A summary around our key themes for last week (w/c 21 May):-
- FOMC – Signalling on rates from minutes & speeches
- No additional rate hikes this year (expect two, rather than three more rate increases), Fed outlook and policy stance hasn’t changed
- Most speeches this week reinforced that Fed will tolerate inflation above 2% for a time
- Econ data tracking in line; no reason to think performance above/below expectations
- Key considerations: inflation just reaching 2% now, continued wage growth, some business uncertainty with regard to trade, shape of the yield curve (future growth expectations “sluggish”)
- Neutral rate: somewhere between 2.25-2.75%. Several speeches highlighted moving to that level and then seeing how the economy develops
- US data – PMI, regional survey’s and durable goods (ex-transport) showing continued expansion. A key theme is rising cost price pressures, some optimism about ability to pass higher costs on.
- Europe – German and European PMI’s continued to slow (expanding at a lower rate), ECB remaining accommodative, core inflation still subdued and has not shown an upward trend yet. Brexit and trade uncertainties.
- UK – slower GDP growth, flat retail sales, inflation moderating (positive), BoE concerned about Brexit, remaining accommodative.
- Japan: Tokyo Inflation continues to moderate, in line with slowing inflation and growth
For all the detail – download the full report:
Another big week ahead with global growth and inflation remaining in focus:-
- US growth, employment and inflation
- EU Inflation, employment
- German retail sales and CPI
- Canada – GDP and BoC rates decision
On the central bank (US) liquidity front this week its month end. Note and bond settlements, Fed holdings mature and Fed balance sheet reduction on 31 May 2018.
Full details of the calendar:
Feedback is welcome – please send any comments or questions to kim.mofardin@marscapitalpartners.net
