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Will Jackson Hole Turn Out To Be Another FED Eyewash?

The Federal Reserve's Economic Symposium to be held at Jackson


Hole, WY, today on 26th August 2016, is the at the epicenter of
speculative bets. Conducted by the US Federal Reserve the
primary agenda on the table would be to iron out the differences
cropping out of economic imbalance and boost growth, thereby
spurring inflation amongst the top economies of the world.
The Symposium is a closed door conference attended by Central
Bankers, Finance Ministers, and Academicians across a wide
spectrum of troubled Economies. Currently, the focus remains on
the issues that continue to the dent the growth prospects in the
World. A key feature of the event is to lay out possible forward
guidance for the future and analyze issues relating to global liquidity outages. The World
Economy is now concerned about the Economic Growth and Worldwide productivity.

Markets addicted to low ratesMarkets had welcomed ultra low-interest rates rolled out by the Fed, post the sub-prime
mortgage crisis. A possible rate hike by the Fed would lead to contagion effects that would
adversely impact the interest cost of dollar dominated loans which might trigger panic amongst
Emerging Economies.

Negative Interest RatesMario Draghi, the ECB President along with Haruhiko Kuroda the Bank of Japan, Governor, have
pushed their economy into negative interest territories. Negative rates mean that the Commercial
Banks must pay to keep their funds on deposit with the Central Bank. In the event of a rate cut
Banks would lose a large portion of the interest pie.

Stagnant Euro-zone
The Euro-zone is still recovering from the wounds of Brexit, topping that the Economy is fast
slipping into a recession. People in Germany, France, and Italy are saving more than they spend,
leaving the Inflation Curve in a lurch. Thus the economy is not being able to generate enough
employment to meet its optimum inflation targets.

Currency wars
The World Economy is actively engaged in aggressive Currency Devaluation where major
Economies reduce their Currency Exchange rates to boost their Exports and Economic Growth.
Japan is expected to increase its Monetary Easing and Devalue its Currency. Similar Economic
Strategies have been followed by the European Central Bank. Such devaluation policies leave the
USD stronger; a further rate hike would strengthen USD even more, which will adversely impact
US Exports and its economic growth prospects.
The World Economy can only prosper and be brought back to growth if actual fiscal reforms are
enforced. Monetary policy can merely solve liquidity issues but aren't sufficient enough to bring
in actual Economic Growth. For an Economy to grow, there must be the rise in GDP. An Economy's
GDP based on the Consumption Expenditure, Government spending, Business Investment and
Net Exports. Monetary policy can only act as a catalyst for growth, so if we are to expect actual
growth strong Fiscal Reforms must be done.
You can also read our article on ECB Keeps Rates Unchanged, Italys Banks in Focus.

Disclaimer

The investment advice or guidance provided by way of recommendations, reports or other ways are solely the personal views of
the research team. Users are advised to use the data for the purpose of information and rely on their own judgment while making
investment decision.
Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022

Disclosure

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Answers to the Best of our knowledge and belief of Dynamic/ its Associates/ Research Analyst: DYNAMIC/its Associates/ Research Analyst/ his Relative:

Do not have any financial interest / any actual/beneficial ownership in the subject company.
Do not have any other material conflict of interest at the time of publication of the research report
Have not received any compensation from the subject company in the past twelve months
Have not managed or co-managed public offering of securities for the subject company.
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benefits from the subject company, nor engaged in market making activity for the subject company
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Article Written by
Sidhant Daga

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