Policy and promises

Daily update

The ECB is almost certain to repeat its earlier policy rate error and unnecessarily raise interest rates. There is unlikely to be any inflation or economic growth impact, but a further rate increase erodes borrowers’ ability to manage future economic crises. This should be the last error, unless oil prices get so high the ECB feels it needs to create a recession in the non-oil economy to create non-oil deflation.
US August producer price inflation data is expected to increase on the headline rate. Underlying measures are seen a little more restrained. The further down the supply chain one travels, the greater the importance of labor costs to pricing, and there is a lot of labor between producer and consumer prices. US labor costs remain subdued.
US President Trump pledged to give every US adult USD 5,000 if Republicans win the midterm elections. Such a payout would require Congressional approval and the (presumably deficit financed) stimulus would be larger than occurred during the pandemic. If bond markets believe the president, the deficit and inflation consequences would be meaningful. The initial reaction suggests bond investors are not taking this seriously.
Europe is offering some industrial production numbers and final consumer price data from assorted countries, but markets are unlikely to be interested.