Rate hikes are coming (as are rate cuts)
- Fed Chair Yellen had something of a Bush Sr. moment ("read my lips, rate hikes are coming") yesterday, as she stayed on message with the idea of rate hikes this year. The Beige Book of anecdotal evidence was similarly supportive, sounding more upbeat on activity.
- In a "compare and contrast" moment, the Bank of Canada cut rates yesterday. The Fed's Beige Book generally regarded lower commodity prices as boosting US activity, clearly the case of Canada is different. Investors are also speculating about more aggressive easing from New Zealand following lower commodity prices.
- The Greek parliament passed the creditors' reform package, albeit with notable defections from the governing Syriza party. Ecofin meet to decide whether this is enough to start bail out negotiations. The ECB meets, and of course questions on the economy cycle are likely to be subordinate to existential questions and Greece.
- China's state council says that it wants to keep the currency basically stable. This has been the general assumption, ahead of China's attempts to have the renminbi included in the IMF's SDR vehicle. Why stability is considered so important for SDR membership, given the volatility of existing members, is a mystery.