How much is "just below"?
- Fed Chair Powell's speech yesterday offered the analysis that interest rates "remain just below the broad range of estimates of the level that would be neutral for the economy." This got investors excited. Economists are less excited. This is what the Fed has been signaling in its forecasts all year.
- US President Trump hinted at a 25% tax for car imports. A US investigation of the Chinese tax on US cars has also been announced. Trade taxes are being partially evaded – assembling cars in Thailand to export to China for instance. Nonetheless, the more taxes are raised the harder they are to evade.
- US personal income and consumption data, and the PCE deflator favored by the Fed are all due for release. The income data should continue to show a robust labor market. The data is unlikely to show the full effect of tax hikes – these take time to pass through, and stockpiling in advance of the taxes staggers their impact.
- Germany and Spain are expected to report consumer price inflation above the ECB's target (German CPI should exceed the US PCE deflator inflation rate. German interest rates do not exceed US interest rates). The Swiss economy contracted in the third quarter.