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The Fed giveth, the Fed taketh away

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  • Fed Chairman Bernanke indicated quantitative policy stays for now, but that it could also end up being reviewed in "a few meetings". It is all contingent on the data flow, in the view of the Fed Chairman.
  • The Fed's dependence on data flow to determine policy is exactly what a good independent central bank is supposed to do. Better that than being hostage to the whims of political action (Japan or inaction (Euro area), which undermines policy independence..
  • Euro area manufacturing sentiment is due and is expected to show weakness (of course). The questions are how much weakness, and how much divergence is evident in the data (the former is economically important, the latter politically important). .
  • UK GDP is revised again by the ONS - markets are looking for an unchanged rate. However, it is always possible that the last period of consecutive negative economic is revised away, clearly demonstrating why the concept of "recession" is more meaningless media jargon than economic tool.

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