Daily update
Daily update
- US interest rate expectations jumped about yesterday. There was a lack of either meaningful data or Federal Reserve commentary. However, there is also a lack of a medium-term policy framework, articulating the Fed’s views on the interaction between policy and economics. At a time of structural change, that lack of a framework encourages volatility.
- The Bank of Japan’s policy decision lies ahead. The Nikkei newspaper has reported an imminent end to negative interest rates and yield curve control, and years of experience suggest that carefully timed stories in the Nikkei are normally uncannily correct. The question is whether there will be further tightening (beyond the natural real rate increase as inflation rates slow).
- The German ZEW business sentiment poll is due—economic reality has tended to be more optimistic than sentiment data (and, indeed, economic reality has tended to be more optimistic than real time economic data). Better exports and lower energy prices may have injected some cheer into German businesses’ views.
- US housing starts are due—the numbers having been moving (noisily) sideways, at a level above the 2019 starts data. US interest rates are at a 23-year high, at over twice the 2019 interest rate peak. Economic relationships with policy do seem to be shifting.
