This week, the European Central Bank (ECB) met to discuss monetary policy and next week the Federal Reserve Bank will do the same. These are important meetings as central banks are at a crossroads as to how aggressively to confront a slowing global economy. The biggest challenges they are facing are geopolitical events such as the intensifying trade war and Brexit. It is not clear how those events will unfold in the coming months or how fully they will affect economic growth.
Growth in Europe is currently flat. On Thursday, the ECB unveiled a plan to cut interest rates and provide stimulus with quantitative easing. It was not the bazooka some were expecting but was a very good sized package that also left the door open for future actions. In their comments following the meeting, they stated the bank will do everything it can to support the economy.
The Federal Reserve has less reason and urgency to act as aggressively as the ECB. The U.S. economy is growing approximately 1.5% - 2.0%, though the growth is uneven. U.S. manufacturing is slowing, or even contracting, due to the trade wars, but the service sector is solidly growing. And the service sector is a much larger component of the U.S. economy. So the expectation is that the next week the Federal Reserve will take a more measured approach and probably cut short-term rates .25%. Investors will also be paying attention to the Fed comments on how they plan to navigate the coming months.
In this week's The Friday Buzz we share an article on the ECB as well as articles on U.S. job growth, how the gig economy is getting new regulations, emergency savings accounts for individuals, how researchers are testing how to turn back the biological clock, global economies over two thousand years and flying cars! We were also touched to receive a letter from a Camp Sunshine family. Thank you for reading!
- ECB Meeting: The ECB cut interest rates from -0.4% to -0.5% (yes those are negatives) and on November 1st will restart quantitative easing with monthly purchases of bonds to the tune of $22B. They are hoping the measures will jolt economic growth higher but are prepared to do more if necessary. Also, Christine Lagarde is preparing to step in to head the bank on November 1st when Mario Draghi's eight-year term ends. The Brexit deadline is October 31st so Ms. Lagarde's first day could be a wild one. Bloomberg Time