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On the radar: Financial stress index retreats further in January 11 week

The St. Louis Fed’s weekly financial stress index retreated further in the January 11 week, falling to -0.841 from -0.667 in the prior week, and the lowest since -0.888 in the November 30 week. While signs of financial stress are higher than before equity markets began their steep drop off in November and the Fed imposed the latest rate hike in December, indications are that fundamental stress remains largely absent from financial conditions. It remains to be seen whether these start to emerge again with the lengthening federal government partial closure and its consequent greater uncertainty for the economic outlook. However, one thing seems increasingly probable — the Fed is less likely to hike rates again any time soon, and maybe not at all in 2019.

 

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