Follow Paul Donovan

Minutes matter for markets

| Posted by: Paul Donovan | Tags: Paul Donovan

The minutes from the US Federal Reserve suggest it is likely to keep raising rates at a steady pace. Our forecast of three further rate increases sits comfortably with the views expressed. Using consumer price inflation (which, admittedly, the Fed does not do), that would leave real fed funds rates around zero at year end.

The Fed indicated a trade war would be economically negative. The back and forth over trade has continued. So far this week Chinese President Xi made an unoriginal speech, US President Trump welcomed Xi's speech on Twitter, and now the Chinese commerce ministry has reiterated that the speech offered no concessions to the US. Expect more noise, and relative market indifference.

The risk of missile strikes against Syria is unlikely to be an issue for most markets – the Turkish lira is perhaps the exception over the medium term. Any escalation of tensions between the US and Russia may raise concerns about further sanctions.

Economic events are limited today. There are a few central bank speakers and the minutes of the ECB meeting (far less exciting than the Fed). US import and export prices will not yet show the full effect of the Trump trade taxes.