Name: FRBは利上げのウィンドウを逃したのか？| 史上初の利上げのチャンスを逃したのか｜FTマーケッツ (Did Fed miss window to raise rate? | FT Markets)
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Welcome to FT Markets. "Sorry, not today, come back another time."

That was the message from Janet Yellen and her Federal Reserve colleagues.

As the U.S. central bank decides to keep rates on hold at their September meeting,

as worries about the global economy persist.

Well, the Euro was up, bond prices also went up, equities have gone down.

So, what are the short-term and medium-term implications of the Fed's decision?

With me to discuss this, is the FT Markets editor, Mike Mackenzie.

Mike, let's start with the Euro, which has seen a slow down, which is moving towards 1.15,

which has been pretty weak as far as the dollars concern.

Stronger Euro, weaker dollar, that's been the story for the last few weeks.

And looks like it's going to be continuing along that path.

Yes, as you can see from here, you've had a nice jump. Basically one figure change from below 1.14 to over 1.15 in the last 24 hours.

And that's essentially disappointment trade, the Fed, by sort of not raising rates, has kind of tempered the dollar Bulls.

As a result, the Euros picked up some steam.

The implication of this, of course is quite profound for equity investors in Europe.

Yes, so in terms of the trend that's... remember the days where we were talking about the Euro-dollar parity?

I mean, that's now to the point where by we have two central banks both wanting pretty weak currencies.

Well, I'm not sure the Fed wants a weak currency. They've seen a tiny financial condition in the U.S. economy

because the dollar has been picking up steam,

and because the dollar has been strengthening, it's hit commodity prices hard.

And it has put a lot of pressure on emerging markets.

And if you look across the emerging market economies, they have a lot of dollar-denominated debt.

So, the last thing you want when your currency is weakening

is the dollar goes up and you're now having to pay back that debt in depreciating local currency terms.

So, the Fed has essentially said. We're worried about China, we're worried about the local economy,

we're holding fire, they want to see the dollar sort of, come down a little bit.

But, yes, you're right. You talked about the Euro-zone, this is the economy that's still pretty much on life support.

You've got a central bank in Europe that's doing an enormous amount of bond-buying,

they want, and they need a weaker currency.

And it's funnily enough when we are talking about, or the market was talking about

potentially the dollar and Euro reaching parity earlier this year

that coincided with the peak in the European stock prices.

Let's look at the next chart, which probably tells us that Mario Draghi, president of the European central bank,

is going to have to extend quantitative easing.

He's going to have to do something because he wants to weaken its currency, and he wants to fire up the stock market

And this is not a pretty picture if you're an ECB official.

This was once a great equity Bull run but it's been coming off for quite a while.

What's the likely direction depending on how the dollar goes against the Euro?

Well, if you get a stronger dollar and a weaker Euro, there are exporters in Europe get higher foreign revenues.

And if you think back to the U.S. bull run in 2011, 2012,

When QE was being done by the Fed and the Fed was weakened and that was it.

Actually saw the dollar weakened quite a lot.

The Bulls in New York loved it because every time the companies produced their earnings,

they were getting great for them from the fact that they were getting stronger foreign revenues.

So this is what European investors and this is sort of the investment bookcase in part for why you want to earn European stocks

so that's why the currency is so important.

So, the bond mark. Let's see how that's been playing.

The European bonds have pretty much been tracking what U.S. treasuries have been doing.

Yes, well treasuries got a nice boost yesterday.

The treasury market has long felt that the Fed's projections for interest rates and the economy generally has been far too rosy.

And yet again yesterday the bond market prevailed the Feds didn't raise rates.

And, as a result, you've had a nice rally last night in the U.S. treasury market,

and that's now spilled over here in the Eurozone and also for the UK.

And interesting thing about the UK is that they, along with the Feds, are really the only two major central banks

in the position to actually raise rates in the next few months.

So, we've seen a pronounced drop in yields and a rise in prices for UK gilts, and the same here for France and Germany.

That's a little bit more of a concern in the Eurozone

given that the global environment is not too good here.

And instead of owning stock in the Eurozone, you're more comfortable earning bonds,

which is essentially, as you can see in Germany and France,

Well, the general environment is not great anywhere.

And our final chart is about the Feds thinking on whether rates are gonna happen this year.

The prospects are receding in general, aren't they?

Yes, they are. I mean the bond market now prices in less than a 50% chance the rate.

This is how the federal reserve members think what their expectations of rate movings is going to be.

Here, we see the first arrival of a negative rate for some time.

Yes, so though, again, the Fed is a committee, and whilst you had one official yesterday saying he thinks rate should be negative,

you have another official Jeffrey Lacker who dissented and said the Feds should've raised rates.

So you can see the polarization of the opinions on the Feds.

The general trend is, these dots have been coming down.

By the end of 2016, they're expecting it to be a lot lower than where they were saying a year ago.

So, in general, the Fed is slowly coming around to the bond markets' view of the world,

which is at rates can be very low. Even if they do finally raise rates,

the increases in borrowing costs are gonna be very small.

Is there... (Does it) ever get to a point in the cycle where it just becomes too late to raise rates?

The bare case the U.S economy is very much one of where,

okay, you're looking at S&P 500 earnings,

they're weakening, they actually went negative last quarter on the year basis,

revenue growth is anemic for major U.S. companies.

That reflects the stronger dollar, which has hit their foreign earnings, or foreign revenues.

You've also got a situation now where banks in the U.S. is going to start calling in their earns

for their oil and gas industry, and shale gas and oil exploration U.S. has been a huge huge driver economic activity last few years.

But now with oil prices having fallen so much, which is part of the commodity story.

You could make a case that you're not going to see as much CapEx in the U.S. economy, and that filters through.

So, things aren't looking so good. And also, what was lost in all the focus on the Feds yesterday,

the U.S. Bureau of Labor Statistics came out with a revision.

Hence for the 12th month till March of this year, they've knocked just over 200,000 jobs off payrolls.

I thought payrolls are going gangbusters.

And again, if you're looking at the labor participation rate,

unemployment rate is low, but the labor participation rate is also very very low.

So, you're not seeing any wage of pressure.