Daily update
Daily update
- The Federal Reserve left rates unchanged, but three rate cuts are forecast for 2024. It is as if Fed members finally read the UBS Year Ahead report. This is not really an easing of policy, however. Real interest rates will be kept more or less stable as US inflation falls, quantitative policy continues to tighten, and regulatory policy may also constrain activity.
- Will the ECB’s creaking decision-making process be capable of signalling a change today? ECB forecasts come from economists rather than policy-makers. Inflation is benign (anything from 1% to 3% inflation should be considered on target), but some of ECB President Lagarde’s many, many, comments have argued against rate cuts in the first half of 2024.
- As an interest rate sensitive economy, an early UK rate cut seems called for. However, weirdness in UK energy pricing will limit the decline in inflation next year. There is the additional complication of a possible early general election (called on a whim of the prime minister).
- US retail sales numbers are due. The switch to spending on fun is not fully captured in this data. Spending on the record number of Thanksgiving flights is not counted, for instance (purchasing overpriced oat milk lattes at the airport will be included).
