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Loose change

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Patience has disappeared from the Fed's vocabulary, and although Fed Chair Yellen was at pains to say that the absence of patience does not equate to impatience, the language is still consistent with a mid year interest rate increase in the United States.
  • The Fed also revised its rate and growth forecasts lower, and tis suggests less tightening will transpire this year. However, we feel that the Fed may be underestimating inflation in the US, and that could give way to a more aggressive tightening cycle next year.
  • The Euro area is offering up labour cost data - figures which dispute the idea that there is now or ever has been a credible deflation threat in the Euro area. Labour costs account for two thirds of the general price level, and it is hard for the general price level to drop when two thirds of the index is rising comfortably over 1%.
  • The Swedish Riksbank governor declared that inflation was bottoming, and then announced that banks in Sweden would have to pay higher taxes (the policy was phrased as "negative interest rates" but negative interest rates are effectively a tax).