British style

Daily update

The Federal Reserve spoke with an almost British accent yesterday, cutting rates a quarter point with a Bank of England-like three-way vote split. Fed Chair Powell signaled that a December cut was not inevitable. While a majority clearly favored insuring against the risks of a brittle US labor market today, there are fears about future inflation pressures and the lack of credible US economic data.
The Fed will end quantitative tightening (stop draining liquidity) in December. This prevents policy tightening. The Fed aims to keep liquidity supply and demand in balance, and has drained liquidity in response to the post-pandemic decline in liquidity demand. It now feels supply and demand are in balance.
The ECB meets, but economists have spoken with one voice and expect no rate change. Disagreeing with a unanimous group of economists is unwise. German October inflation is expected to slow somewhat. Modest inflation pressures in Europe give consumers spending power.
The US (though not yet China) announced a year-long Sino-US trade agreement. The details have to be worked out. Markets are likely to be cheered, but not wildly enthusiastic. In a climate of scapegoat economics, economic nationalism is a convenient position to return to if political leaders need a distraction from domestic economic problems.