Daily update
Daily update
- The authors of the latest Federal Reserve Beige Book are clearly followers of TikTok memes. The economy was described as being modest and demure (actually as growing at a “slight or modest pace” but it amounts to the same thing). The benign growth story fits with most economists’ central projections. On inflation, anecdotes suggested a more concerted resistance to profit-led inflation from consumers.
- Bank of England Governor Bailey may have had the retreat of profit-led inflation on his mind when he spoke of the more disinflation than had been expected. Inflation surprises are not that surprising in a profit-led inflation cycle. The driver of prices is less the economic cycle, and more the opportunistic expansion of margins under the cover of a good story. Mathematical models do not capture that well, giving upside inflation shocks as margins expand, and then more disinflation than expected as consumers resist.
- The economic calendar is growing under the weight of business sentiment surveys today—these have tended to suggest dire economic outcomes (especially for manufacturing) which have not actually happened.
- There are still more central banks speakers scheduled—Bailey, again, and a repeat performance from ECB Chief Economist Lane. Markets are perhaps starting to exhibit central bank speaker fatigue.
