Daily update
Daily update
- The Federal Reserve minutes of the December FOMC meeting suggested rate cuts were self-congratulatory about the decline in US inflation (though this was only partly due to the Fed). They signaled rate cuts this year. They also signalled no rush to cut rates, and interestingly mentioned that activity may be stronger than reported. Economic indicators designed in the 1920s struggle to accurately measure modern ways of working in the 2020s.
- The minutes confirm whatever you wanted to think about the direction of US interest rates before the release. I would suggest they are consistent with three rate cuts, starting later than March—but that was my bias before the minutes.
- Energy base effects will likely add to Eurozone December consumer price inflation (year-over-year comparisons make last year’s prices as important as this year’s prices). The core rate, excluding some energy price effects, should slow. Core inflation last meaningfully surprised to the upside in February, and there have been two or three meaningful downside shocks since then. Slowing profit-led inflation is rarely captured well in economic forecasting models.
- Tensions in the Middle East have pushed up oil prices again—at the moment, the oil price is not a significant economic issue, but it will stay in focus.
