Mel's Blog

ECB "The Announced Taper" - Check This Out!

October 31st, 2017 3:46 PM by Mel Samick

The most highly anticipated event of last week, the European Central Bank meeting, contained no surprises and caused little reaction even though they expected much more from the ECB meeting, it turned into a yawner. Reports about President Trump's favored pick for the next U.S. Fed Chair caused some volatility during the week but had only a small net effect. The key GDP report also was not much of a market mover. In the end, mortgage rates finished the week slightly higher.

 

At Thursday's meeting, the European Central Bank (ECB) announced future plans for its bond purchase program which closely matched investor expectations. The ECB will extend its bond purchase program from its current end date in December by nine months to September and will reduce its monthly purchases from its current level of 60 billion euros to 30 billion euros beginning in January. The market took this in stride.

 

President Trump is expected to soon announce his nominee to serve the next term as Fed Chair. On Tuesday, it was reported that the two leading contenders out of the many people under consideration were Jerome Powell and John Taylor. The report that Taylor is one of the two finalists caused some concern for investors. Taylor is viewed as the candidate most in favor of a more rapid increase in the federal funds rate. The news caused mortgage rates to move higher. On Friday, however, another report named Powell as the top choice. Under Powell, it is expected that the Fed would maintain a course for monetary policy similar to the current Fed policy. Following the news, mortgage rates offset the increase from the report on Tuesday. The market is betting against the economist in favor of Powell who will steer things pretty much as the Fed has been doing for the last few years. Yellen is believed out of the running due mostly to her very favorable comments over the years for the Obama economic agenda.

 

The first estimate for third quarter Gross Domestic Product (GDP) growth released on Friday was 3.0%, well above the consensus forecast of 2.5%. However, an increase in inventories accounted for 0.7% of the growth. An increase in inventories is typically viewed similar to a one-time event and is discounted when evaluating the underlying strength of the economy.

 

Due to the large influence of inventory levels on the results, investors considered the GDP data to be close to the expected levels and showed little reaction. But Trump's pro growth plans have additional running room if the 4th quarter does well. Based on recent reports the economy and jobs seem to be on the rise.

 

 Let's keep our fingers cross for continued prosperity, whether your a Democrat or a Republican we all want better times so we can all prosper, we all can hopefully agree to that!

Mel

Some info provided by MBS Quoteline


Posted in:General
Posted by Mel Samick on October 31st, 2017 3:46 PM

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