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US chart of the week – Two-tier job market

The latest release of the Atlanta Federal Reserve series on median wage growth provides interesting clues about the current US wage puzzle – i.e. the question why US wage growth remains tame despite the very tight labour market (the unemployment rate was only 4.1% in March). Of particular interest is the widening gap between wage […]

NAFTA update – All’s well that ends well?

Having progressed slowly for several weeks, the NAFTA (North America Free Trade Agreement) renegotiation talks seem to have found some fresh impetus lately, with several officials suggesting that a deal could be reached as soon as early May. A trilateral meeting will take place in Washington DC this Thursday on the margins of the G20 finance […]

Congressional Budget Office does not believe US tax cuts will ‘pay for themselves’

  The Congressional Budget Office (CBO), a bipartisan budget body reporting to US lawmakers, released a fresh 10-year economic and budget outlook earlier this week, incorporating the effects of both the December tax cuts and the March Congressional spending deal. The news is not great. The CBO seems half convinced about the medium-term benefits of […]

US chart of the week – Car deflation

March CPI inflation was relatively muted. Core inflation rose a relatively moderate 0.18% m-o-m, the same as in February, and below January’s 0.35% m-o-m rise. What this shows is that while core inflation is gradually improving – echoing the improvement in the US economy – fears of inflation getting out of hand are still proving […]

US inflation worries prove unfounded

After a solid reading of 0.35% m-o-m in January – which scared some market participants – core consumer price inflation (CPI) proved tamer in February and again in March, posting a more moderate 0.18% m-o-m gain in both months. (That is not too far from the average since 2010 of 0.15% m-o-m). Due to base […]

Federal Reserve’s tightening still on track

Among the many questions posed by the recent more aggressive trade rhetoric from the Trump Administration is whether it will ‘scare’ Federal Reserve officials, and therefore interrupt the current US tightening cycle. But recent comments from Fed policymakers, including from Chair Jerome Powell, suggest that officials remain cool-headed about recent Trump rhetoric. Powell has insisted […]

US chart of the week – Benefits vs wages

The next US monthly employment report (published this Friday) will once again be scrutinised for signs that wage growth is on the rise. While wage growth has been improving in recent years, the pace has remained glacial. Average hourly earnings were up 2.6% y-o-y in February, a relatively subdued pace when taking into account near […]

US PCE inflation – Still moderate

February core PCE inflation rose 0.23% m-o-m, in line with expectations. The y-o-y reading was up to 1.6% from 1.5% in January. The improvement in US core inflation remains quite unspectacular when taking into account full employment and solid underlying growth (likely to reach 3% this year). Core inflation should rise to 2% y-o-y in […]

The US’s Chinese phone addiction

For decades US trade policy’s biggest focus was on the country’s astronomical imports of oil. But the oil bill has moderated significantly in recent years, due to the domestic shale oil production boom and the (associated) drop in global oil prices. Lately, and more particularly since Donald Trump arrived in the White House, the focus […]

March Fed review – Mr. Middle Ground

On 21 March, the Federal Reserve hiked rates by one quarter point, as widely expected, nudging the interest rate on excess reserves (IOER) to 1.75%. Chair Jerome Powell’s press conference and the accompanying material – in particular the forecasts for future rate hikes (the ‘dots’) – revealed a slightly hawkish tone, mostly due to policymakers’ […]

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