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Fed on the road to normalisation, People’s Bank of China stands pat

As was widely expected, the Federal Reserve decided at latest policy meeting on June 14 to raise the Fed funds rate target range by 25bp to 1.0%-1.25%. The Fed appeared relatively upbeat on the economy, downplayed the recent weakness in inflation numbers and left unchanged its median projections for Fed funds rates – one more quarter-point hike […]

U.S. job creation softens, but unemployment lowest in 16 years

May was a mixed month for US employment data. Job creation was softer than expected, the figures for the previous couple of months were revised down and average hourly earnings data were somewhat disappointing. However, the unemployment rate unexpectedly fell further, reaching its lowest level since March 2001. Non-farm payroll employment rose by a soft […]

Trump’s proposed budget is light on details

President Trump’s budget request was issued yesterday. Higher defence and infrastructure spending are proposed, more than compensated for by drastic cuts in other spending. The consequence is that total outlays are reduced dramatically. On the revenue side, the budget plan was very short on details. It assumes that tax cuts will be neutral for the […]

U.S. consumer spending showing signs of rebound

  Core retail sales in the US rose by 0.2% m-o-m in April, below consensus expectations (+0.4%). However, retail sales for March were revised up by 0.2%. The result was that between Q1 and April, nominal core retail sales grew by a healthy 3.6% annualised, following an increase of 3.5% q-o-q in Q1 and 3.1% […]

US unemployment falls to fresh cyclical low

  Non-farm payroll employment rose by a solid 211,000 in April, above consensus expectations. Unexpectedly, the US unemployment rate continued to fall from 4.5% in March to 4.4% in April, and is now significantly below the Fed’s median estimate for full employment (4.8%). However, wage data were somewhat disappointing, with the pace of hourly wage […]

US economic prospects look good

US GDP growth decelerated from 2.8% in H2 2016 to 0.7% quarter on quarter (q-o-q) annualised in Q1, slightly below consensus expectations (1.0%). However, this weak reading is mainly due to statistical anomalies (growth tends to be lower in Q1) and transitory factors that weighed on consumer spending and stockbuilding. However, fixed investment growth picked […]

Markets react well to Fed hike

In line with what almost every forecaster was expecting, the Federal Open Market Committee (FOMC) decided at its latest policy meeting to raise the Fed funds rate target range by 25bp to 0.75%-1.0%. Fed Chair Janet Yellen explained that the decision to raise rates was appropriate “in light of the economy’s solid progress toward our […]

Healthy job reports open the way to rate increases

February’s US non-farm payroll figure was strong (although partly due to temporary factors and unusually mild weather), with non-farm payrolls rising 235,000, above expectations. Other data in the February employment report were also upbeat. The US unemployment rate fell back from 4.8% to 4.7% in February, slightly below the Fed median estimate for full employment […]

Early rate hike means change in our U.S. rates scenario

As we don’t expect any big negative surprise in the February employment report (to be released on Friday), the probability of a hike next week has risen sharply. We are therefore changing our forecasts for Fed rates this year. Our main scenario is now that the Fed will first hike in March, instead of June. […]

Trump’s fiscal stimulus package may well be delayed

In his first speech to Congress yesterday, President Trump sounded more presidential but was short of specifics on many of his main policy proposals. He once again complained that US companies are facing higher barriers than their foreign counterparts, but didn’t elaborate on how specifically he intended to remedy this situation. Most notably, there was […]

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