Daily update
Daily update
- The publication of US consumer price inflation forces economists to become used car salespeople and real estate fantasists. Part of the disinflationary trends come from used cars (which most US households will not buy this year) and the fictional owners’ equivalent rent (which no one pays). Disinflation in these categories does not improve the spending power of most consumers.
- Federal Reserve Chair Powell’s two big policy errors were to elevate the importance of consumer price data, and to stress data dependency. Market expectations about rate cuts in September will thus be influenced by today’s data. Real interest rates justify rate cuts—but a broad range of inflation measures should be used to calculate real rates. Repressive real rates is why the Fed is late, but not disastrously late in cutting rates.
- UK inflation was a little lower than expected. Energy base effects added to the year-over-year price change, but hotel prices increased more slowly. Household durable goods remain in deflation, and food price inflation is restrained as customers refuse to accept profit-led inflation.
- Eurozone second quarter economic growth is not normally market moving, as we know the regional data already. French final consumer price inflation is almost never different from the preliminary number.
