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Fundamental economics or flip-flop economics

| Posted by: Paul Donovan | Tags: Paul Donovan

  • It is not clear if the inconsistencies in Yellen's testimony to the Senate reflect her own views or the views of the FOMC as a whole. She described the labour market as "slowing" - which is a bit of an ambitious interpretation of the numbers.
  • The core CPE deflator was mentioned by Yellen - it averaged 1.7% in the first quarter. It averaged 1.7% over the past 20 years. Interest rates are somewhat below their 20 year average. We believe economic fundamentals justify a September rate increase.
  • Marine le Pen of France's FN party has backed a UK exit from the EU, and she has suggested that she would seek a French exit in the event that she won the French Presidential election next year. Markets have focused on the risks of contagion from any UK exit.
  • UK opinion polls show the two sides within a margin of error of one another. Bookmakers favour the "remain" vote. It is worth remembering that betting is a plutocratic process (one pound, one vote). The value of bets favours "remain", the volume of bets favours "exit".