Daily update
Daily update
- ECB President Lagarde signalled nothing markets did not already know yesterday. Rate cuts are coming. Economically, the dissenters on the governing council are probably correct and rate cuts would be better now—but precise timing on monetary policy is less important when the objective is cyclical (precision matters when the aim is liquidity or managing disorderly markets).
- There is an important central bank event today, which markets will likely ignore. Former Federal Reserve Chair Bernanke’s report on Bank of England forecasting is due. The UK central bank perhaps faces a bigger challenge than some other central banks—parts of the UK economy have been experiencing very rapid structural change, resulting in more dramatic revisions to data.
- Yesterday’s US producer price data highlighted another data challenge. The motor insurance component rose 6.5% y/y, while in consumer price data it rose over 22% y/y. Different measurement techniques lead to wildly different visions of inflation. Import and export prices are due today (US export prices are in deflation).
- US Michigan consumer sentiment offers another insight into the degree of political polarisation in the US. Looking at unaligned voters’ sentiment may be useful; with a third of the metropolitan US experiencing food price deflation, sentiment (free of political bias) might improve.
