Monetary Policy World Tour

Monetary Policy World Tour

Key Points:The Fed is preparing the U.S. market for an interest rate increase; odds favor one increase by the end of the year—specifically, the December meeting.Draghi and the ECB didn’t deliver on extending their asset purchase program but will if they have to.The BOJ “stands ready to use every possible policy tool” if necessary to achieve their policy objectives—especially key as they shift their strategy.Alpha can be found in any corner of the globe, but before capital can be put to work, the fundamentals must be taken into consideration. Nowadays, one of the biggest drivers of returns is central banks. Accordingly, below is what you need to know for each major central bank, from where they stand to what expectations are being priced in, as well as the effectiveness of their current policy as measured by economic activity and inflation.The Federal Reserve – USAAs expected, The Federal Reserve left interest rates unchanged in their September meeting. Fed Chair Yellen did, however, hint strongly at one hike by the end of the year, but slowness in numerous indicators dashed those plans for the September period. Prior to the announcement, rate hike odds were at 18%. For the next meeting, November 2nd, the market has rate hike odds at 7.2%. For the last meeting of the year, December 14th, the market is giving a significant edge to a hike. There is a 64.3% chance the benchmark rate is upped to 50-75 bps, 30.8% chance of being unchanged, and a very slim chance of 4.8% to the 75-100 bps range.Business fixed investment, inflation, and energy prices have kept a cap on inflation...