Our baseline expectation for the ECB’s Governing Council meeting on 3 December is that it will endeavor to shock inflation expectations upward by credibly promising to behave irresponsibly.
Despite very different cyclical conditions and growth trajectories, central bankers everywhere generally think inflation is too low for comfort. Still, near-term policy paths are likely to diverge.
Nearly 42 million Americans will make road trips of 50 miles or more to celebrate Thanksgiving this year, an increase of 0.7% from last year, AAA says. And more of them will be driving bigger, less fuel-efficient vehicles and pumping premium gasoline.
For equities, when rising rates are spurred by expectations for economic growth, it may be a catalyst to reverse an unusually long period of value stocks underperforming growth.
Inclusion of the Chinese yuan in the IMF’s basket of reserve currencies, expected to be approved at the end of this month, heralds China’s increasing presence in global capital markets.
Japan needs to escape deflation given the nation’s fiscal situation. But an increasingly important question is, What is a feasible and desirable inflation target, both economically and politically?
The minutes of the Federal Open Market Committee’s October meeting offered a surprise. No, not a surprise about the likelihood the Federal Reserve hikes at the next meeting. A reading of these minutes both confirmed that this committee expects it will hike in December and that the members clearly wanted to send that message. Message received!
Wage pressures may finally be building. The Labor Department recently reported that average hourly earnings for private employees rose 0.4% month-over-month – a 2.5% year-over-year rate that was the highest reading since 2009. And then October’s Consumer Price Index (CPI) report provided evidence that this is feeding through to consumer prices.
The FX factor – that is, the economic impact of foreign currency exchange rates – is increasingly relevant not only to nominal GDP outcomes in The New Neutral global macro environment, but also to the microeconomic side. For many corporations, FX volatility is shaking up their business landscape.
PIMCO global strategic advisor Richard Clarida discusses key factors influencing U.S. growth and inflation (consumer, housing, exports, energy) as well as the possible policy path for the Fed in the coming year.