The Fed has a cunning plan
- The US Federal Reserve minutes made it clear that a rate hike in June is to be expected. This is not a surprise to economists, who have long had the June FOMC meeting ringed in their calendars. However, the minutes also signaled a growing consensus around tightening quantitative policy.
- A plan for a preannounced, progressively increasing passive tightening of quantitative policy may be an attempt to ensure sensible Fed policy in the event that US President Trump fires Fed Chair Yellen and appoints a less-than-suitable replacement.
- There is a special election for a Congressional seat in Montana today. Trump won Montana by 20%. If that margin of victory is significantly reduced, it may lead members of Congress to question whether Trump is an electoral asset or a liability, influencing his political capital in Congress.
- Europe is partially closed for the Ascension Day holiday. Revised Spanish and UK GDP data is due (this is still largely a guess at what is happening with the economy – the data will be much revised in the future). The political context probably focuses attention on the UK numbers.