Daily update
Daily update
- Despite King Charles reassuring US members of Congress that there was no “rearguard action” to re-establish control, the Federal Reserve has acquired a distinctly British accent. Four dissents (in two directions) is a straightforward Bank of England imitation (economics is always more convincing in a British accent). Fed Chair Powell pledged to remain in office as a governor.
- This creates a challenging environment for Fed Chair nominee Warsh. Warsh commands a different level of respect within the Fed than Powell, and Powell has had difficulty building support. If Federal Open Market Committee (FOMC) members are not sock puppets, they will base policy votes on economic facts—but if there is an ambiguous decision, Warsh may struggle to influence the outcome.
- The European Central Bank (ECB) should continue its masterful inactivity. The only reason for a central bank to tighten policy after an oil shock is if there are second-round effects. It is too soon for clear evidence of second-round effects—although several major Euro economies have had inflation surprise to the downside.
- Japanese and German consumer spending data continues to demonstrate consumers’ ability to maintain non-oil spending even as oil prices rise. US March personal income and spending data (and the deflator) will be looked to for signs of similar resilience.