Another little cut

Daily update

The Federal Reserve is expected to cut rates a quarter point. The absence of credible short-term data since the last Fed meeting means policymakers cannot follow Fed Chair Powell’s “data dependency” mantra and must instead focus on economic trends. Market interest will be focused on the spectrum of views, the tone of the press conference, and (inevitably) speculation about Powell’s successor.
US inflation will continue to increase into the first quarter. Indeed second-round inflation effects are a note of caution that may slow the pace of easing. However the US labor market has rather brittle qualities at the moment, and the Fed wants insurance against a shattering of employment confidence.
China is proposing increasing domestic consumption as a share of the economy (we have heard this desire before). With a declining trend rate of GDP growth and a lower consumption share than other middle income economies, raising the consumption share would allow living standards to grow faster than the economy. It also counters trade localization trends.
Spanish third quarter GDP is expected to come in somewhere around 3% y/y growth. Post-pandemic, Spain has outperformed the US (significantly) for all but three quarters. This challenges the narrative of Europe being weighed down by regulation and exceptional US performance.