Fed fun

Daily update

The Federal Reserve is expected to leave rates unchanged today. The Bank of Japan started with an accommodative stance, and has moved toward neutral. The European Central Bank started with a neutral stance, and unnecessarily moved toward a restrictive policy. The Fed started the year with a mildly restrictive policy, and there is no necessity for change.
The more interesting question is whether Fed Chair Warsh can exert any influence over policy. The Fed chair normally leads on cyclical policy, and also sets the philosophical framework within which policy should be considered. Powell failed to present a framework, but still led the cyclical policy decisions. Warsh’s reputation within the Fed, and the increasing tendency for Fed members to dissent, may undermine the authority wielded by previous chairs.
UK May inflation data was lower than expected (and the consensus skewed to the upside). Inevitably, transport was the main contribution, with most other sectors working to reduce inflation. This data will not trouble the Bank of England.
US May retail sales should continue to show resilience (the numbers do not adjust for inflation). US consumer spending is growing faster than income, as savings rates are cut to pay the higher prices resulting from the Iran war (and the dwindling effects of tariffs).