Daily update
Daily update
- ECB policy decisions have not changed the inflation outlook. They have reduced credibility. Forward guidance was killed off with a 0.5ppt rate increase—this was probably done as a deal to get bond manipulation through. Killing forward guidance means economists now have no reason to listen to the innumerable speeches of ECB President Lagarde.
- The bond market manipulation plan is “we do what we want, when we want.” Conditions are determined by the ECB, leaving market manipulation down to spin, not objective assessment. Bond buying will be sterilized (no money supply increase). The euro soared to levels not seen since Wednesday night, and Italian bond spreads widened. The plan adds excitement to the otherwise dull lives of bond traders, creating a treasure hunt to discover ECB intervention levels.
- Japanese June consumer price inflation was dull—unchanged headline, nationally-defined core, and internationally-defined core rates (the last 0.2% y/y). The Bank of Japan continues to print money, and savings rates are extremely low, but strong liquidity preference limits the policy inflation impulse.
- UK June retail sales volumes showed consumers buying food and perhaps a modicum of alcohol to celebrate Her Majesty’s platinum jubilee. Higher fuel prices are pushing down the volume of fuel sales. More expensive items like furniture also have weaker demand.
