Fed Warns “Valuation Pressures Have Increased Further” In Latest Monetary Policy Report

Friday, July 7, 2017
By Paul Martin

by Tyler Durden
Jul 7, 2017

Moments ago the Fed released its July Monetary Policy Report which forms the basis of Janet Yellen’s testimony to Congress next week, and while it does not traditionally discuss monetary policy it does provide a snapshot of the Fed’s take of the economy and capital markets at any given moment. Here are some of the highlights courtesy of BBG:

Federal Reserve says bond liquidity ample despite lower market-maker inventory, in monetary policy report in Washington.
Fed sees little evidence of liquidity impairment in corp bonds
Fed says financial markets recently performed well under stress
Fed says financial system vulnerabilities stayed modest
Fed notes liquidity mismatch at FHLBs as funding-strain risk
Fed warns that valuation pressures are up in bonds, equities, com real estate
Fed says term-premium rise poses downside risk to long bond prices
Fed sees signs of tightening credit in commercial real estate
Fed defends its opposition to rules-based monetary policy
And some further details, first on the the global productivity slowdown.

“Over the past decade, labor productivity growth both in the United States and in other advanced economies has slowed markedly. This slowdown may reflect a waning of the effects from advances in information technology in the 1990s and early 2000s. Productivity growth may also be low because of the severity of the Global Financial Crisis, in part because spending for research and development was muted. Some of the factors restraining productivity growth may eventually fade, but it is difficult to ascertain whether the recent subdued performance of productivity represents a new normal”

The Rest…HERE

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