A reluctant defense of Powell

Daily update

In my view, central bank policy would have been better served had US President Trump extended former Fed Chair Yellen's term instead of appointing Powell. Powell has lacked confidence, and failed to articulate a medium-term vision for the economy at a time of uncertainty caused by structural change. The resulting mantra of “data dependency” has not been helpful as data has very obviously become significantly less reliable.
However, Powell has never been a political stooge. Today, there is an appearance of a political assault on the independence of the Federal Reserve. Whether this is the intention is irrelevant—the appearance of an assault raises risks. If this perceived assault continues, bond markets will require a risk premium that will raise real borrowing costs for the government and companies. Today’s speech by Powell in theory looks at the economic outlook. It is to be hoped it will offer a robust defense of central bank independence too.
Japanese July consumer price inflation rates fell slightly. The internationally defined core rate is 1.6% y/y, amongst the lowest for industrialized countries.
UK consumer confidence improved slightly, but more generally reflects the media spin rather than the relatively good economic position. Second quarter German GDP was supported by government spending.