Give thanks for economists
- It is time to give thanks for independent central banks run by economists (not politicians). The minutes of the US Federal Reserve's December meeting indicated a December rate hike is highly likely although this was already signaled by Fed Chair Yellen.
- The Fed minutes did indicate considerable divergence about spare labor market capacity despite recognizing the stronger US inflation story. This division, alongside Yellen's bias and uncertainty about Trump's future Fed nominees, increases the risk of a loose fiscal/loose monetary policy combination in the US in 2017.
- President Erdogan of Turkey has declared that he has nothing against the independence of the central bank "but…". His speech criticized the high real interest rates in Turkey currently. The Turkish lira has hit a record low.
- German and Spanish "final" GDP data is due. German growth and inflation divergence in the Eurozone may increase problems for the ECB in 2017. Spanish real GDP should be confirmed at a robust level although nominal GDP growth (relevant for debt) is running at half its pre-crisis rate.