Daily update
Daily update
- Economics now enters a limbo period. The data flow that we get over the next few weeks relates to the period before the recent financial volatility. There is considerable uncertainty over how the real economy is affected by that volatility. The optimistic case is that larger banks do not tighten bank lending standards dramatically, and consumers carry on more or less as before. The pessimistic case is that lending standards tighten, consumers are forced to spend using only their falling real wages, and fear of unemployment constrains consumption further.
- US Federal Reserve President Kashkari was essentially making the same points over the weekend, noting (in a statement of the obvious) that recession risks have risen after the financial volatility. There is a case to be made that the Federal Reserve was tightening policy too far anyway—monetary tightening should slow profit-led inflation, but it does a lot of unnecessary damage in the process.
- Bank of England Governor Bailey speaks at the London School of Economics (where the audience allows for a more detailed explanation of policy). Bailey testifies to Parliament tomorrow (where the audience allows for a less detailed explanation of policy).
- Germany’s March ifo business sentiment opinion poll is due, and is not expected to change very much.
