The US economy is holding up despite a rise in Covid cases.
‘’It is hard to find a huge drop in the real-time economic data,” The Richmond Fed President said Monday. “I am thinking about credit-card spending which I get to see every week. It really has not taken a step back.”
The Fed’s monthly asset purchases of $120-B already are providing strong stimulus to the economy, in addition to near-Zero interest rates.
The FOMC is considering changes to its asset program, including new guidance, the minutes of its last meeting revealed.
“I am intrigued by what the Bank of Canada has done in terms of duration extension,” Mr. Barkin said. “I think that is an interesting technique if we decide the economy needs some more stimulus.”
Last month the Bank of Canada made a technical adjustment to its bond purchase program, scaling back the buying of government bonds while shifting purchases to longer-term securities.
But, with long-term US Treasury yields below 1%, a move to push down rates further might have little effect.
“We have a relatively flat yield curve at relatively low levels,” he said. “It is not compellingly obvious to me that the big challenge we have right now is around how do we lower Treasuries another few basis points.”
Americans’ savings built up over the last 9 months from fiscal stimulus and from cutting spending while sheltering at home will serve as a backstop for the economy, 72% of which is consumer spending.
The Richmond Fed President a FOMC voter next year said: “I am reasonably hopeful about the vaccine for the virus. If that comes full in say at the end of the 2nd quarter, then you can imagine light at the end of the tunnel” for a full recover to pre-chaos levels, as the economic data is overall good.
Economist Bruce WD Barren explains the whys and wherefores of the above below, as follows:
“Two other key indicators in our economic recovery is that Consumer Confidence in the United States is expected to be 76.00 points by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, they estimate Consumer Confidence in the United States to stand at 82.00 in 12 months time. In the long-term, the United States Consumer Sentiment is projected to trend around 88.00 points in 2021.Meantime, inflation expectations, or better – consumer fears, were left unchanged for both the year ahead (2.8 percent) and the next 5 years (2.6 percent).”
Also important is the fact that the US dollar continues to face heavy selling pressure in December, testing the 91.20 area for the first time since April of 2018. Shortly after the pandemic started, the greenback skyrocketed, and by May it began a slide that took the dollar index from 100 to under 92. While it sounds negative, this is also a positive important indicator due to the fact that a lessening in the dollar value promotes exports which means more employment.
“So, what does all of the above tell us is that the next President will inherit all of the positive indicators for a quick economic recovery. This is particularly important now that multiple vaccines are about to come on the market, thus dislodging man’s greatest fear – increasing unemployment, family survival but removing its greatest obstacle, residual mental depression.
“Thanks to the last 6 -12 months, the groundwork is all there. Constructive hope is starting to return and the reality of survival looks more than just a reality as shown in the recent gains in the stock market performance. Soon our family isolation will become history,” says economist Bruce WD Barren, a editorial contributor to Live Trading News.
Have a healthy day, Keep the Faith!
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