Correspondent, Chicago
Ann's Feed
May 1, 2015

Fed rate hike in June ‘on the table,’ two policymakers say

/PHILADELPHIA (Reuters) – The Federal Reserve could well raise interest rates as soon as June, two top U.S. central bankers said on Friday, so long as economic data strengthens as expected from a dismal first quarter.

That view – from the hawkish-leaning chief of the Cleveland Fed and from the centrist head of the San Francisco Fed – is at odds with the view of many traders, whose bets in the interest-rate futures markets suggest they have all but discounted a June rate hike and now expect the Fed to wait until December before raising rates for the first time since 2006.

May 1, 2015
via MacroScope

Monetary policy: New T-shirt needed?

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San Francisco Fed President John Williams  believes deeply that monetary policy is data-dependent, so much so that he has printed the mantra on T-shirts that he is giving away coast to coast. On Friday at Chapman University in Orange, Calif., however, he didn’t discuss the current state of U.S. economic data or the stance of monetary policy. Instead, he focused on why forcing the Fed to follow a strict monetary policy rule to make interest rate decisions would be, well, a problem (http://reut.rs/1bmCfvB). It’s a view that a number of his colleagues, including Fed Chair Janet Yellen, have publicly embraced. Monetary policy — it’s independent. Sounds like something you could put on a T-shirt.

May 1, 2015

CME Group suspends two gold futures traders for allegedly spoofing

By Ann Saphir and Tom Polansek

(Reuters) – CME Group Inc on Thursday suspended two
traders from its markets for allegedly colluding to enter orders
repeatedly with no intention of trading, a strategy that has
been fingered as a key contributor to the 2010 Wall Street flash
crash.

Heet Khara and Nasim Salim, both traders of CME Group’s gold
and silver futures contracts on its Comex exchange in New York,
are prohibited from trading for 60 days, according to a
disciplinary notice released by the futures exchange.

Apr 29, 2015
via MacroScope

As Fed’s statement shrinks, data looms larger

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Perhaps the most notable aspect of the Federal Reserve’s April statement is its brevity: at just 560 words, it’s the shortest post-Fed-meeting statement since October 2012.  In saying less about its much-anticipated first interest-rate hike, the Fed is nudging markets to pay attention to other stuff. Like, for instance, the April jobs report next Friday, and the May jobs report one month later. “The Fed is data dependent,” says Eaton Vance portfolio manager Eric Stein. “They’d like to get to a world where the market will react more to numbers rather than Fed meetings and statements.”

Apr 28, 2015
via MacroScope

Data isn’t as objective as the Fed might have you believe

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Fed officials say they will be “data-dependent” when it comes to making monetary policy. San Francisco Fed President John Williams feels so strongly about it, he’s even printed up a T-shirt to get that message across. But truth be told, data-dependency is not as objective as it sounds. Data doesn’t dictate policy; it’s the interpretation of data that’s key. What is rate-hike-worthy data to one policymaker is keep-the-pedal-to-the-metal data for another. Take, for instance, U.S. GDP growth. Richmond Fed President Jeffrey Lacker says he expects GDP growth to average 2 percent to 2.5 percent this year, a pace that would justify a Fed rate hike in June. Chicago Fed President Charles Evans expects 3 percent growth this year, and does not believe even that would justify a rate hike until the first half of 2016. So what does it tell you about monetary policy if you see GDP growth of 2.5 percent? Not a whole lot, judging from these two. And the statements of other Fed officials are hardly more helpful. Indeed, as Atlanta Fed President Dennis Lockhart said recently, “I don’t think it is advisable to approach such a decision with rigid quantitative triggers in mind.” Watch the data, sure. But don’t assume the data will tell you much about the exact timing of the rate hike. Monetary policy – it’s subjective. Maybe some policymaker will print that on a T-shirt.

Apr 24, 2015

Flash crash trader’s CME seat: bought for $435,000, now worth just $69,500

SAN FRANCISCO/CHICAGO, April 24 (Reuters) – The UK-based
trader accused by U.S. authorities of making more than $40
million manipulating markets and contributing to the 2010 Wall
Street flash crash was on the losing end of at least one trade:
his purchase of the CME Group seat that helped to make the
alleged scheme possible.

Navinder Sarao bought the seat in May 2008 for $435,000,
only a few months before the financial crisis hit, exchange
records show; it’s now valued at just $69,500, an 84 percent
decline. He still owns it, an exchange spokeswoman confirmed.

Apr 23, 2015

Analysis: Delayed flash crash arrest may herald future spoofing detection woes

By Douwe Miedema and Ann Saphir

WASHINGTON/SAN FRANCISCO(Reuters) – The five years it took
regulators to bring high-profile charges against a UK trader
underscore how hard it is to spot wrongdoing in fast-developing
markets, and may herald problems in detecting future mishaps.

Navinder Singh Sarao, 36, was arrested in London on Tuesday,
charged with market manipulation and wire fraud. Authorities
sought to link his activities to the May 6, 2010, so-called
flash crash when about $1 trillion was temporarily wiped out
from U.S. stock markets in a matter of minutes.

Apr 23, 2015

Delayed flash crash arrest may herald future spoofing detection woes

WASHINGTON/SAN FRANCISCO (Reuters) – The five years it took regulators to bring high-profile charges against a UK trader underscore how hard it is to spot wrongdoing in fast-developing markets, and may herald problems in detecting future mishaps.

Navinder Singh Sarao, 36, was arrested in London on Tuesday, charged with market manipulation and wire fraud. Authorities sought to link his activities to the May 6, 2010, so-called flash crash when about $1 trillion was temporarily wiped out from U.S. stock markets in a matter of minutes.

Apr 13, 2015

Exclusive: Fed’s Williams sees less risk of rate retreat after lift-off

SAN FRANCISCO (Reuters) – As the U.S. job market improves, the risk is receding that an unexpected setback could derail the recovery once the Federal Reserve raises interest rates, San Francisco Fed President John Williams told Reuters.

Concern that it could be forced to retreat to near-zero interest rates, where the Fed has little room to maneuver, if it pulled the trigger too soon has been a significant reason the Fed has kept rates pinned to the floor well into the recovery. With that less of a threat, policymakers can now focus on charting an appropriate rate path and worry less about sliding back to zero, Williams said in an interview late on Friday, expressing a view that appears to have taken root more broadly at the central bank.

Apr 10, 2015

PG&E fined record $1.6 bln for deadly California pipeline blast

SAN FRANCISCO, April 9 (Reuters) – Pacific Gas & Electric
Corp must pay a record $1.6 billion in penalties
stemming from a natural gas pipeline explosion in 2010 that
killed eight people near San Francisco, California’s chief
utility regulator ordered on Thursday.

The penalty levied for the deadly rupture in San Bruno,
California, marks the largest ever imposed by the five-member
state Public Utilities Commission, dwarfing a $38 million fine
against PG&E for a 2008 natural gas explosion near Sacramento,
according to the agency.