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Independence Day

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The US Federal Reserve declared that the monetary policy tightening cycle lives on. As it should. The US economy needs higher rates. The US Federal Reserves signaled independence from political influence. As it should. The fabled dot plots signal two rate hikes (which is what UBS expects). Fed Chair Powell signaled that the fabled dot plots were a signal to take seriously.
  • Central banks, even central banks run by lawyers, look at the whole economy when setting policy. Equity markets are not the whole economy (and may be increasingly divorced from the whole economy). The Fed is confident about domestic demand and concerned about everyone else. These days every economist around the world seems to be confident about their own economy and worried about everyone else.
  • The Bank of Japan (which may or may not be independent) left policy unchanged, as expected. The Bank of England is politically independent, but not independent of the real world consequences of political decisions (specifically the interminably tedious divorce process from the EU). So no change is expected, despite an inclination to raise.
  • The data calendar is pretty quiet. US initial jobless claims may be worth a glance, as the US labor market is getting interesting.