Page 15 - July-August 2018 GSE Report Flip Book

MONETARY POLICY
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The economy is strong. Inflation is near our 2 percent objective, and most people who want a job are finding one. My colleagues and I are carefully monitoring incoming data, and we are setting policy to do what monetary policy can do to support continued growth, a strong labor market, and inflation near 2 percent. (Transcript of Monetary Policy in a Changing Economy, Jerome H. Powell,08/24/18; Over My Shoulder, Patrick Watson, 08/28/18)
“The Fed seems likely to continue gradually hiking rates given that financial conditions have not started to tighten much and given that the Fed views the neutral policy rate as being around 3.00% (currently the fed funds rate is 2.00%),” wrote Merk Research’s Nick Reece. “As of writing the market is suggesting around a 95% chance for a September Fed rate hike, which would take the federal funds rate to 2.25%. Potentially weighing down U.S. interest rates is the relatively large amount of global debt that is negative yielding (primarily denominated in euros and Japanese yen). The percentage of global debt that is negative yielding very well may have peaked in mid-2016, but the European Central Bank and the Bank of Japan still have negative interest rate policies in place, which is helping to keep a significant portion of the world’s debt negative yielding.” (U.S. Interest Rate Chart Book, Nick Reece, August 2018)
PERCENT OF GLOBAL DEBT THAT IS NEGATIVE YIELDINGChart - 8/27/2018 Dollar value of negative yielding debt in the world divided
Percent of Global Debt that is Negative ...
Percent of Global Debt that is Negative Yielding
Dollar value of negative yielding debt in the world divided by dollar value of total debt in the world
by dollar value of global total debt
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Analysis: Potentially weighing down U.S. interest rates is the relatively large amount of global debt that is negative yielding (primarily denominated in euros
Bloomberg ® 08/27/2018 12:15:12 11
and Japanese yen). The percentage of global debt that is negative yielding very well may have peaked in mid-2016, but the European Central Bank and the Bank of Japan still have negative interest rate policies in place, which is helping to keep a significant portion of the world’s debt negative yielding.
U.S. INTEREST RATES CHART BOOK - AUG 2018 - MERK RESEARCH
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