Daily update
Daily update
- The violent swings in US equity pricing yesterday tell investors all they need to know about Federal Reserve Chair Powell’s communication skills. In the battle between extremists predicting a hard landing and the realists who see a soft economic landing, the Fed seems to tilt towards a soft landing. Rates have peaked, a March cut is (probably) not happening, but cuts are coming.
- Central banks’ policy rests on three pillars: monetary, quantitative, and regulatory. Powell also suggested the Fed will start talking about quantitative policy, hinting at a slower pace of quantitative tightening (probably at some point in the second quarter).
- The Bank of England meets. The bank has two advantages relative to the Fed. It is headed by a real life economist, and communications are always more convincing when delivered with a British accent. UK inflation is falling, and the bank should look through the peculiarities of UK electricity pricing (which will add some short-term noise). The timing, not the inevitability of easing, is what is of interest.
- Dutch consumer price inflation rose—in theory, this was “above consensus” but there are so few people forecasting Dutch inflation the consensus is pretty meaningless. German and French data yesterday slowed, and was lower than expected. Eurozone inflation is due today.