Today investors were served with several central bankers statements. In the context of the Fed, it is worth recalling that due to the trading scandal, two local Fed presidents - Rosengren and Kaplan - resigned. Today, the head of the Philadelphia Fed, Harker, spoke before the panel discussion at ECB Forum. He is considered a hawk but is not a voting member in 2021 and 2022.
- If there is no agreement in Congress to extend the budget limit, it could have a major economic impact.
- Inflation will remain above 4% this year and above 2% in 2022
- No interest rate increases are expected before the end of 2022 / beginning of 2023 (current market consensus)
- Harker wants to start slow and methodical tapering, even in November and end the process in the middle of next year (consensus among Fed members)
- Risks to the economy currently pose supply issues and a possible spread of coronavirus
- The Fed's asset purchases are no longer helping the economy at the moment
- Lack of government funding is a potential problem and could weaken confidence in US debt and could cause problems for the dollar
Source: InTouch Capital Markets
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At the moment, the dollar remains strong against other currencies, but if the government funding problem is not resolved soon, it could have a huge impact on the dollar and bond yields (which may rise, but not because of the positive aspects). Source: xStation5
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