Precisely

Daily update

US monetary policy is in focus, with Federal Reserve Chair Warsh refusing to give forward guidance on policy at the IMF meetings—then giving forward guidance of a sort. Warsh failed to sound hawkish. The word of Warsh carries relatively little weight, but this chimes with Fed President William’s earlier remarks. Expectations for an October rate increase are fading.
The Fed has a dangerous balancing act. It wants policy at the top of the neutral range, so it can demonstrate toughness. It does not (presumably) want a restrictive policy. But economic data is increasingly imprecise. While the US consumer’s resilience is practically a TikTok meme, there have been some hints of increased sensitivity to rising prices.
There is some less important inflation data due. Final September Italian consumer price figures will be passed over, as rarely being revised (and we all know the details will show oil prices driving inflation). US import prices offer a frisson of excitement, with so much of the shiny new toy of AI being imported into the US.
The AI-related market moves have had some economic relevance. Bonds rallied yesterday on safe-haven demand. But safe havens need to be safe. The rallies undermine the idea that fiscal sustainability is a paralyzing fear for investors.