Daily update
Daily update
- The Federal Reserve did what was expected, raising rates by 0.25 percentage points (pps) yesterday. Fed Chair Powell offered a confused set of signals, even by the confused standards of Powell's ordinary commentary. For instance, rates would continue to rise but the Fed was not going to challenge the markets' dovish expectations. Since the June policy errors trashed forward guidance, markets have been inclined to emphasize the Fed's actions rather than words.
- The Bank of England is expected to raise rates by 0.5pps. Markets' focus will likely be on the nature of the bank's divisions. The monetary policy committee sometimes resembles an Oxford college’s senior common room, engaged in an intensely passionate debate that is perhaps slightly detached from thoughts of real world consequences. The peak of UK rates is near.
- The European Central Bank is also expected to raise rates by 0.5pps, and here the risk is of a longer period of tightening (into the second quarter). This is perhaps less a function of economics, and more due to the ECB's factional divisions under weak leadership.
- US unit labor cost and productivity numbers are due. The labor costs are a reminder of how much of current inflation is due to profits, but the data is not terribly precise.
