Market Commentary - Focus

Vital information about the markets, the economy, rates, and more.

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Basel III Proposed Regulatory Capital Changes Webinar

FinSer is pleased to provide a replay of a webinar we held jointly with the Accounting Firm of Fisher, Herbst & Kemble in September 2012 on the proposed changes to

Regulatory Capital, Implementation of Basel III, Minimum Regulatory Capital, Capital Adequacy and Transition provisions 

Regulatory Capital Rules: Standardized Approach for Risk-Weighted Assets; Market Discipline and Disclosure Requirements

To view the replay select this link.

Economic Outlook - SEPTEMBER 2015

For months the markets were told that the Fed was “data dependent” in regard to raising interest rates. At the July FOMC meeting, members felt that all it would take would be “some” additional labor market improvement, which came in the August employment report with the unemployment rate falling to 5.1 percent. Markets had been on tenterhooks as investors waited for the FOMC’s interest rate announcement on September 17th. In the end, the Fed resolved to stand pat for the time being. The rationale for Fed’s decision was concern over “global financial and economic developments.” The word “global” was thought to really be Fed code for China, and policy makers in control of the Committee worried about spillover from China’s weakening economy and turbulent markets into U.S. growth and its inflation outlook. 


The Fed also suggested that in light of significant economic and financial interconnections between the U.S. and the rest of the world, the situation abroad bears “monitoring.” Despite a relatively low exposure to world growth through trade, global weakness and a stronger dollar have already manifested their effects on U.S. manufacturers through declining exports. Additionally, spillover from commodity prices and exchange rates, through monetary policy expectations, feeds into U.S. inflation and its projections.


In the Summary of Economic Projections (SEP), released to coincide with the release of the post-meeting policy statement, the Committee lowered its expectations for increases in inflation over the next three years and now anticipates solid, but a bit slower, economic growth in 2016 and 2017 than in earlier forecasts, due to the impact of slowing growth in China and the impact of the stronger dollar. The FOMC also lowered its expectations for the federal funds rate over the same period. While the trajectory is lower than previous projections, as illustrated in the graph below, the forecast also shows the Committee’s continued desire to “get away from zero,” with thirteen of seventeen Fed officials expecting a rate hike by year-end.


  In her press conference, Fed Chair Janet Yellen stuck closely to the FOMC policy statement and added color to the Fed’s generally favorable assessment of the economy. She also said that the Committee considered the possibility of starting policy normalization at the September 16-17 meeting. “An argument can be made for a rise in interest rates at this time,” she said. However, a softer inflation outlook and developments abroad counseled caution in spite of largely balanced risks.

 The bottom line is that global uncertainty appeared to weigh heavily on the Committee members’ minds at the September meeting and the Fed chose the more cautious route, given that uncertainty. The Fed’s hesitation to begin rate liftoff in September was not motivated by recent U.S. economic performance. The same could not be said for inflation however. While the economy remains on solid footing, uncertainty related to global growth prospects poses a downside risk to inflation. The Fed has long telegraphed its desire to get away from zero by raising rates this year and unless the global macro backdrop deteriorates substantially, the Fed should make good on that pledge, likely at the December meeting.