Wry & Dry

US Fed: watched more than Donald Trump – this week.

Donald Trump’s presidential-race hairpiece was thankfully swept from front page viewing this week. No, it wasn’t because Hillary Clinton did something sensible, like resigning from that presidential-race.

It was because of another woman. And an older one at that. It was the pronouncement by Janet Yellen, the 69 year old Chairman of the US Federal Reserve Board (the ‘Fed’ – effectively the Central Bank of the US), to keep unchanged US interest rates.

The affable, but extremely smart, Ms Yellen probably has more economic power than any other person on the planet. No shortage of equal opportunity there.

The ability to control US interest rates is an amazing tool. It significantly affects that economy. And rolls around the world like a Rolling Stones tour.

The last time the Fed raised interest rates was in June 2006. Inflation was then 4%; now it is 0.2%. Unemployment was then lower than it is now. Commodity prices are one third lower now than then. The risk now seems to be more deflation than inflation.

So she decided to leave interest rates unchanged.

But it is not to the share-market that W&D looks. It is to the emerging market economies, especially of Asia. See more, below, on China.

How will Australia be affected? Not too much. The share-market will bounce around a little, as it always does. The bigger outcome on the share-market will be the new Turnbull government.