Daily update
Daily update
- The Federal Reserve meets, with no plausible justification for a rate increase. Slowing price and wage inflation mean that real interest rates continue to rise. A growing economy normally requires liquidity growth, but quantitative tightening is withdrawing liquidity.
- US inflation is only above target because of fictional and Floridian prices. Transitory durable goods inflation is clearly over—the last positive durable goods inflation rate was in November 2022. Energy is not adding to inflation the way it was before. Profit-led inflation is under pressure from cost-conscious consumers. Fears of a fourth wave—of wage inflation—are not supported by the data. Only public sector wages are trending positively, and public sector wages do not generate cost-push inflation.
- The US ISM manufacturing sentiment poll is due. This has failed to get manufacturing activity right all this year. Part of the problem with unofficial survey evidence is that there is rarely any detail as to survey reliability (e.g., response rates).
- A day after the Bank of Japan suggested 10-year yields should be “about” 1%, it has intervened to keep 10-year yields below 1%. The country’s Ministry of Finance showed that there was no foreign exchange intervention last month, but said it was on “standby” to intervene.
