Inflation stability, not an inflation squeeze
- The Fed minutes indicated that tightening means tightening. The tone was consistent with the idea of four rate increases this year, and belief in a modest increase in inflation. However, the Fed is not trying to squeeze inflation out of the system, rather it's trying to maintain stability. This should not be seen as especially anti-equity, therefore.
- There are more Fed speakers on the agenda today. Yesterday, Kashkari noted that markets overreact to reality, and policy-makers should not care about this. Markets also tend to ignore data revisions – and as data has generally been revised stronger, this means markets tend to underestimate economic reality.
- German Ifo business sentiment data is due. The Germans are better at filling in surveys than other nationalities, but it is still sentiment data. The French are offering final CPI data that no one will care about.
- The UK prime minister has several key ministers visiting Chequers, the prime minister's country house. This is either to discuss the long goodbye from Europe or to conduct an Agatha Christie-style country house murder. The market focus is likely to be on the prime minister's speech next week.