Central banks a focal point again.
Central Banks are back in the spotlight this week. The Fed has postponed rate action again while the Bank of Japan (BOJ) has announced two policy changes. Principal Global Investors Chief Global Economist, Bob Baur, Zach Dietrich and the Principal Economic Committee provide commentary in this week’s Economic Insights.
Key insights include:
- The Fed’s lack of decision in keeping markets uneasy and not raising rates suggest they don’t believe the economy is yet healthy. Recently appointed Fed Governor Brainard noted several reasons to delay raising rates, while three members of the Federal Open Market Committee (FOMC) dissented from this week’s decision
- While the Fed took no action this week, the signal seemed pretty clear that the funds rate would go up by yearend, probably December. The policy statement mentioned that the labor market “continued to strengthen;” activity “picked up from the modest pace seen in the first half of the year;” household spending was “growing strongly;” but business investment was “soft”
- Government spending financed by the central bank may not be all that far away in Japan. At least that may be the long-run impact of the change in direction this week by the BOJ.
Read the full Economic Insights here.