a rate cut to avoid market confusion. Thai Baht and Political Uncertainty : The Bank of Thailand kept its rates unchanged for the fifth consecutive meeting, des...

  Federal Reserve officials are poised to lower borrowing costs soon, a move that Chair Jerome Powell may indicate in the coming week. The central bank aims to balance the need to control inflation with the desire to avoid harming the job market. Key Takeaways: Expected Rate Cut: The Fed is likely to keep rates unchanged this week but may lower them in September. Economic Data: Recent data shows milder price increases and strong economic growth, but the Fed seeks more assurance that inflation will drop towards the 2% target. Employment: The July jobs report, expected to show moderate hiring and a stable 4.1% unemployment rate, is crucial. Hurricane Impact: Hurricane Beryl may affect job numbers and hours worked. Global Context: Rate decisions in Japan and the UK, as well as GDP data from Europe and Canada, are also in focus. Federal Reserve officials aim to ensure a balanced approach to maintaining maximum employment and stable prices, signaling a cautious path towards a poten...

Traders have intensified their bets on the Federal Reserve implementing three interest rate cuts this year, bolstered by Goldman Sachs Group Inc.'s recent forecast suggesting that conditions are ideal for monetary easing. With two quarter-point reductions already priced in for 2024, the market is now seeing an increasing probability of a third cut, following softer-than-expected employment and inflation data for June. Key Takeaways Market Pricing:  Two quarter-point rate cuts are fully priced in for 2024, with a 60% likelihood of a third cut by year-end. Goldman Sachs Forecast:  Economists at Goldman Sachs suggest there is a strong case for a rate cut as early as July, although they still predict the first cut in September. Fed Swaps and Futures:  December contracts are pricing in about 62 basis points of easing, indicating significant market anticipation for rate reductions. Fed Chair's Comments:  Fed Chair Jerome Powell emphasized the central bank’s confidence in a...

In the most recent update from the Bureau of Labor Statistics, the core consumer price index (CPI) of the United States demonstrated a minimal increase of 0.1% from May to June 2024, marking the smallest advance since August 2021. This significant slowdown, particularly in housing costs, has reinforced expectations that the Federal Reserve might lower interest rates in the near future. Key Takeaways: Subdued Core Inflation:  The core CPI, which excludes volatile food and energy prices, rose by only 0.1% month-over-month, while the year-over-year figure increased by 3.3%, reflecting the slowest pace in over three years. Overall CPI Decline:  The broader CPI metric declined by 0.1% from the previous month, indicating the first reduction since the pandemic began, largely driven by lower gasoline prices. Impact on Federal Policies:  These developments have buoyed market sentiments, with investors increasingly anticipating a rate cut by the Federal Reserve, possibly as soon as...

Investor resilience has been a notable theme in the market, with the S&P 500 advancing in all sessions this week despite significant political drama. The index recorded a 2% gain, the most substantial weekly increase since April, driven by economic data that suggested a contraction in services industries and an uptick in the unemployment rate. These factors have bolstered optimism regarding potential Federal Reserve rate cuts. Key Highlights/Takeaways Fed Dominance : The Federal Reserve remains a critical influence, with expectations of rate cuts continuing to support market sentiment. Treasury Yields and Dollar : Initial spikes in ten-year Treasury yields and the dollar, following President Joe Biden’s debate performance, were reversed, contributing to a stable market environment. High Valuations : The S&P 500 trades at 26 times earnings, the highest valuation on any Election Day since 1990, raising concerns about future performance. Sector Performance : Technology megacaps le...

FBM KLCI jumped 13.15 points to close at 1,716.34 The FBM KLCI saw a strong trading day today as the market jumped 13.15 points to close at its intraday high of 1,716.34.  The uptrend was in line with the regional market after the US Fed decided to keep rate on hold. The decision, reached at a two-day Federal Open Market Committee (FOMC) meeting that begun on Tuesday, resulted in renewed investor confidence in emerging markets. Across the regional market, Hong Kong's Hang Seng index was up 167.82 points or 0.82%, South Korea's KOSPI rose 4.13 points or 0.21%, and Singapore's Straits Times Index gained 15.07 points or 0.52%. Japan's Nikkei 225, however, was down 211.57 points or 1.25% while the Stock Exchange of Thailand slipped 0.43 points or 0.03%. According to Reuters, Asian shares edged higher on Friday as oil touched a 2016 high. Today, FBM KLCI saw 2.03 billion shares, valued at RM2.98 billion, traded. There were 538 gainers against...