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Now is the Summers of our discontent

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  • Larry Summers has written a letter saying that he does not want the job of Fed Chair. Markets have become agitated by this, having perceived Summers as a hawkish candidate, and speculating that Janet Yellen will replace Bernanke (though one could suggest Summers' move reduces her chances).
  • The issue of the Fed Chair probably does not impact near term policy that much. We view the scaling back of quantitative policy as established in economic terms, and therefore somewhat automatic. The views of the next Fed Chair matter most when the reversal of quantitative policy concludes.
  • The US-Russia deal on Syria will be a background focus this week, with the Syrians required to submit an inventory of weapons, and the UN Security Council expected to issue a resolution. For the time being the agreement has encouraged risk markets.
  • Euro area inflation is due for August. From the US there is the Empire State survey of sentiment, and industrial production. Production is forecast at a robust 0.7% (sentiment indicators have been far more volatile than underlying economic data of late).

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