Fed Policy Meeting / Outlook

Good Morning Ladies and Gentlemen

“The battle between ‘capitalism’ and ‘communism’ is back.”

by Mr. Thomas Straubhaar,
Professor of International Economic Relations at the University of Hamburg

Last week’s policy meeting vs this week’s inflation numbers

Last week, we were looking at the ECB policy meeting. There has been no change after their first monetary policy meeting this year. They left the key interest rate at 4.5% and the deposit rate at 4%. Yesterday’s Eurozone consumer prices came in at  2.8% higher than in January 2023; however, they were below the 2.9% of December 2023. The price trend is slowly approaching the ECB’s medium-term target of 2%.

This week’s Fed policy meeting

On Wednesday, the U.S. monetary authorities decided to maintain their key interest rate range of 5.25% to 5.5%. At the same time, Fed Chairman Jerome Powell made it clear that the central bank needed more confidence in the downward trend in inflation, even though this had already been underway for the last six months. “Clear signals” were needed that the downward trend towards the Fed’s inflation target of 2% was sustainable.

Same same

So, therefore, both central banks communicated in line and, as far as I am concerned, in line with my expectations.

Change in outlook?

My personal outlook was thus confirmed. There was too much hot air in the markets in the second half of Q4 2023 because of overconfidence concerning interest rate cuts. Now, I still believe in a renewed interest rate cut fantasy after a short period of consolidation in Q1 2024. Furthermore, in January 2024, the Dow Jones Industrial Average Index rose by 1.2 %. Since 1987, 80% of the years in which the Dow was up in January ended with a gain. In addition and, also according to stats, the performance of a president like Joe Biden, who is in his first presidential cycle, initially tends to move sideways in his fourth year in office before gaining ground, leading to a solid yearly performance. But then again, Ladies and Gentlemen, that is only prognostic based on stats.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
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Mail: smk@incrementum.li