Fed up

Posted by: Paul Donovan

28 Apr 2021

Daily update

  • The US Federal Reserve meets; Fed Chair Powell (who is not an economist) will then talk about economics. The absence of a serious inflation threat means monetary policy is not an investor concern. Repeated positive economic surprises mean that quantitative policy (bond buying) is a subject of interest—no one expects bond buying to end now, but there may be hints at it ending later this year.
  • US President Biden has signed an executive order raising the minimum wage for contract workers in the US federal government. Minimum wages are controversial—in theory they could reduce employment by raising labor costs, but the real-world evidence for this is not conclusive.
  • Australian consumer prices are not normally a global investor focus (the data is only published quarterly). However, as Australia eased pandemic restrictions very early, it does have a test-case role. The data was weak, even with the effects of oil prices. There was some evidence of higher prices in areas that pass the Instagram test (spending to have fun). The April UK BRC shop price index remained in deflation.
  • Japanese retail sales were (of course) stronger than expected, showing consumers adapting to restrictions. Japanese restrictions were tightened again last week, so momentum may now slow.

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