Daily update
Daily update
- Real yields helped push US 10-year yields higher yesterday. Caution is needed when interpreting market moves in the dull days of summer, but there are concerns that the Federal Reserve may keep rates higher for longer. Fed policy fears are difficult to control, because Fed Chair Powell’s 2022 policy errors trashed forward guidance. Work from the San Francisco Fed suggests policymakers are more divided than normal.
- US economic data has tended to be better than expected, partly because of problems with consensus expectations. Aggregate data is given too much importance—middle income consumers have more savings and lower inflation than aggregate numbers might suggest. There is still an economic landing in progress, and the Fed is now tightening policy aggressively by letting real (inflation-adjusted) interest rates rise as inflation falls rapidly.
- UK government borrowing was lower than expected in June (a month when tax payments lower borrowing). As people rarely pay taxes they do not owe, this hints at hidden parts of the economy adding to activity—TikTok influencers should pay taxes too.
- There is some survey-based evidence ahead. The UK Confederation of British Industry (CBI) distributive trades (retail) survey may generate a little interest. The US Richmond Fed business sentiment survey is unlikely to generate much interest, even in Richmond.
