As expected, The FOMC meeting concluded yesterday with the decision to lower interest rates by 0.25% to a level of 4.5%-4.75%. Chairman Powell made two important remarks during the press conference: (1) he doesn’t rule out an interest hike if inflation picks up in 2025, although he thinks that’s unlikely and (2) he stressed the independence of the Fed by saying that he will not resign if newly elected president Trump would ask. The meeting was mostly about inflation, and not that much about unemployment. On the other side of the World, China’s government just announced the expected fiscal package to support the economy and the real estate sector. The central government will allocate 6 trillion yuan ($840 billion) to local governments to alleviate their hidden debt. On top of that and starting this year, the Chinese government will issue 800 billion yuan a year in local government special bonds over five years, for a total of 4 trillion yuan. Total amount of measures:$1.4Tn. Fiscal and monetary stimuli continue to work its way into the global economy and they might bring back inflation.
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