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The Fed and the threat of more US taxes

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The US Federal Reserve is next in the list of major central banks offering policy pronouncements. The Fed's policy is painfully transparent to the point of being boring. The Fed says what it will do, slowly and clearly, and then does it. This is not the meeting to raise rates. The comments on the longer term outlook offer the only hope of excitement.
  • There is uncertainty over the longer term outlook because there is uncertainty over possible increases in US consumer taxes. There are reports that US President Trump wishes to more than double the burden of taxation on US consumers of goods partially made in China, by raising the tariff from 10% (easy to evade) to 25% (more difficult to evade).
  • There is no data in the Eurozone that a discerning economist needs to pay any attention to. PMI opinion polls of business sentiment are due.
  • The UK BRC shop price index came in at -0.3% y/y. Prices of goods in stores have been falling since 2013. Of course, people spend much more on things you cannot buy in stores, but falling prices in shops creates a perception of low inflation, higher real incomes and general economic well-being.