US Inflation
This is important
● CPI biggest market mover
● Fed focuses on inflation
● Markets liked it
Inflation
● Core CPI MoM most important
● Fell from 0.6% to 0.3% last time
Inflation
● See-saw may return, probably above 0.3%.
● Comes just before Fed decision
What I expect
● Strong inflation
● Markets to freak out
● Dollar to surge, then calm ahead of the Fed.
Fed decision
Slowing down
● Because Powell said so
● Moderation as soon as December
● 50 bps on the cards
But what’s next?
● All eyes on the dot plot
● Terminal rate stood at 4.6% last time.
● Rise to 5%
Mixed US economy
● Manufacturing is down, services are up
● Housing cools but stabilizes
● Consumers are crying buy buying
Strong jobs market
● NFP at 263K, above pre-pandemic levels, beating estimates
● Wages saw a bump up in November
● But household survey quite flat
● JOLTs off the highs
What to expect
● 50 bps + aggressive dot plot
● Talk about 50 bps in February
Powell
● Latest speech was dovish
● Softer tone than dots suggest
● Doesn’t want to wreck economy, overtighten
What I expect
● Dollar to jump on statement, dot plot
● Fall on Powell
● See-saws are common
BOE
Relative calm
● Politics are stable for now
● Inflation probably dropped in November
● No press conference
But
Uncertainties
● Next moves in energy prices
● Brexit
● Political stability
● Another 75 bps like last time?
● Most probably 50 bps
What I expect
● A 50 bps to calm things down
● Hints that the BOE intends to further slow down
● Pound falls
ECB
Confusing times
● Unclear if 50 or 75 bps
● Forecasts are darker than reality
The weather
● Hot October brought sigh of relief
● But now it’s cold again
The weather
● No worries of shortages
● But high gas prices hurt economy
Inflation
● Headline inflation tumbled
● Core inflation elevated
The weather
● Forecasts point to recession in 2023
● ECB’s window closing
What I expect
● A 75 bps hike to appease hawks
● Taking advantage of growth so far
● High core inflation
● But gloomier forecasts in staff projections
● Promises to slow down next moves
● Always a compromise in Europe
● EUR/USD to rise on rate hike
● Fall with Lagarde
