The core inflation rate is low at 1.6% missing the target of 2% with federal fund rate hovering around 2.5%. Hopefully, as Mr. Powell discussed, low inflation number is temporary. The Fed balance sheet is down to $3.9T and has both Mortgage Backed Securities and Treasuries. The low inflation is worrisome since the US economy is in top gear. Unemployment at the lowest levels with one of the highest wage growth in recent years, low core inflation (excluding energy and food prices) smells trouble.
Inflation is of two types: the supply side and the demand side. Printing excess money did not yield in much inflation and we will have to wait and see the next quarter for the demand side effect to structure out. Monthly treasury securities reduction is down to $15B from $30B from this month. With low inflation, pruning security reduction makes sense although according to experts treasury security reduction did not cause liquidity crunch. FED is right in waiting for another quarter to understand the direction of inflation for a more decisive action.
Attaching the link to the balance sheet normalization plan of the FED.
I was planning to publish two videos to celebrate the essence of Easter before I got to know about terror attacks in Sri Lanka last evening. It shook me up and as a mark of respect for the victims, I have postponed both the articles for a bit. One article is a motivational interview of a physically challenged person and his success as a fitness trainer while another is about a French friend of mine and his artistic and versatile flair in music. (The video was shot while celebrating Easter in a café).
The Global Impact Investing Network (GIIN) just released a report on impact investing market. Looks an interesting read. 1340 organizations manage $502 bn assets globally which is less than 1 percent of the size of global capital markets. Asset managers dominate with 51% of estimated AUM and DFI at 27%. To make the impact space more impactful, the size of DFI must increase exponentially. Maximum number of the sample organizations are headquartered in North America.
Iceland passed the world’s first equal pay rule on January 1 2018 for companies with 25 employees and more with four years to be compliant. The rule becomes a benchmark to bridge inequity in the pay based on gender.
The FED will not be increasing any more rates this year and there might be a possibility of a rate cut. The US yield curve is showing an inversion forecasting a possible recession in the US. I had argued in my article on Jerome Powell about inverted yield curve a few months back when the yields were flat. Somehow my words have proved to be prophetic which is a bit scary for me. The labor market looks very strong still in the US.