Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

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Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Macroeconomics

<p>Despite the current lack of quality information about the economic impact of spread of the coronavirus outside of China, the Federal Open Market Committee (FOMC) lowered the federal funds rate by 50 basis points to just 1%-1.25% on 3 March. Financial markets remain fixated with the rising economic and financial costs of prolonged and geographically-dispersed containment policies pursued by governments.</p>
<p>Initially, the FOMC did not wish to be portrayed as panicking in the wake of the coronavirus outbreak, particularly given respectable incoming US economic data and the earlier resilience of US equities. Furthermore, governments' efforts to contain the spread of the virus may have also delayed FOMC action dues to hopes for a quick decline infection rates. </p>
<p>Recent declines in US equity prices raised the ante on the FOMC to respond to the rising economic uncertainty relating to the coronavirus spread. History suggested that the FOMC would eventually fall into line with market expectations, but their main focus will be to ensure that the financial sector does not ration credit availability to the rest of the economy. </p>
<p>US Treasuries have rallied sharply with the return of risk aversion, while recession concerns raise fears of the federal funds rate returning to zero that could impact the short-term interest rate expectations embedded in long-term interest rates. Hitherto, the bulk of the decline in long-term US interest rates is attributable to a falling term premium, thereby suggesting that global risk aversion is dominating short-term interest expectations in their determination.</p>
<div>The FOMC cut the federal funds rate ahead of its next policy meeting on 17-18 March, but the equity market's initial reaction was disappointing, thereby suggesting investors wanted more aggressive action. Meanwhile, the depletion of the Fed's interest rate buffer raises the chances of another protracted period for a zero bound policy rate.</div>

Despite the current lack of quality information about the economic impact of spread of the coronavirus outside of China, the Federal Open Market Committee (FOMC) lowered the federal funds rate by 50 basis points to just 1%-1.25% on 3 March. Financial markets remain fixated with the rising economic and financial costs of prolonged and geographically-dispersed containment policies pursued by governments.
Initially, the FOMC did not wish to be portrayed as panicking in the wake of the coronavirus outbreak, particularly given respectable incoming US economic data and the earlier resilience of US equities. Furthermore, governments' efforts to contain the spread of the virus may have also delayed FOMC action dues to hopes for a quick decline infection rates. 
Recent declines in US equity prices raised the ante on the FOMC to respond to the rising economic uncertainty relating to the coronavirus spread. History suggested that the FOMC would eventually fall into line with market expectations, but their main focus will be to ensure that the financial sector does not ration credit availability to the rest of the economy. 
US Treasuries have rallied sharply with the return of risk aversion, while recession concerns raise fears of the federal funds rate returning to zero that could impact the short-term interest rate expectations embedded in long-term interest rates. Hitherto, the bulk of the decline in long-term US interest rates is attributable to a falling term premium, thereby suggesting that global risk aversion is dominating short-term interest expectations in their determination.
The FOMC cut the federal funds rate ahead of its next policy meeting on 17-18 March, but the equity market's initial reaction was disappointing, thereby suggesting investors wanted more aggressive action. Meanwhile, the depletion of the Fed's interest rate buffer raises the chances of another protracted period for a zero bound policy rate.

Fed's Depleting Interest Rate Buffer Puts Policy Credibility into Focus Following Emergency Easing