Fed to start normalizing its monetary

by HVB Group Global Markets Research Impulses. Once again, the US economy is proving to be more “resilient“ than anticipated. At just over 1½%, we expect that GDP growth in Q2 2008 was even stronger than at the beginning of this year (+1%). The main catalyst was, however, the federal tax rebate checks (p. 5-7). Fed. This boost to purchasing power should also be felt in the current quarter. At the same time, inflationary pressures are still increasing. But the Fed cannot yet scale back its massive monetary policy stimulus as reflected by the negative real target rate (cf. chart): the financial crisis has not been resolved, equity markets remain vulnerable, the labor market is still weakening, and the elections are drawing closer. Policy change. The Fed should, however, have reached the turning point towards the end of the year... [read full story]