Global Growth Declining, Fed Funds Rate Hike not likely, Consumer Sentiment
June 10, 2016
Friday – June 10
This week, the World Bank cut its outlook for global growth citing declining business spending as it now forecasts 2.4% growth from the near 3% projected in January. In addition, low commodity prices, weak global trade and diminishing capital flows were also key factors. Here in the U.S., it is expected is also expected that growth will fall to an annual 2016 rate of 1.90% from the 2.0% originally forecasted. The World Bank says a steep decline in the U.S. energy sector was the reason behind the slide.
Next Tuesday, the two-day Fed meeting kicks off, where it expected that there is nearly a zero percent chance of a Fed Funds Rate hike at the meeting. Clues as to when the Fed will move on interest rate hikes in the future will be the key element in the statement. The Federal Funds Rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on an uncollateralized basis. The Federal Reserve is the central bank of the U.S. The Fed, as it is commonly known, regulates the U.S. monetary and financial system.
Consumer Sentiment edged lower in early June as Americans grew more cautious, though sentiment remains solid and could lift household spending and the broader economy in the summer months. The Consumer Sentiment Index fell slightly to 94.3 from May’s reading of 94.7. May was the highest reading in 11 months. “Consumers rated their current financial situation at the best levels since the 2007 cyclical peak largely due to wage gains,” said Richard Curtin, the survey’s chief economist. But “On the negative side of the ledger,” he added, “consumers do not think the economy is as strong as it was last year nor do they anticipate the economy will enjoy the same financial health in the year ahead as they anticipated a year ago.”