Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
INTEREST RATE MARKET FUTURES
Federal Reserve governor Christopher Waller said on Friday he would support a slower pace of interest rate increases at the central bank’s next meeting. Waller, who was an early supporter of rapid interest rate hikes last year, said the economy and the outlook for inflation was changing in a way that would allow the central bank to slow the pace of interest rate increases.
His comments represent the last opportunity for policy makers to speak ahead of their coming policy meeting because last Saturday started the traditional quiet period ahead of the Fed’s February 1 policy meeting.
According to financial futures markets currently, there is a 98.0% of probability that the Federal Open Market Committee will increase its fed funds rate by 25 basis points and a 2.0% probability of a 50 basis point hike at the February 1 policy meeting.
The long term outlook is for higher futures prices.
STOCK INDEX FUTURES
Stock index futures are higher despite an atmosphere of increasing concerns about a potential recession.
The 9:00 central time December leading indicators report is expected to show a 0.7% decline.
The technical aspects are supportive on balance.
CURRENCY FUTURES
The U.S. dollar index is higher despite several Federal Reserve officials making the case for a downshift in the U..S. central bank’s rate tightening path.
Interest rate differentials are neutral for the U.S. dollar.
The European Central Bank is likely to raise interest rates by 50 basis points in February and March, according to ECB governing council member Klaas Knot.
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