Conflicting signals from the Federal Reserve on the timing and magnitude of U.S. interest rate cuts have accelerated hedging flows into swaptions and derivatives tied to overnight rates, with investors seeking protection against heightened policy uncertainty. Short-term volatility --specifically three-months and under -- on longer-dated swaptions such as those on 10-year and 30-year swaps has picked up following a prolonged period of compression. Swaptions, which are options on interest rate swaps, are one segment of the more than $600 trillion over-the-counter rate derivatives market....
The minutes of the Federal Reserve's (Fed) discount rate meetings from April 7, 28, and May 8 revealed that policymakers are increasingly uneasy about the coming economic impacts, mostly from U.S. trade policy. While overall economic conditions are stable, tariff uncertainty continues to weigh on business operators, who are preparing contingency plans and slowing their investment and spending rates. Key highlights Overall, central bank directors noted considerable uncertainty about the outlook. While most directors described current economic conditions as generally stable, they also...
Austan Goolsbee, President of the Chicago Federal Reserve Bank, expressed his belief on Monday that the U.S. central bank will be able to reduce short-term borrowing costs once the uncertainty caused by tariff policies is resolved. During a webcast interview with the Quad Cities Regional Business Journal in Davenport, Iowa, Goolsbee stated that if the economy can navigate through this challenging period, the dual mandate looks promising. The dual mandate of the Fed is a reference to its two primary objectives: full employment and price stability. Goolsbee further stated his ongoing belief...
Federal Reserve Bank of San Francisco President Mary C. Daly was on the news Thursday night, noting that the White House's unbalanced trade policies are keeping the Fed in a wait-and-see mode as policymakers prepare to see what kind of impact on the U.S. economy high import tariffs will have on the broader economy. Key highlights The labor market is in solid shape. Workers are worried about inflation. We're not going to get to 2% inflation this year. We're actually making progress on inflation. I see the balance in the labor market that we need for 2% inflation. Bond yields show the...
According to a statement by the Federal Reserve (Fed), Fed Chair Jerome Powell met with United States (US) President Donald Trump on Thursday, where the head of the Fed reiterated that the Fed's decisions on monetary policy are based on trackable data from the US economy. Donald Trump has been writhing on social media for months, desiring sharp rate cuts from the Fed as a low rate environment tends to make federal debt cheaper, something that the Trump administration's budget policies will add plenty of over the next ten years. Fed highlights Fed Chair Powell met with Trump at White House...
Federal Reserve Bank of Chicago President Austan Goolsbee said on Thursday (29) that they could return to a situation where interest rates could fall if tariffs are avoided through a deal or otherwise, according to Reuters. "If politics drives interest rates, inflation will come back," Goolsbee added, further noting that sometimes central banks have to do what the political apparatus doesn't like. "Stagflation is the worst case scenario for central banks; that's not what we're facing now." "This is the direction of stagflation, but it's not stagflation." Market reaction The US Dollar...
President Donald Trump said he would fire Lisa Cook from the Federal Reserve's Board of Governors if she does not resign her post over mortgage-fraud accusations from a top...
The Reserve Bank of Australia (RBA) maintained its cash rate at 4.1% during its April meeting, holding borrowing costs unchanged after slashing 25 bps in the February meeting, aligning with market...