CFP®; CIMA®, CPWA®, CIMC®, and RMA℠ Eligible

Duration: 1 Hour

Option 1: Monday, March 1^st at 9:00am ET

Option 2: Wednesday, March 24^th at 3:00pm ET

This session will include participant Q&A.

Course Description

Economies and markets globally are impacted by the policy actions of Central Banks, especially the US Federal Reserve (FED).

Central Banks such as the FED have a predominant influence on interest rates, which have major impacts on economies and financial markets. Even before the worldwide economic recession, practically a depression, caused by the pandemic, many Central Banks ran expansionary monetary policies. This meant they engineered low, and in some cases negative, interest rates. Monetary policy became much more expansionary or “looser” to restore economies after the pandemic led to record unemployment in April 2020.  Looking at aspects other than the pandemic response, the “inverted yield curve” and the FED’s reaction to it in 2019 are prime examples of the interaction between monetary policy and economic forecasts. The FED has a dual mandate to maximize employment while also keeping inflation low and steady. The FED monitors key variables related both to the job market and to inflation.  We will analyze different gauges on the Federal Reserve's "job market dashboard" and its “inflation dashboard.” Pre-pandemic the U.S. exceeded 'full employment' as commonly defined and measured by the official unemployment rate. However, other metrics did not indicate truly full employment. Of course, the pandemic has led to massive underemployment globally. We will analyze various forms of underemployment.  Next, we will discuss the interplay of monetary policy and inflation. Expansionary monetary policy (in some sense printing money) could cause inflation, and rising inflation could lead to pressure to tighten monetary policy.

Our analysis of the “job market dashboard” and the “inflation dashboard” will show that the FED monitors a variety of metrics which are crucial for its decisions about interest rates. These decisions have a strong influence on financial markets. We will discuss the recent path and forecasts for inflation and unemployment, given the FED’s targets.

Beyond the FED, we will analyze the policies and actions of other key Central Banks, including those which have adopted negative interest rates. By looking at various Central Banks, we can gain insight into the movements of exchange rates as well as of interest rates.

Finally, given the need for systemic justice and aware of the racial inequality in the US, the FED has been working on an implicit third mandate: to use monetary policy to try to improve economic opportunity for all. We will discuss this new focus.

This session will engage participants by analyzing the current state and prospects for monetary policy. This analysis will enable participants to explore the future of economies and financial markets.

Learning Objectives:

• Financial professionals need to understand the dynamics of the economy and financial markets. Specifically, understanding the impact of monetary policy on economies, and the role of the job market and its performance on financial markets, is crucial. This session aims to heighten understanding of job market linkages with the economy and with financial markets.
• The performance of the US job market, and the degree of underemployment or "slack," has been the subject of intense analysis by economists, financial professionals, and policymakers since the financial crash of 2008-09.  This concern regarding underemployment spiked due to the 22 million jobs lost when the US locked down in March and April 2020. An objective here is to discuss the metrics used by experts to analyze the job market and its practical impacts. We will link the job market metrics to policy actions by Central Banks that impact interest rates and exchange rates.
• Markets and economies globally are impacted by the policies of Central Banks such as the FED. The FED has an “inflation dashboard” which gives them useful metrics for determining monetary policy, especially interest rates. An objective is to analyze inflation and policy linkages.
• This session aims to be highly engaging, discussing with financial professionals the implications of possible policy actions by the FED and other major Central Banks on potential investment strategies.