Daily update
Daily update
- The Bank of Japan raised interest rates a quarter point, as had been signaled in the media in advance. The BoJ appears to have confidence in rising wages, and like other central banks is following the trend of inflation (the difference is that Japan’s trend is rising). We expect one further rate increase this year.
- ECB President Lagarde is speaking, which is not unusual. The remarks are being made at the World Economic Forum in Davos which may add media attention. Investors are confident in their expectation that rate cuts are coming.
- US President Trump declared they knew interest rates better than the Federal Reserve. This omniscience may be undermined by Trump also declaring the recent inflation was probably the highest in US history. US inflation was higher four times during Trump’s lifetime (in the 1940s, 1950s, 1970s, and 1980s). Economists believe inflation is important to understanding interest rates.
- At Davos, Trump seemed to imply a universal tax on US consumers of any imported goods (a universal tariff). Universal tariffs cannot legally be avoided, while supply chain rerouting can escape selective tariffs (as happens with up to a third of China’s exports to the US). Trump then said they were reluctant to further tax US consumers of goods from China.