2016–09–20 Tomorrow is the big day
So Tomorrow is the big day and we will have three Central bank rate decisions and statements. At 3am gmt we have the Bank of Japan. Then at 6pm we have the FOMC projections and the dot plots revision with the FED’s rate decision and statement. And to end the day at 9pm we have the Reserve Bank of New Zealand rate decision. The consensus of the analysts and the markets are for no change on current rates for all three central banks. Rumors about Haruhiko Kuroda president of the BoJ introducing new stimulus are running hot but the market is skeptical how further stimulus can correct the current outlook, huge debt and credit bubble.
So this is the last FOMC dot plot revision from March to Junes projections and we can clearly see the projections have been revised down. How much will they revise down tomorrow?
So the FOMC still sees rates above 3% above 2008 and around 1.5% at the end of 2017. For this year we see rates expected to be below but near 1%. The FOMC have been talking a hawkish speech for over 1year and did nothing so far and this is why the market is only expecting one more hike in December. If the FED does not hike it will be seen as weak and little credible. Their target can be reached with one hike in December and they are doing everything possible to prepare the markets for it. The S&P500 is where all the big money is, all the biggest companies, where all the power resides and where all politicians and central bankers get their pockets funded. So this is politics and a theater. the FED wants to avoid a market crash, or bigger correction, over 20% at all costs. the money needs to keep flowing and dividends cashed into banks accounts from all the big guys. Hiking would strengthen the dollar and cause a correction on an already very overbought market. But if the dollar keeps weak and rates cheap investors will keep pumping money into this bubble.
So this is the big dilemma and drama, a big expensive theater to entertain us and manipulate the market sentiment, lowering risk and volatility and full damage control. Every time the big guys say “Everything is ok”, you know there will be a big storm coming. The dollar needs to stay the world currency, needs to be reliable and strong, but without gaining market strength to keep economy recovering and increasing. Meantime the big guys have to make even more money to weather the storm that is coming.
Lets see how much the dot plots will change, as this is what basically drives the long term fundamentals and will dictate the trend for the following months.
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