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Fed Does Nothing

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On September 17th, the U.S. Federal Reserve has decided to keep its benchmark interest rates pegged at 0% to 0.25%. The rates have been at this level since December 2008. The central bank was averse to end an era of age of unprecedented monetary stimulus.

Federal Reserve Statement: Link

Information received since the Federal Open Market Committee met in July suggests that economic activity is expanding at a moderate pace. Household spending and business fixed investment have been increasing moderately, and the housing sector has improved further; however, net exports have been soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, labor market indicators show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee’s longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation moved lower; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. Nonetheless, the Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring developments abroad. Inflation is anticipated to remain near its recent low level in the near term but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams. Voting against the action was Jeffrey M. Lacker, who preferred to raise the target range for the federal funds rate by 25 basis points at this meeting.

SWFI First Read, December 10, 2018

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IMF Bentham Opens New London Office

IMF Bentham Limited opened a new London office called IMF Litigation Funding Services Limited. The division will provide litigation finance, investment capital and strategic services for disputes in the EMEA region, which includes the United Kingdom, Europe, Middle East, and Africa.

Falck Renewables Buys Portfolio of Windfarms in France

A subsidiary of Falck Renewables acquired a portfolio of five onshore windfarms in north-eastern and western France from a fund affiliated with Glennmont Partners for €37 million. The sale was due to the fund’s divestment plan. These windfarms are located in Bois Ballay, Les Coudrays, Mazeray, Eol Team, and Noyales.

Carlos Ghosn Charged by Japanese Prosecutors

Japan government prosecutors indicted Carlos Ghosn, the former chairman of Nissan Motor, and the auto company. The indictment accuses the parties of violating Japanese financial laws by underreporting his compensation. Nissan disclosed Ghosn’s misconduct which included underreporting his compensation and using corporate funds for personal expenses.

OIF Plans to Go Defensive on Public Equities

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First Inning on Augmented Reality a Strike for SWFs

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Augmented reality (AR), which is not the same as virtual reality, is an industry that sovereign wealth capital has slowly permeated. The impressive technology has not made inroads into mainstream U.S. culture – remember Google’s efforts with Google Glasses. However, these augmented reality glasses may have industrial purposes such as in car production or logistics.

Malaysia’s Khazanah Nasional Berhad backed London-based Blippar, an augmented reality studio company. Blippar appears to be on the brink of financial collapse, according to a number of media sources. There is a dispute between investors Khazanah and Nick Candy, in which the SWF had blocked emergency fundraising. This fundraising effort would have most likely lowered Khazanah’s equity stake. In June 2018, Blippar raised an extra £20 million from investors to keep things running. David Rubin & Partners LLP was hired by Blippar as insolvency practitioners.

Magic Leap

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PREVIEW COVER: January Issue of the Sovereign Wealth Quarterly

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Here is a mockup cover of the next issue of the Sovereign Wealth Quarterly, the top publication on sovereign funds, pensions, and other institutional investors.

For advertising opportunities: https://www.swfinstitute.org/advertise/

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