Daily update
Daily update
- Federal Reserve Chair Powell’s cry of “hike, hike, hike” was evident in the Senate testimony yesterday. Powell stressed “data dependency” but not “understanding the data”. Profit-led inflation and seasonal adjustment distortions may slow disinflation early in the year, and accelerate disinflation later in the year. Despite some articulate questioning, Powell failed to elaborate how policy tightening will transmit to reversing profit-led inflation.
- Powell testifies again today. We also get the Fed’s Beige Book of anecdotal evidence—the economic equivalent of the celebrity gossip magazines available at supermarket checkouts (when supermarket checkouts existed). Anecdotal evidence is unaffected by seasonal adjustment or fictional concepts like owners’ equivalent rent. It is affected by the media spin cycle and partisan bias.
- Eurozone final 4Q GDP is likely to be completely ignored by the financial markets. ECB President Lagarde is speaking on the role of women in the economy. Female participation suffered disproportionately during the pandemic. While economic gender stereotypes remain, flexible working could potentially increase both participation and productivity for women. Over the longer term, tackling prejudice politics and unconscious bias to improve diversity is critical to economic success.
- German industrial production and retail sales data fell slightly less than expected in January. Of course, all the previous month’s data was revised stronger.
