Independent thinking

Daily update

Gulf states, meeting on the fringes of the United Nations gathering, have suggested peace talks between Iran and the US are not progressing. Markets are not, perhaps, too surprised to learn this. The Gulf states are indicating a long-term desire to cooperate with Iran and provide mutual security in the region. Such independence is important, as it might change the recycling of Gulf petrodollars into US-focused military procurement. That would have market implications.
ECB Chief Economist Lane suggested that energy prices would keep inflation higher for longer (but service sector prices would be unaffected—i.e. no second-round effects). At what point do a series of “one-off” shocks morph into being an inflation problem? The only way to offset an oil supply-shock’s inflation impact is to create a downturn in the non-oil economy. Lane’s focus on growth drivers suggests that the ECB is not ready to do that.
Federal Reserve President Williams is to speak—the Fed faces the same dilemma as the ECB, with the added need to present political independence, and the challenge of a divided economy.
Assorted regional US business sentiment polls are due. Political polarization is a distorting factor, and US President Trump’s record low approval ratings complicate how this data is interpreted.