The U.S. Federal Reserve always finds it impossible to keep monetary policy out of the election cycle maelstrom, but it would do well to stick to its mandate and ignore the usual election cycle games, writes Michael Ivanovitch.
Markets should join growing concerns about the toll trade deficits are taking on outlook for corporate sales and profits instead of clamoring for cheap money.
Politicians inevitably wade into interest rate discussions, and market punters take those "who-said-what" events as their daily betting fodder. Still, markets continue to fret that the flattening yield curve foreshadows a bleak growth outlook, the economy, in their view, is headed for a recession and — music to politicians' ears — the Fed has damaged the economy and is way overdue for a round of interest rate cuts.Hopefully, the Fed knows better, and will continue to discharge its difficult policy mandate regardless of market noise and political posturing.
Trade fights are continuing no end while colossal deficits keep pushing America's net foreign debt to $10 trillion and counting. Those liabilities are funded by imports of foreign savings in exchange for a growing pile of U.S. debt instruments — $6.4 trillion at the end of last April. And it is just a matter of weeks or months until a resumption — if there is one — of trade talks with China hit a new impasse in the face of Beijing's efforts to completely deconstruct Washington's negotiation strategy.
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