Daily update
Daily update
- Federal Reserve Chair Powell’s speech at Jackson Hole last week was classic Powell. That is not a terribly good thing. Powell signaled an increased probability of a September rate cut to counter the damage of trade taxes on the US economy. Markets liked that. But this was essentially the “data dependent” mantra padded with additional rhetoric.
- What was missing was a proper medium-term policy framework for an economy facing structural upheaval. There was little defense of the Fed. US President Trump’s weekend threat to fire Fed Governor Cook is widely reported as an attack on Fed independence. Markets need to consider what a politicized Fed might mean. The main concern is a return of inflation uncertainty risk, which could add a percentage point to real borrowing costs. That impacts fiscal costs, corporate investment, housing affordability, savings, and speculative behavior.
- There are business sentiment polls—the German ifo and the Dallas Fed manufacturing survey. The polarized comments section of the latter reminds investors that politics creeps into subjective answers, even when data collection is still politically neutral.
- Japan’s Juily department store sales continue to fall. This data point is not a major market focus, but (as elsewhere) domestic consumers are becoming more important to the growth narrative.