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Maybe September, December or not until 2016

Published Thursday, July 30th, 2015

There you have it forward guidance in a nutshell. Next week, next month, next year, never. Another two-day Federal Reserve meeting that leaves markets as unsure as they were before the gathering began. According to the Fed the US economy is “expanding moderately”, there have been “solid job gains” of late but risks are still “nearly balanced” and inflation continues to remain elusive.

The decision is data dependent, there will not be another meeting for two months so the forward guidance is effectively that the Fed does not know when it will increase interest rates even by a minuscule 0.25% for the first time in nearly a decade. The Fed funds rate has been at zero since December 2008. Could such a tiny increase really cause US economic growth to stumble and emerging market economies to fall into recession?

A phoney peace

Nobody has anything good to say about the Greek deal. The Greeks do not like it, the Germans do not like it and the IMF hates it. You would have a hard job finding anyone who thinks it will work. The eurozone is more divided than ever as it becomes increasingly obvious that the currency union will always be imperfect without much deeper integration which involves giving away precious tranches of sovereignty.

to read the rest of the report, please click here

Posted by David Hufton