Monetary Policy
The Fed is unanimous in expecting a mild tightening cycle of no more than 75 bps, but that outcome is contingent on a rapid drop in core inflation in 2027.
Scott Bessent’s attempts to suppress yields while financing large twin deficits risk crashing foreign inflows, the dollar, US bonds, and equities. Without a major equity selloff or large-scale commercial bank purchases of Treasurys, the bond selloff will persist – producing a major equity drawdown and a lower dollar.
The August CPI report was slightly hotter than expected and guarantees a Fed hike on Wednesday; but there is still no evidence of broadening inflation pressures or second-round effects. Headline CPI was in line with consensus at 0.4% m/m, leaving the annual…
August’s 0.3% increase in core CPI breaks inflation’s 3-month downtrend and is likely hot enough for the Fed to hike rates when it meets next week.
The August PPI report showed a renewed cost-push inflation impulse, but there is still little evidence of second-round effects. Headline PPI for final demand rose 0.4% m/m, in line with estimates and up from an upwardly revised 0.1% in July, lifting the…
The ECB hiked rates by 25 bps to 2.50%, but the supply-driven nature of inflation should limit how far tightening extends into restrictive territory. This was the second hike since the Iran war began in February, leaving the deposit rate at the upper end of…
Australia's August NAB Business Survey points to a cooling economy and supports an on-hold RBA. Business conditions turned negative for the first time since 2020, falling to -1 from 4 and well below the long-term average. Profits and sales dropped to their…
Sweden’s August inflation miss reverses July's core spike, strengthening the case for fading Riksbank tightening. CPIF held at 0.7% y/y, below the 0.9% consensus, while CPIF excluding energy eased from 0.6% to 0.5%, undershooting the 0.7% consensus and…
Fed Governor Waller signaled that the September FOMC decision hinges on August inflation data, with continued disinflation favoring a hold. Waller said he is inclined to keep rates unchanged if disinflation continues, arguing against hiking while inflation is…
The Bank of Canada held rates at 2.25%, with two-sided stagflationary risks returning but the BoC tilting slightly more toward upside inflation risks than downside growth risks. The overnight rate remains at the bottom of the BoC’s estimated neutral range…