Fed’s Barkin gives no December signal while viewing rates as close to neutral

With “no base case” for interest rates at the December meeting, Richmond Federal Reserve (Fed) President Tom Barkin also highlighted debt levels, saying that “government, not consumer debt is at a historic level.” His remarks came in a speech at the Greater Greer Chamber of Commerce in South Carolina.

Despite a healthy latest jobs report, Barkin continued to see a low-hire, low-fire environment. On interest rates, he suggested that the “current policy rate [is] likely around or slightly below neutral”.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

What were Barkin’s main observations?

It is government debt, rather than consumer debt, that stands at a historic level

The December meeting has no base case

The economic impact of the elections is difficult to gauge

The policy rate is probably close to neutral or slightly below it

Having two full months of economic data available for every Fed policy meeting would be an advantage

Despite the healthy latest jobs report, firms still appear to be operating in a low-hire, low-fire environment.

I do not believe measures passed in the recent elections will hinder data centre expansion; firms will find locations to build

How Is the US Dollar Trading Today?

The US Dollar recorded its strongest performance against the Canadian Dollar today. The table below sets out the percentage changes in the US Dollar (USD) against the major currencies listed.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.56%	-0.55%	-0.30%	0.07%	-0.69%	-1.45%	0.04%
EUR	0.56%		0.01%	0.27%	0.63%	-0.14%	-0.89%	0.60%
GBP	0.55%	-0.01%		0.28%	0.61%	-0.15%	-0.90%	0.59%
JPY	0.30%	-0.27%	-0.28%		0.35%	-0.41%	-1.17%	0.32%
CAD	-0.07%	-0.63%	-0.61%	-0.35%		-0.76%	-1.51%	-0.02%
AUD	0.69%	0.14%	0.15%	0.41%	0.76%		-0.75%	0.74%
NZD	1.45%	0.89%	0.90%	1.17%	1.51%	0.75%		1.50%
CHF	-0.04%	-0.60%	-0.59%	-0.32%	0.02%	-0.74%	-1.50%

To read the heat map, select a base currency in the left-hand column and a quote currency in the top row. Each cell shows the percentage change between those major currencies. For instance, choosing the US Dollar on the left and following its row across to the Japanese Yen gives the percentage change for USD (base)/JPY (quote).

Fed: Frequently Asked Questions

How does the Federal Reserve’s role influence the US Dollar?

Achieving price stability and promoting full employment are the two mandates of the Federal Reserve (Fed), which sets US monetary policy. Adjustments to interest rates are its main means of pursuing these objectives. If prices climb too rapidly and inflation exceeds the Fed’s 2% target, the central bank increases interest rates. The resulting rise in borrowing costs across the economy strengthens the US Dollar (USD), as international investors find the US a more attractive destination for their funds. By contrast, inflation below 2% or an excessively high unemployment rate may prompt the Fed to cut interest rates to stimulate borrowing, putting pressure on the Greenback.

What is the schedule for the Fed’s monetary policy meetings?

At eight policy meetings each year, the Federal Open Market Committee (FOMC) reviews economic conditions and decides monetary policy for the Federal Reserve (Fed). Twelve Fed officials take part in the FOMC: the seven Board of Governors members, the president of the Federal Reserve Bank of New York, and four of the other eleven regional Reserve Bank presidents. Those four serve rotating one-year terms.

How does Quantitative Easing (QE) work, and what does it mean for USD?

When financial conditions become extreme, the Federal Reserve may turn to Quantitative Easing (QE) to substantially boost credit flows through a stalled financial system. Used in crises or periods of extremely low inflation, this unconventional policy was the Fed’s preferred response during the Great Financial Crisis in 2008. Under QE, the Fed prints additional Dollars to purchase high-grade bonds from financial institutions. The US Dollar typically weakens as a result.

How does Quantitative Tightening (QT) work, and what does it mean for the US Dollar?

Reversing QE, quantitative tightening (QT) involves the Federal Reserve halting bond purchases from financial institutions and allowing its existing bonds to mature without reinvesting the principal in new bonds. This process generally supports the US Dollar’s value.