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Tasteful tightening, and its implications

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Bond investors have had to think long and hard about yields this week. Central bank comments have been correlated (but almost certainly not coordinated) – as economist-policymakers all react logically to similar economic circumstances. Policy tightening is to be expected – but it will be genteel, tasteful tightening (the economic equivalent of an episode of Downton Abbey).
  • Inflation data litters the economic landscape today. The Euro area offers up the flash estimate of consumer price inflation, with the Spanish having offered "weaker" and the Germans having offered "stronger" data. Germany outweighs Spain in the aggregation, leaving French data today the arbiter of the collective number.
  • The US personal consumer expenditure deflator, favored by the Federal Reserve, is due. Consumer prices are not followed by the Fed because the largest single component of CPI is a fictitious price that no one pays. However, there are still distortions in today's numbers.
  • The UK offers revised GDP data, a day after the US admitted that growth in the first quarter was running at double the initial estimate (this latest number can still be revised, and trends are exaggerated by annualization).