Financial markets remain volatile and seemingly at the mercy of the latest inflation data. At the same time, diverging performances among the major economies continue to provide scope for a broader decoupling of central bank monetary policies. Subscribe The post Podcast – Global economic round-up appeared first on Econoday, Inc ..read more

In the wake of the softer-than-expected payroll gains for April in the monthly employment report, the inflation data for April in the May 13 week become the next signpost for the outlook for Fed monetary policy. Markets reacted to the hint of softening in the labor market by anticipating easier financial conditions. However, it is only one month’s data and only half of the Fed’s dual mandate for maximum employment and price stability. The FOMC’s vigilance on the inflation front means that its attention may shift back more to the latter even if the FOMC statement from May 1 said that risks at t ..read more

Global economic data continue to come in very near expectations, at minus 3 for the Relative Performance Index and at plus 3 less prices (RPI-P). Though the outlook for monetary policy varies by region, on net the results point to a steady period for global interest rates. Overall economic activity in Eurozone had underperformed for almost all of April but May’s early releases have proved surprisingly strong. At 21 and 41 respectively, both the RPI and, in particular, RPI-P, show the latest data quite easily beating market forecasts. ECB policy remains on course for a June ease but beyond that ..read more

With the next round of inflation reports on the near horizon, markets should be prepared for a disappointment that, following April’s employment report, may well erase the uptick in rate-cut expectations. The bottom line is that good prices are no longer on the downward trend that has powered the disinflation in the major inflation indicators. Much of the prior improvement in commodities prices was due to a healing of the supply chains related to inventory shortages that resulted from the pandemic. Now that most goods are moving along freely and supply bottlenecks are pretty much gone, the fun ..read more

Recent comments from a number of MPC members have hinted that a cut in Bank Rate might not be too far away and possibly rather sooner than financial markets currently expect. However, apart from the leading dove, Swati Dhingra, most policymakers would still seem to favour waiting until there has been further progress on reducing inflation. Consequently, there is a strong market consensus in favour of the benchmark rate being held at 5.25 percent on Thursday. There is also a good chance that March’s 8-1 vote for no change will be repeated. Once again, there is unlikely to be anything new on th ..read more

The May 6 week presents a remarkably empty calendar for US economic data. This will leave plenty of time to speculate about the direction of Fed monetary policy after the downside surprise in the change in nonfarm payrolls with April coming in with a 175,000 increase and a net downward revision of 22,000 to the prior two months. This compares to the consensus estimate of 243,000 in April in the Econoday survey of forecasters. The unemployment rate came in as expected at 3.9 percent. To be sure, this is only a softer-than-expected reading on payrolls for one month and is by no means a weak repo ..read more

At minus 7, the Relative Performance Index (RPI) extended an improving trend and is now signaling that global economic data on net are nearly meeting economic forecasts. At minus 2, the index less prices (RPI-P) is almost at breakeven zero. In the UK, a mix of upside and downside surprises cancelled each other out to leave the RPI-P at exactly zero. At minus 7, the RPI shows overall economic activity falling slightly short of expectations but not to the extent that would prompt a majority of BoE MPC members to vote for a cut in Bank Rate on Thursday. In the Eurozone, unexpectedly soft core inf ..read more

The two high points of the April 29 week are the FOMC meeting on Tuesday-Wednesday and the April employment report at 8:30 ET on Friday. For the former, no change in the fed funds target rate range of 5.25-5.50 percent is expected. For the latter, the outlook is for ongoing firmness in hiring and low unemployment. The FOMC meeting statement is scheduled for 14:00 ET on Wednesday and will not be accompanied by an update to the summary of economic projections. With no official update to the FOMC projections due until the June 11-12 deliberations, the FOMC will have to rely on the meeting stateme ..read more

At minus 14 and minus 9, both the Relative Performance Index and the index less prices (RPI-P) extended the prior week’s pattern of global underperformance, too limited, however, to sway expectations for monetary policy. In the Eurozone, the RPI (minus 13) and RPI-P (minus 12) remained in negative surprise territory. Economic activity looks to be recovering from earlier aggressive ECB tightening but momentum has recently slipped behind forecasts. Accordingly, an ECB interest rate cut in June remains very likely although that could still change should Tuesday’s flash inflation report for April ..read more

While expectations are universal that the FOMC will remain on hold with interest rates at the April 30-May 1 meeting, there is a good possibility that it will elect to make an announcement about a change in balance sheet policy. At his March 20 press conference, Chair Jerome Powell signaled that the FOMC was prepared to adjust the pace of reductions in balance sheet reinvestment to slow the shrinking of the Fed’s holdings of US treasuries and agency mortgage-backed securities. The intent is first to achieve a smoother transition for markets to avoid liquidity problems for money markets and to ..read more