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A Fed divided

| Posted by: Paul Donovan | Tags: Paul Donovan

  • There was a mass of statements from the US Federal Reserve overnight, although the volume was not perhaps matched by message consistency. There was disagreement on the impact of the UK referendum on the US economy.
  • On policy a spectrum of views was on display. Kashkari suggested that rates could stay low because inflation was low (this second point is not entirely true. Most inflation indicators are at or above 20 year averages). Mester was suggesting every meeting is a potential rate hike meeting.
  • The Japanese Cabinet Secretary said "no" to 'helicopter money'. Why is a government minister opining on monetary policy matters that are in the BoJ's remit? Why, indeed. With Japanese consumer inflation expectations the highest in the developed OECD, helicopter money would seem an unwise aggravation.
  • In the UK, if Her Majesty has a spare few minutes she is expected to appoint May as her new Prime Minister. Markets are likely to be most interested in who will be the Chancellor of the Exchequer, and what that might signal about policy direction (fiscal, financial and regulatory).