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Really, was that a surprise?

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The US Federal Reserve did what was widely expected. The Fed will start scaling back bond holdings in nominal dollar terms from next month. Fed Chair Yellen essentially indicated "quantitative policy tightening ends when you pry it out of my cold, dead hands".
  • There was a relatively clear hint of a 0.25% rate hike at the next Fed meeting. This is also not a massive surprise. Unless one lives in a fantasy world of pinpoint accuracy, the Fed has met its inflation target and the US has full employment and trend growth. The only abnormality in the US economy is the interest rate.
  • The Bank of Japan pursued its policy of masterful inactivity overnight, changing nothing. This is no surprise. We have the inestimable delight of hearing from ECB President Draghi today, who is likely to be a reluctant tightener of policy.
  • There is little on the data calendar. The US Philly Fed opinion poll on business sentiment is due. UK PM May will discuss tomorrow's speech on the EU exit with the cabinet, increasing the chance of leaks. Iran remains in focus – US President Trump has made a decision on the nuclear deal, but will not say what it is.