Daily update
Daily update
- The Federal Reserve left interest rates unchanged—surprising no one. There was no apology for past policy errors or the unnecessary risk premium created by Powell’s lack of a policy framework, but Fed Chair Powell finally seemed to acknowledge this might be the rate peak. Bond markets rallied. Let speculation about rate cuts begin.
- The Bank of England now decides policy. The UK economy is more interest rate-sensitive than the US, but less rate-sensitive than it was in the past (a majority of homeowners have no mortgage nowadays). UK price levels have also risen less than in the US since the pandemic, and are comparable to post-pandemic price level changes in Europe. A split decision for unchanged rates seems the most likely outcome.
- ECB Chief Economist Lane speaks, and while all Chief Economists deserve to be heard with rapt, reverential attention, it seems unlikely that Lane will move markets. Comments on the recent downside surprises to Euro area inflation would be interesting.
- There are some manufacturing sentiment polls due in Europe, and the US offers unit labor cost data. Unit labor costs are valuable data points in theory, but are likely to be inaccurately measured in practice (at least in real time).
