Interest rates fell in January as the Federal Reserve signaled that it would hold off on additional rate increases until economic data warranted a rise. Bond prices, which move inversely to bond yields, rose across all fixed income sectors, alleviating concerns of further rate increases.
It is expected that the Fed won’t raise again until it has validation about economic and wage growth producing inflationary pressures.
Central banks from around the globe continue to shrink their balance sheet, emulating the latest actions by the Federal Reserve in the United States. Shrinking or reducing a central bank balance sheet is a form of monetary tightening, thus an indirect method of raising short term rates. So far, the Fed’s balance sheet has fallen from a peak of $4.5 trillion four years ago in January 2015 to $4 trillion in January 2019.
Sources: U.S. Treasury, Federal Reserve, Bloomberg
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