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Fed fun

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The Greco-German crisis in less than 45 seconds: Ecofin meets. Nothing will be decided. There may be name calling. Watch for bank deposit withdrawals (from Greek and potentially other members' banks) as a barometer of breakup risk.
  • Grownups will be interested in the US Federal Reserve meeting. June was once thought to be a meeting to raise rates, but the expectation is now focusing on September, which is what the dot chart would indicate. Remember, not all dots are created equal at the Fed.
  • The US economic fundamentals, stripped of the noise, suggest it is time to consider tightening. The fact that rates have remained unchanged for so long after the ending of the recession and the recovery of the labour market is unprecedented modern times.
  • The UK offers minutes from the Bank of England meeting, which may have a hawkish tinge. The labour market data is due, but this is a little less important than in the US as the wage consequences of a tighter labour market are partially offset by supply flexibility as workers flee the Euro area.