Financial and Economic Brief - September 26, 2017by © Liberty Publishing, Inc.
Fed is Focusing on “Normalization”
U.S. central banker John Williams said he does not expect any market turbulence as the Fed starts reducing the huge balance sheet of $4.5 trillion in assets that was built up to stimulate the U.S. economy after the 2007-2009 financial crisis and recession. “Obviously we've talked about this endlessly. We've announced it and the markets have taken totally taken this in stride. But it's still an open question as we actually implement this next month and over the next several years - how will markets react?” The Fed also signaled it will likely raise rates again later this year and three more times next year, despite low inflation.
Mercedes Spending in Alabama
Mercedes will be spending $1 billion in its Alabama plant and creating 600 new jobs as it plans to make new electric SUV models and construct a battery plant nearby. The investment will put Mercedes in direct competition with Tesla in the U.S. “With production locations for electric vehicles and batteries in Europe, China and, now, the U.S., our global network is ready for the era of electric vehicles,” said Markus Schäfer, the automaker's head of production planning. Mercedes says that by 2022 it will offer customers at least one electrified alternative in all vehicle segments.
According to European Central Bank (ECB) President Mario Draghi, the ECB is growing increasingly confident that inflation will rise back to its target but patience is still needed. Draghi “singled out” currency volatility as a source of uncertainty which requires monitoring and argued that the economy still needed to “absorb slack”, requiring “ample” ECB accommodation. With the euro zone economy now growing for the 17th straight quarter, the ECB is expected to reduce stimulus from next year, even if inflation will remain below the ECB’s near 2% target for years to come.