I have always been slow to keep up with the news while on vacation. Vacations are a good time to unplug. As I was scanning through my phone, a few economic dates in September caught my eye.
The first is September 20-21. This is the date of the next Federal Reserve Open Market Committee Meeting. Bill Dudley, chair of the New York Federal Reserve, recently made comments about it being closer to a point in time when the Fed will raise interest rates. He also mentioned that he doubted the election would impact their decision one way or another.
Personally, I serious doubt any Fed interest rate action at this point. The economy is plodding along at an anemic growth rate of under 1%. Any rate increase may send us into a recession. The last rate increase in December 2015 caused a stock market crash of 11% over an eight-week time span. Also, there is no way that Democrats on the Fed Board like Janet Yellen and LaelBrainard, would allow a rate hike to hand the election to Trump.
The Fed is nervous about new stock market highs and would like to facilitate an orderly step down. So you may expect more comments like Dudley’s to prod the market in their desired direction.
The next date is September 4. This is when leaders of the G-20 nations will meet in China. It has been reported there may be a lot of maneuvering to undermine the dollar’s status as the world’s reserve currency. This move could climax on September 30, when a major change to the International Monetary Fund’s “world money”, often called specific drawing rights (SDR), will take place.
China is on fully on board with the new SDR market and has approved the creation of a SDR dominated bond from the World Bank to be sold in China. This is the steps to replace the dollar as the world reserve currency in favor of a SDR. This also allows countries to purchase assets with SDRs instead of dollars, which should weaken the demand for the US Dollar. If many other investors are seeking to trade in SDRs instead of dollars, what will happen to the dollar? What will also happen to our large government debt we have to fund? Will a weakening dollar mean that our exports are more attractive?
We do live in interesting times. It will be interesting to see if these events do come true, what will become of the US stock market, interest rates on government debt, and the economy.