The Fed will most likely leave its key interest rates unchanged tonight (20:00 CET) and emphasize its long-term expansionary stance. The interplay of monetary and fiscal policy, often called for by Fed Chairman Jerome Powell, is likely to be strengthened under the new administration of President Joe Biden. On Wall Street and also on the Asian stock exchanges, investors were cautious ahead of the interest rate decision. In New York, the indices trended more or less sideways. The Dow Jones Industrial and the S&P 500 closed yesterday virtually unchanged at 30'994.40 (-0.07%), respectively at 3'857.11 points (-0.15%). In addition to the upcoming Fed decision, earnings reports of listed companies are also in focus, especially tonight the quarterly figures of Apple. On a positive note, the mood of American consumers has brightened at the beginning of the year. The consumer confidence barometer rose more than expected from 87.1 points in December to 89.3 points, according to the New York-based economic research institute Conference Board.
Former Federal Reserve Chairman (2014-2018) Janet Yellen (74) was confirmed yesterday in the Senate as the future Secretary of the Treasury of the United States with a large majority (84 to 15). The filling of this key position represents an important success for the new President Joe Biden. Yellen is also the first woman to hold this top position. The economist faces a difficult task in view of the corona pandemic and the negative impact on the US economy. One key to success could be better and closer cooperation between the Treasury Department and the central bank in the future. Fed Chairman Powell had repeatedly called for greater use of fiscal policy, and Yellen seems to be of the same opinion in this regard and has already attracted attention with her call to use all means in crisis management (“act big“).
In its forecasts presented yesterday, the International Monetary Fund (IMF) assumes that the Covid-19 vaccines have improved global growth prospects. For the current year, the Monetary Fund expects the global economy to grow +5.5%. This is 0.3 percentage points higher than the previous forecast. In addition to the start of the vaccination campaigns, the IMF also expects positive effects from fiscal and monetary policy. For 2022, the IMF forecasts a global growth rate of +4.2%, unchanged from the last forecast in October. In the United States, the IMF expects growth of +5.1% this year, two percentage points higher than in October. According to the IMF, China is likely to report growth of +8.1%. The forecast for the eurozone has been reduced by one percentage point to +4.2%. However, in view of the ongoing corona crisis, the forecasts are still subject to considerable uncertainty.
As a lesson from the corona crisis, the European Union's pandemic defense is to be strengthened by a program designed for the long term. EU Commission President Ursula von der Leyen said at the digital World Economic Forum that the EU wants to work with private companies to identify new, dangerous viral pathogens in order to quickly develop and produce vaccines on a large scale.
|08:00||GE||GfK Consumer Climate (February)||-7.3|
|08:45||FR||Consumer Confidence (January)||+95.0|
|14:30||US||Durable Goods Orders (December, m/m)||+1.0%|
|20:00||US||FOMC monetary policy announcement||0.0-0.25%|
|20:30||US||Fed press conference|
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Source: LGT Bank (Switzerland) Ltd.
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