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The Fed, the banks, and the risk of deregulation bubbles

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Fed Chair Yellen's testimony to Congress dominates markets. The Chair speaks for the FOMC as a whole, and it seems unlikely that there will be direct hints of a March rate increase (we do not expect that). Comments on whether the Fed would have to offset bubble risks from financial deregulation would be exciting.
  • The US has gained a Treasury Secretary and lost a National Security Adviser overnight. The Trump cabinet is being confirmed relatively quickly (compared to other administrations), which means Congress will soon be free to consider other policies that matter to investors.
  • Chinese consumer and producer prices were both a little higher than expected, but the global relevance of this is limited. The Lunar New Year makes comparison difficult. China has been a net contributor to global inflation in the past (inefficient commodity consumption outweighs low cost production) but its impact is very small.
  • German GDP and Italian GDP should confirm above and below trend growth rates respectively. The UK consumer and producer price data should continue to show that the burden of a weaker sterling falls more heavily on corporates.