Policy, promises, and affordability

Daily update

Markets may be becalmed in anticipation of tomorrow’s US monetary policy decision. However, the meeting is expected to leave interest rates unchanged and investors are skeptical that Federal Reserve Chair Warsh will offer any useful insights at the press conference. Insight may come with subsequent remarks by those markets regard as the Fed’s intellectual leaders.
The US affordability crisis has weighed on consumer sentiment (with less impact on consumer actions). There is another sentiment poll due today, but political partisanship will undermine any economic credibility. Opinion polls do carry weight with politicians and the US administration seems to be increasingly concerned about the mid-term elections, so the poll may have a bearing on last-minute policy promises.
China’s October industrial profits were fairly stable, with electronics leading gains. This is presumably coming from the export sector, rather than the more lackluster domestic economy. It does argue against export dumping (which occurs when goods are sold at a loss).
The British Retail Consortium shop price index rose more than five economists expected in October. This is despite weaker labor costs for retailers—retail average earnings growth has slowed sharply this year, as have employment levels (retailers’ labor costs are the largest individual component of prices).