Managing expectations

Daily update

The political costs of the Gulf war are evident—US President Trump suggested removing the federal tax on gasoline. Gasoline prices (unlike diesel) feed directly into US consumer price calculations. However, even supposing Congress was in session long enough to pass the legislation, a less than 19% reduction per US gallon has to be considered against a price increase of over USD 1.25 since the war began. But sensitivity to the political cost may encourage optimism about US attitudes toward a deal with Iran.
Some US inflation expectations data is due. Expectations only matter if consumers are willing or able to change their behavior in consequence. Neither wage growth (poor) nor consumption (resilient) suggests changing behavior. The minutes of the last US central bank meeting are due—we should be grateful Federal Reserve Chair Warsh still allows their publication. A more nuanced approach may be evident than the unanimity of the decision implied.
Japan’s August cash wage growth was in line with expectations, though some earlier data was revised lower. Wages are moderately exceeding inflation. Bank of Japan Governor Ueda signaled a willingness to raise interest rates again.
German August industrial production data is due. European manufacturing trends have been OK, though with a little summer softening in the data.