Monetary policy and forever wars

Daily update

Markets’ responses to last Friday’s US employment report rebuke US monetary policy communication. The report showed strong payrolls growth, but unemployment rates drifted very slowly higher. The labor market is not creating accelerating wages. Market rate hike expectations increased, but the decision is still essentially a coin toss. With a clearly communicated framework for monetary policy, markets would not be plagued by such indecision.
Iran and the US both attacked oil tankers over the weekend, pushing crude oil prices close to USD 100 a barrel. There is nothing central banks can do to influence this price—but if the Gulf War becomes a “forever war” and oil prices keep rising, should central banks create a slowdown in the non-oil economy (producing disinflation) to offset oil economy inflation?
Germany’s far-right AfD party is projected to win 44% of the vote in Saxony-Anhalt. This was expected. With several European elections due next year, politicians may consider fiscal responses. With AfD thanking social media head Musk, the issue of regulating extremism on social media platforms may be a focus.
Eurozone revised GDP is not likely to excite markets—the growth rate is hovering around trend, and the ECB is widely expected to repeat its policy error with a rate hike this week.