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It's a rate rise, not "lift off"

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The Greco-German crisis in 45 seconds. The Eurogroup of finance ministers meet today. Nothing of any real interest has happened so far, but markets continue to assume a deal will be done.
  • German ifo business sentiment follows on from some generally positive sentiment figures yesterday – with the normal caveat about the quality of all sentiment data. The ifo is still treated with some reverence in the market, a legacy from the days when German data was wrongly treated as a proxy for the Euro area as a whole.
  • US first quarter GDP is due for another bout of revision this morning (those who dare criticise economists forecast accuracy should remember just how often this data is revised – revisions take place for up to 80 years after publication). Note that Q1 GDP actually rose in year over year terms on the current reading.
  • Fed governor Powell appeared to endorse the UBS view of a September and December rate hike in the US this year. Media sensationalisation of the rate increase as "lift off" needs to stop: lift off implies a rocket like trajectory, and the Fed seems to be at pains to point out the gradual nature of the tightening cycle.