Fed Sees “Elevated Valuation Pressures”, Will Continue “Gradual” Rate Hikes

Moments ago the Fed released its semi-annual Monetary Policy Report which forms the basis of Janet Yellen’s testimony to Congress next week, and while it does not traditionally discuss monetary policy it does provide a snapshot of the Fed’s take of the economy and capital markets at any given moment. Here are some of the highlights courtesy of BBG:

  • Fed says outlook for higher inflation appears to be on track
  • Fed sees labor market strong, hourly pay gains moderate
  • Fed: fiscal policy likely to give gdp moderate boost this year
  • Fed: prime-age labor force participation may continue to rise
  • Fed: drag on gdp from higher oil prices likely to be smaller
  • Fed says valuations still elevated for range of assets
  • Fed: vulnerabilities from leverage in financial sector look low
  • Fed: commercial property valuations continue to be stretched

There were no major surprises in the 63-page report which remains consistent with the Fed’s current outlook which is that strong economic growth and low unemployment require rate rises but that a lack of severe inflation pressures means they can remain gradual. read more

The Permian Is Banking On These Key Pipelines

Authored by Tsvetana Paraskova via OilPrice.com,

Booming crude oil and natural gas production in the Permian Basin and not enough pipeline takeaway capacity have widened the discounts at which oil and natural gas pumped in the most prolific U.S. shale basin are trading relative to the U.S. benchmarks.

Midstream operators have planned and continue to announce plans for more oil and natural gas pipeline projects in the area to ship oil and gas from the Permian to the Gulf Coast. But many of those pipelines will not come on stream before late in 2019 and 2020. read more