The New Zealand Services PMI fell back into
Services PMI 48.9
vs. 50.6 prior.
Below the long-term
average of 53.5.
The RBA Assistant Governor Kohler highlighted how the
decline in inflation could be more gradual that previously thought and the main
risk is that high inflation today feeds into inflation expectations:
Decline in inflation
to be more gradual than previously thought.
back to target is likely to be more drawn out.
inflation has been widespread and slow to decline.
of demand have allowed businesses to pass on cost increases.
Wages growth has
picked up, but now appears to have broadly stabilised.
Key risks is
possibility that high inflation today feeds into inflation expectations.
measures of medium-term inflation expectations consistent with target.
conditions are easing but are still tight.
There is no doubt
that the RBA cash rate is at a restrictive level.
There is the risk of
shocks, the road ahead could be bumpy.
The Japanese PPI missed
expectations with the 3-month and 6-month averages being in deflation:
PPI M/M -0.4% vs. 0.0%
expected and -0.3% prior.
PPI Y/Y 0.8% vs.
0.9% expected and 2.0% prior.
ECB’s Kazaks (hawk – non
voter) maintains a cautious approach as he hasn’t seen a peak in wage growth
Too soon to say that
terminal rate has been reached.
Sees risk of
spillover into inflation.
No clear peak of
wage growth seen yet.
ECB’s de Guindos (dove –
voter) continues to support the “wait and see” approach:
Will be in a better
position to reassess inflation outlook in December.
Expect a temporary
rebound in inflation in the coming months.
It is likely that
euro area economy will remain subdued in the near-term.
There are signs that
labour market is beginning to weaken.
Will be in a better
position to reassess inflation outlook and required action in December
disinflationary process continuing over the medium-term.
Will ensure policy
remains sufficiently restrictive for as long as necessary.
Forward guidance is
out of fashion.
BoE’s Mann (hawk – voter)
just delivered some general comments on inflation with no policy outlook,
although she remains one of most hawkish members:
Research points to increased
inflation, increased inflation persistence, and increased inflation
volatility associated with climate shocks, policies, and spillovers.
Carbon price shocks
lead to more inflation persistence and then oil price shocks.
revenues from carbon taxes or emission certificate auctions have economic
effects of direct interest to central banks.
The UK Jobs data beat expectations across the board
with positive revisions to the prior figures:
change 33K vs. 32K prior (revised from -11K).
unemployment rate 4.2% vs. 4.3% expected and 4.2% prior.
change 54k vs. -198k expected and -82K prior.
weekly earnings 7.9% vs. 7.4% expected and 8.2% prior (revised from 8.1%).
weekly earnings (ex bonus) 7.7% vs. 7.7% expected and 7.9% prior (revised
SNB’s Jordan maintains a hawkish tone as he
warns that they will not hesitate to tighten more if necessary, although the
conditions do not warrant such an action:
We will not hesitate to tighten monetary policy further if necessary.
review at the next meeting whether measures taken to date are sufficient to
keep inflation within price stability range on a sustainable basis.
this end, we will monitor inflation developments closely in the coming weeks.
not sure whether the terminal rate has been reached.
The US NFIB Small Business Optimism Index ticked lower
to 90.7 vs. 90.8 prior. This marks the 22nd straight month that the
index sits below its 50-year average of 98. As such, it reaffirms that small
business sentiment is still struggling somewhat.
Fed’s Jefferson (neutral – voter) as other Fed
speakers recently, maintains a hawkish tone:
Uncertainty on inflation persistence may warrant stronger policy
measures of economic uncertainty, particularly for inflation, are elevated.
decisions taken under uncertainty may look different from those optimal under
The US CPI report missed across the board triggering
huge moves and making the market to bring forward rate cut odds:
CPI Y/Y 3.2% vs.
3.3% expected and 3.7% prior.
CPI M/M 0.0% vs.
0.1% expected and 0.4% prior.
Core CPI Y/Y 4.0%
vs. 4.1% expected and 4.1% prior.
Core CPI M/M 0.2% vs.
0.3% expected and 0.3% prior.
ex-Housing Y/Y 3.8% vs. 3.8% prior.
Real weekly earnings
-0.1% vs. -0.1% prior (revised from -0.2%).
Fed’s Goolsbee (dove – voter) highlighted the progress
on the inflation front:
continues, economic growth has been strong, labour markets are vibrant.
This year could see
the fastest non-war related one-year fall in US CPI inflation in a
century, with an unemployment rate that never gets above 4%.
He attributed this
unusual situation to factors such as a rebound in supply following
COVID-19 disruptions, increased productivity, and well-anchored inflation
Still have a way to
go before the US central bank 2% inflation goal is reached.
development allows blockbuster economic growth without added inflationary
More concerned about
possible external shocks than about the economy overheating.
Central bank should
focus its attention mostly on inflation data.
Key to further
progress on inflation is housing, there will be some bumps.
October CPI report
‘looked pretty good’.
participation has come back more than we would have expected.
estate remains an area of concern.
There are a lot of
real pessimistic people that are spending a lot of money, that’s a puzzle.
data relationship to spending is ‘utterly broken’.
Inflation is a very
Fed’s Barkin (neutral – non voter) is wary of the
risks from both over and under tightening:
There are risks from
over and under-correcting on inflation.