Weekly Market Recap (18-22 September)

<p>Monday:</p><p>The New Zealand
Services PMI fell further into contraction:</p><ul><li>47.1
vs. 48.0 prior.</li></ul><p>BNZ Senior Economist Doug
Steel commented:</p><ul type="disc"><li>“The latest PCI readings
suggest any bounce through the Q2 GDP figures will be short lived and are
consistent with economic contraction returning. In this sense, the PMI and
PSI results are more consistent with the RBNZ forecast of a return to
recession than the Treasury’s latest forecasts of moderate growth ahead”.</li></ul><p>ECB’s Kazimir
(hawk – voter) maintains his hawkish views although they are toned down following
September hike:</p><ul type="disc"><li>I wish that
September rate hike was the last one.</li><li>But cannot rule out
further moves.</li><li>Only via the March
forecast next year can we confirm the path towards inflation goal.</li><li>End of rate hikes is
to open debate on how to adjust PEPP and APP.</li><li>Once it is clear
that no more rate hikes are needed, debate should be on how to speed up QT.</li></ul><p>The US NAHB Housing
Market Index missed expectations as higher rates are weighing again on the
housing market:</p><ul type="disc"><li>NAHB 45 vs. 50
expected and 50 prior.</li><li>Current
single-family home sales 51 vs. 57 prior.</li><li>Sales over next six
months 49 vs. 55 prior.</li><li>Prospective buyers 30 vs. 35 prior.</li></ul><p>Tuesday:</p><p>The RBA released the
Meeting Minutes of its September meeting:</p><ul type="disc"><li>Considered raising
rates by 25 bps or holding steady at the September meeting.</li><li>Some further
tightening may be required should inflation prove more persistent than expected.</li><li>Case to hold was
stronger, recent data did not materially alter the economic outlook.</li><li>Economy still
appears to be on a narrow path by which inflation returns to target,
employment grows.</li><li>Members recognize
the value of allowing more time to see full effects from past tightening
on the economy.</li><li>Policy moves will be
guided by incoming data and assessment of risks.</li><li>Concerned about
productivity growth not picking up as anticipated, services inflation
remaining sticky.</li><li>Fuel prices rose
sharply in August, could boost headline inflation in Q3.</li><li>Members noted that
the labour market remains tight but could be at a turning point.</li><li>Scheduled mortgage
payments rose to a historical high of 9.7% of household income in July,
set to increase further.</li></ul><p>ECB’s Villeroy (hawk –
voter) basically confirmed that the ECB is done hiking:</p><ul type="disc"><li>We will maintain
interest rates at 4% for a sufficiently long time.</li><li>The medicine is
beginning to work.</li><li>Current ECB rates
are at a good level, better to be patient now.</li><li>Once inflation is back
to around 2%, rates can fall again.</li></ul><p>The Canadian inflation
measures beat expectations across the board with the market now seeing a 50/50
chance of another rate hike from the BoC:</p><ul type="disc"><li>CPI Y/Y 4.0% vs.
3.8% expected and 3.3% prior.</li><li>CPI M/M 0.4% vs. 0.2%
expected and 0.6% prior.</li><li>BOC Core Y/Y 3.3% vs.
3.2% prior.</li><li>BOC Core M/M 0.1% vs. 0.5% prior.</li><li>CPI Median 4.1% vs.
3.7% expected and 3.9% prior (revised from 3.7%).</li><li>CPI Trimmed 3.9% vs.
3.5% expected and 3.6% prior.</li><li>CPI Common 4.8% vs.
4.8% expected and 4.8% prior.</li></ul><p>The US Housing Starts
data missed expectations while Building Permits beat forecasts:</p><ul type="disc"><li>Housing Starts
1.238M vs. 1.440M expected and 1.447M prior (revised from 1.452M).</li><li>That's the lowest
level since June 2020 during the pandemic.</li><li>Building permits
1.543M vs 1.443M expected and 1.442M prior. </li></ul><p>BoC’s Kozicki commented
on the CPI report and noted that the increase was mainly due to higher energy
prices. Their focus is on the underlying measures but even those beat expectations
for 3 months in a row already:</p><ul type="disc"><li>One of the big
drivers in August CPI inflation was energy and gasoline prices. They can
be pretty volatile.</li><li>It will take a lot
of time to sort through the inflation data, given what's going on
underneath.</li><li>Energy prices on
their own, if it's temporary, is something that gets much less weight
because we are concerned about the underlying inflation.</li></ul><p>Wednesday:</p><p>The PBoC left the LPR
rates unchanged as expected:</p><ul><li>LPR 1 year 3.45%.</li><li>LPR 5 year 4.20%.</li></ul><p>The UK CPI missed
expectations across the board with market now seeing the BoE done with rate
hikes:</p><ul type="disc"><li>CPI Y/Y 6.7% vs. 7.0%
expected and 6.8% prior.</li><li>CPI M/M 0.3% vs.
0.7% expected and -0.4% prior.</li><li>Core CPI Y/Y 6.2%
vs. 6.8% expected and 6.9% prior.</li><li>Core CPI M/M 0.1%
vs. 0.6% expected and 0.3% prior.</li></ul><p>ECB’s de Cos (dove
– non voter) said that the risks to the inflation outlook are now balanced,
which is another way to say that they are done. </p><p>ECB’s Makhlouf (neutral
– non voter) didn’t want to pre-commit on the next rate decision but he’s of
the idea that they have reached the top:</p><ul type="disc"><li>I do think we are
there, or thereabouts, at top of the ladder on rates.</li><li>My view at the
moment is that March 2024 is probably too early for 1st rate cut.</li><li>Not saying at our
next meeting that we are going to hold, but we are near the top.</li><li>We will have a
better sense of 2024 rate profile one we have the next set of projections
in December.</li></ul><p>The BoC released the
minutes of its September meeting:</p><ul type="disc"><li>The Bank of Canada's
Governing Council did not want to set expectations for a rate reduction in
the near future, as per the September 6th announcement minutes.</li><li>The Council's
discussions revolved around either maintaining the current rates or
increasing them.</li><li>Given the uncertain
trajectory of core inflation, maintaining a stricter policy should be
considered.</li><li>The lack of
improvement in underlying inflation is a major worry.</li><li>The Council
deliberated if high core inflation might continue even as signs show that
restrictive monetary policy is dampening demand.</li><li>Many core inflation
metrics appear to be persistent, with little change observed since the
July rate announcement.</li><li>There's concern over
the proportion of items in the CPI basket that are increasing at an
annualized rate exceeding both 3% and 5%.</li><li>The Council
anticipates that rising oil and gasoline prices will push inflation up in
the coming months.</li><li>The balance between
economic supply and demand will play a pivotal role in determining future
core and total inflation.</li><li>The large drop in
commodity prices will soon be excluded from inflation calculations.</li><li>Governing Council
observed that the impact of base-year effects will diminish.</li></ul><p>The Fed kept interest
rates unchanged at 5.25-5.50% as expected with a hawkish outlook as they kept
the terminal rate for 2023 at 5.6% and revised higher the 2024 forecast from
4.6% to 5.1%. Growth was revised higher, unemployment was revised lower and
inflation basically unchanged:</p><ul type="disc"><li>2023 end of year
target rate: 5.6%, unchanged from June.</li><li>2024 end of year
target rate: 5.10% from 4.6% in June.</li><li>Economic activity
has been growing steadily.</li><li>Job gains have
decelerated but remain robust; unemployment is low.</li><li>Inflation is currently high.</li><li>The U.S. banking
system is stable and robust.</li><li>Stricter credit
conditions may impact economic activity, employment, and inflation.</li><li>The exact impact of
these conditions is still uncertain.</li><li>The Committee is
highly focused on inflation risks.</li><li>The Committee's
goals are maximum employment and a 2% inflation rate over the long term.</li><li>The Committee will
evaluate further information and its implications for monetary policy.</li><li>Factors considered
for policy adjustments include the overall tightening of monetary policy,
its delayed effects on the economy, and other economic and financial
events.</li><li>The Committee plans
to reduce its holdings of Treasury securities and other agency debts and
securities.</li><li>The primary aim is
to bring inflation back to the 2% target.</li><li>The Committee will
keep assessing the economic outlook based on incoming data.</li><li>If risks arise that
could hinder the Committee's objectives, they are ready to modify the
monetary policy stance.</li><li>Their evaluations
will consider various data, including labour market stats, inflation
trends, financial, and global events.</li></ul><p>Moving on to the Fed
Chair Powell’s press conference opening remarks:</p><ul type="disc"><li>Fed is squarely
focused on dual mandate.</li><li>Fed has covered a
lot of ground, full of facts have yet to be felt.</li><li>We can proceed carefully.</li><li>Our decisions will
be based on assessments of data and risks.</li><li>Growths in real GDP
has come in above expectations.</li><li>Consumer spending particularly robust.</li><li>Activity and housing
have picked up.</li><li>Higher rates
weighing on business investment.</li><li>Labor market remains tight.</li><li>Labor supply and
demand continue to converge to better balance.</li><li>Labor demand still
exceeds supply.</li><li>Expects labor market
rebalancing to continue, easing upward pressure on inflation.</li><li>Inflation remains
well above our long-run goal of 2%.</li><li>Getting inflation
down to 2% has a long way to go.</li><li>Longer term
inflation expectations appear to be well anchored.</li><li>Strongly committed
to return inflation to 2%.</li><li>Current stance of
policy is restrictive, putting downward pressure on economic activity,
employment and inflation.</li><li>We are committed to
achieving and sustaining sufficiently restrictive policy to bring
inflation down to 2% over time.</li><li>Federal Reserve will
make decisions meeting by meeting. Federal Reserve is mindful of the
uncertainties.</li><li>The Fed is prepared
to raise rates further if appropriate.</li><li>Will keep rates
restrictive until confident inflation moving down to 2%.</li><li>Reducing inflation
is likely to require a period of below trend growth, some softening of
labor conditions.</li><li>We will do
everything we can to achieve goals.</li><li>Restoring price
stability is essential in reaching maximum growth potential.</li></ul><p>Q&amp;A:</p><ul type="disc"><li>The fact that we
decide to keep policy rates where it is does not mean we have decided we
have or have not reached the stance of policy we are seeking.</li><li>Fed wants to see
convincing evidence that we have reached the appropriate level.</li><li>Real interest rates
are meaningfully positive.</li><li>Recent labor market
report was a good example of what we want to see.</li><li>People want to be
careful not to jump to a conclusion one way or the other.</li><li>We are fairly close
we think to where we want to get.</li><li>I would attribute
huge importance to one hike.</li><li>Stronger economic
activity is the main reason for needing to do more with rates.</li><li>It may be that the
neutral rate has risen.</li><li>It is plausible that
the neutral rate is higher than the longer-run rate.</li><li>I still think there
will need to be some softening in labor market.</li><li>In the median
forecast don't see a big increase in unemployment, but that is not
guaranteed.</li><li>Would not call soft
landing a baseline expectation.</li><li>It is also possible
the path to soft landing has widened, it may be decided by factors outside
our control.</li><li>The fact we've come
this far lets us proceed carefully.</li><li>You know
sufficiently restrictive only when you see it. It is not something you can
arrive at with confidence in a model.</li><li>For now, the
question is to try to find a level where we can stay there. We haven't
gotten to the point of confidence yet.</li><li>The time will come
at some point that it's appropriate to cut, but not saying when. </li><li>Part of the decision
to cut may be that real rates are rising because inflation is coming down.</li><li>Strikes, government
shutdowns, resumption of the student loan payments, and higher long-term
rates are among risks.</li><li>On UAW strike, it
could affect output, hiring, and inflation depending on length of strike.</li><li>Government shutdowns
don't traditionally have much of a macro effect.</li><li>Energy prices being
higher is a significant thing. Higher energy prices sustained can
affect inflation and spending.</li><li>The economy appears
to have significant momentum.</li><li>A soft landing is a
primary objective.</li><li>The worst thing we
can do is fail to restore price stability.</li><li>We have the ability
to move carefully, and that's what we are planning to do.</li><li>Forecasts are highly uncertain.</li><li>Growth has come in
stronger than expected, requiring higher rates.</li><li>The last three
readings of inflation have been very good, well aware we need more than
three good readings.</li><li>The risk of
overtightening and under tightening is becoming more equal, need to find
our way to the right level of restriction. </li><li>A possible
government shutdown could curtail some of the data we get, we would have
to deal with that.</li><li>It looks like we've
had a bit of a turn of inflation in June.</li><li>Energy prices don't
have that much of a signal about where economy is going.</li><li>If energy prices
increase and stay high, it will affect spending, may affect inflation
expectations.</li><li>We tend to look
through short-term moods and energy prices.</li><li>Rising long-term
yields is mostly not about inflation, more about growth supply of
treasuries.</li><li>Any decision about
future rate cuts will be about what the economy needs.</li><li>We are not looking
for a decrease in consumer spending.</li><li>It is a good thing
the economy is holding up under rate hikes.</li><li>If economy comes in
stronger than expected, it means we will have to do more to bring down
inflation.</li><li>Concern number one
is restoring price stability.</li></ul><p>Thursday:</p><p>The New Zealand Q2 GDP
came in much better than expected:</p><ul><li>GDP Q2 Y/Y 1.8% vs. 1.2%
expected and 2.2% prior.</li><li>GDP Q2 Q/Q 0.9% vs. 0.5%
expected and 0% prior (revised from 0.1%).</li></ul><p>The SNB left interest
rates unchanged at 1.75% vs. 2.00% expected (the market was pricing a 60% chance of a hold):</p><ul><li>Significant tightening of
policy in recent quarters is countering remaining inflationary pressure.</li><li>It cannot be ruled out
that further tightening may become necessary.</li><li>SNB will monitor
inflation developments closely in the coming months.</li><li>Will remain active in the
foreign exchange market as necessary.</li><li>Sees 2023 inflation at
2.2% (unchanged).</li><li>Sees 2024 inflation at
2.2% (unchanged).</li><li>Sees 2025 inflation at 1.9%.</li></ul><p>SNB’s Chairman Jordan is
comfortable with the level of inflation in Switzerland but wary of future
risks:</p><ul type="disc"><li>Inflation battle is
not over.</li><li>Given
"comfortable" level of Swiss inflation, the best solution is to
wait and see.</li><li>Have to see what
happens over the next 3 months.</li><li>Clear focus is on
price stability.</li><li>We are not reacting
to weakening in the economy, but to lower inflation.</li></ul><p>ECB’s Kazaks (hawk –
voter) didn’t call for higher rates as the ECB is now expected to just keep
rates higher for longer:</p><ul type="disc"><li>Rise in energy
prices does create upside risk to inflation.</li><li>Recent energy price
rise is structural, not a short-term transitory rise.</li><li>Given current
outlook, rate cut expectations around middle of 2024 are too early.</li><li>Rates will need to
remain restrictive for quite a while.</li></ul><p>ECB’s Nagel (hawk –
voter) is another member leaning on the higher for longer stance as he said
that “rates must stay sufficiently high for sufficiently long”. </p><p>The BoE left the bank
rate unchanged at 5.25% vs. 5.50% expected, although the market’s pricing was a
50% chance for both the outcomes:</p><ul><li> Bank rate vote 4-5 vs 8-1 expected (Bailey,
Broadbent, Dhingra, Pill, Ramsden voted to hold).</li><li> Underlying growth in the 2H 2023 is likely to
be weaker than expected.</li><li>Labour market remains tight by historical
standards.</li><li>CPI inflation is expected to fall
significantly further in the near-term.</li><li>Monetary policy will need to be
sufficiently restrictive for sufficiently long to return inflation to the 2%
target sustainably in the medium-term.</li><li> Further tightening in monetary
policy would be required if there were evidence of more persistent inflationary
pressures.</li></ul><p>BoE’s Governor Bailey left
a door open for further tightening but the preferred strategy now is to keep
rates higher for longer:</p><ul type="disc"><li>Inflation is falling
and we expect it to fall further this year.</li><li>That is welcome news.</li><li>Previous rate hikes
are working but inflation is still not where it needs to be.</li><li>There is absolutely
no room for complacency.</li><li>Will be watching
closely to see if further rate hikes will be needed.</li><li>Will need to keep
rates high enough and long enough to get the job done.</li><li>Will do whatever is
needed to get inflation back to normal.</li><li>The job is not done
yet.</li><li>Not predicting what
next bank rate move will be.</li><li>We have got a big
job to do yet.</li><li>There is no
premature celebration here on inflation falling.</li><li>MPC has not had any
discussion about cutting bank rate.</li><li>There are strong
views on MPC about inflation outlook.</li></ul><p>The US Jobless Claims
beat expectations once again by a big margin:</p><ul><li> Initial Claims 201K vs. 225K expected and
221K prior (revised from 220K).</li><li> Continuing claims 1662K vs. 1695K expected
and 1683K prior (revised from 1688K). </li></ul><p>This report coincides with the
NFP survey period.</p><p>ECB’s Vujcic (hawk
– non voter) is comfortable with the current level of rates:</p><ul type="disc"><li>As prices ease, the
4% rate will be more restrictive.</li><li>If outlook holds
won't need any more rate hikes.</li><li>Latest hike puts us
in a better position.</li></ul><p>ECB’s Wunsch (hawk
– voter) is also leaning towards keeping rates higher for longer:</p><ul type="disc"><li>Whether we need to
do more or not is a very difficult question.</li><li>Have greater
confidence that projections can be used as an anchor.</li><li>May have reached a
peak in wages, but that's still uncertain.</li><li>Can't conclude yet
that we've reached terminal rate.</li><li>I'm fine with
reaching inflation target only in 2025.</li><li>Can't exclude a
recession, but not the base case.</li><li>Does not see APP
sales for now.</li><li>PEPP reinvestments
could and earlier than end of 2024.</li><li>There aren't
arguments to keep PEPP reinvestments until end of 2024.</li><li>Would be cautious
about raising mandatory reserve requirements.</li></ul><p>ECB’s Knot (hawk –
voter) joins the other hawks in calling the current level of rates sufficient:</p><ul type="disc"><li>Does not expect a
rate hike at next policy meeting.</li><li>Comfortable with
current interest rates.</li><li>ECB will stay alert
to signals indicating inflation remains too high.</li></ul><p>The US LEI Index
declined by 0.4% in August following a 0.3% decline in July. The Leading
Economic Index has now fallen for 17 straight months. </p><p>Friday:</p><p>ECB’s Lane (dove –
voter) sees the monetary policy transmission firmly taking hold and expects rates to be held at 4% for sufficiently long:</p><ul type="disc"><li>Sees staggered reset
of prices and wages across the economy, a process which is ongoing.</li><li>Dynamics of wages
and profits in the coming quarters still an open question.</li><li>The transmission of
our monetary policy to broader financing conditions and the real economy
is firmly taking hold.</li><li>Central banks try to
hit inflation in the medium term.</li><li>Inflation over 2% is
costly for the economy.</li><li>Says won't be
speculating on future European Central Bank policy moves.</li><li>The most efficient
wat to tighten monetary policy is via interest rates.</li><li><p>4% rate will do quite a
bit to bring inflation to 2%.</p></li><li><p>ECB is still very data
dependent.</p></li><li><p>Expect rates to held
sufficiently long at 4%.</p></li><li><p>Key wage data will not
be available until sometime in the 2024.</p></li><li><p>Not seeing a toxic mix
that will trigger a recession.</p></li></ul><p>The Australian
Manufacturing PMI fell further into contraction while the Services PMI jumped
back into expansion:</p><ul><li>Manufacturing
PMI 48.2 vs. 49.6 prior.</li><li>Services
PMI 50.5 vs. 47.8 prior.</li></ul><p>The Japanese CPI
data matched the prior readings with inflation remaining at cycle highs:</p><ul><li>Japan
CPI Y/Y 3.2% vs. 3.3% prior.</li><li>Japan
Core CPI Y/Y 3.1% vs. 3.0% expected and 3.1% prior.</li><li>Japan
Core-core CPI Y/Y 4.3% vs. 4.3% prior. </li></ul><p>The Japanese
Manufacturing PMI fell further into contraction with the Services PMI remaining
in expansion:</p><ul><li>Manufacturing
PMI 48.6 vs. 49.6 prior.</li><li>Services
PMI 53.3 vs. 54.3 prior.</li></ul><p>The BoJ kept its
monetary policy unchanged as expected with the interest rate at -0.10%:</p><ul type="disc"><li>Maintains 10-year
JGB yield target around 0%.</li><li>Maintains band
around its 10-year JGB yield target at up and down 0.5% each.</li><li>Maintains offer to
buy 10-year JGB at 1.0% daily through fixed-rate market operations.</li></ul><ul type="disc"><li>Makes no change to
forward guidance.</li><li>Japan's economy recovering moderately.</li><li>Japan's economy
likely to continue moderate recovery.</li><li>Inflation
expectations showing renewed signs of accelerating.</li><li>Must watch financial
and forex market moves and impact on Japan's economic activity, prices.</li></ul><p>Moving on to the
press conference, BoJ Governor Ueda repeated that they are ready to ease more
if necessary and that they are not yet sure that inflation can reach the 2%
target sustainably:</p><ul><li>Will not hesitate to take additional easing measures if necessary.</li><li>We are yet to foresee inflation reaching 2% in a stable manner.</li><li>Japan economy is recovering moderately.</li><li>Wages and price setting behaviour has been more
positive recently.</li><li>(Clarified
on the recent interview where he mentioned a “quiet exit” from monetary easing)
I said that we need to patiently continue easy policy. </li></ul><ul type="disc"><li>We could consider
ending yield curve control and modify negative interest rate policy.</li><li>But only when we
judge that achievement of 2% inflation is in sight.</li><li>We are not in a
situation now to decide on the order of change in policy tools.</li><li>One
of the most important factors to judge prices is strength of wage growth.</li></ul><p>The UK August
Retail Sales missed expectations with some minor positive revisions to the
prior readings:</p><ul><li>Retail
Sales Y/Y -1.4% vs. -1.2% expected and -3.1% prior (revised from -3.2%).</li><li>Retail
Sales M/M 0.4% vs. 0.5% and -1.1% prior (revised from -1.2%).</li><li>Core
Retail Sales Y/Y -1.4% vs. -1.3% and -3.3% prior (revised from -3.4%).</li><li>Core
Retail Sales M/M 0.6% vs. 0.6% expected and -1.4% prior. </li></ul><p>French PMIs missed
expectations by a big margin falling deeper into contraction:</p><ul><li>Manufacturing
PMI 43.6 vs. 46.0 expected and 46.0 prior.</li><li>Services
PMI 43.9 vs. 46.0 expected and 46.0 prior.</li></ul><p>German
PMIs beat expectations across the board:</p><ul><li>Manufacturing
PMI 39.8 vs. 39.5 expected and 39.1 prior.</li><li>Services
PMI 49.8 vs. 47.2 expected and 47.3 prior.</li></ul><p>The Eurozone Manufacturing
PMI missed expectations while the Services PMI beat forecasts although they
both remain in contraction:</p><ul><li>Manufacturing
PMI 43.4 vs. 44.0 expected and 43.5 prior.</li><li>Services
PMI 48.4 vs. 47.7 expected and 47.9 prior. </li></ul><p>The UK Services
PMI fell further into contraction while the Manufacturing PMI saw a small
bounce:</p><ul><li>Manufacturing
PMI 44.2 vs. 43.0 expected and 43.0 prior.</li><li>Services
PMI 47.2 vs. 49.2 expected and 49.5 prior.</li></ul><p>The Canadian July Retail
Sales missed forecasts although the core reading was much better than expected:</p><ul><li>Retail Sales Y/Y 2.0% vs.
-0.6% prior.</li><li>Retail Sales M/M 0.3% vs.
0.4% expected and 0.1% prior.</li><li>Core Retail Sales M/M
1.0% vs. 0.5% expected and -0.7% prior (revised from -0.8%).</li><li>August advanced estimate
-0.3%.</li></ul><p>ECB’s de Cos (dove
– non voter) joins the others in the higher for longer camp:</p><ul type="disc"><li>Underlying inflation
is now easing.</li><li>Inflation seems to
be turning a corner.</li><li>Current interest
rate level – if maintained for sufficiently long – is broadly consistent
with achieving the target.</li><li>Too early to talk
about rate cuts.</li><li>Would be cautious
about discontinuing PEPP reinvestment.</li><li>Selling bonds is not
something the ECB is currently considering in the future.</li></ul><p>The S&amp;P Global
US Manufacturing PMI beat expectations while the Services PMI missed:</p><ul type="disc"><li>Manufacturing PMI
48.9 vs. 48.0 expected and 47.9 prior.</li><li>Services PMI 50.2 vs.
50.6 expected and 50.5 prior.</li></ul><p>Fed’s Collins
(neutral – non voter) leans on the higher for longer stance acknowledging the current
resilience in the economy:</p><ul type="disc"><li>Optimistic inflation
can fall with only a "modest" rise in unemployment, see a widened
pathway to that outcome.</li><li>Current policymaking
requires "considerable" patience to get the right signal from
data.</li><li>Despite
"encouraging" recent data, inflation remains too high.</li><li>Key elements of
inflation, such as core services excluding shelter, haven't demonstrated
"sustained" improvement.</li><li>Supports vigilance
regarding inflation risks; believes it's "too soon to be
confident" that inflation is under control given the continued
above-trend economic activity.</li><li>Cash levels are
reverting to "pre-pandemic norms"; anticipates household and
business spending to be more influenced by high interest rates.</li><li>Some inflation
readings have been encouraging.</li><li>Economic activity
continues to be above trend.</li></ul><p>Fed’s Bowman (hawk
– voter) expects further interest rates increases as the economy remains too
strong for a timely achievement of their inflation goal:</p><ul type="disc"><li>Further interest
rate increases likely appropriate with inflation "still too high”.</li><li>Fed policy will need
to be held at a restrictive level "for some time" to return
inflation to 2% "in a timely way."</li><li>Continued risk of
further increase in energy prices could reverse some of the recent
progress on lowering inflation.</li><li>Economy still
growing at a "solid pace," with robust consumer spending and
solid job gains.</li><li>Bank lending
standards have tightened but no sign of a "sharp contraction" of
credit that would significantly slow the economy.</li><li>Expect progress on
inflation is "likely to be slow" under current conditions,
suggesting the need for even tighter policy.</li><li>It's imperative that
bankers provide feedback on recent plans to toughen bank rules.</li></ul><p>The
highlights for next week will be:</p><ul><li>Monday:
German IFO.</li><li>Tuesday:
US Consumer Confidence.</li><li>Wednesday:
BoJ Meeting Minutes, Australia Monthly CPI, US Durable Goods Orders.</li><li>Thursday:
Australia Retail Sales, US Q2 Final GDP, US Jobless Claims.</li><li>Friday:
Japan Tokyo CPI, Japan Unemployment Rate, Japan Retail Sales, UK Q2 Final GDP,
Eurozone CPI, Canada GDP, US Core PCE.</li></ul><p>That’s all folks,
have a great weekend!</p>

This article was written by Giuseppe Dellamotta at www.forexlive.com.