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39 matches for " inflation risk":
The disappearance from the FOMC statement of any reference to global risks, which first appeared back in September, was both surprising and, in the context of this cautious Fed, quite bold. After all, one bad month in global markets or a reversal of the jump in the latest Chinese PMI surveys presumably would force the Fed quickly to reinstate the global get-out clause. So, why drop it now?
The spike in the May core CPI, and its likely echo in the core PCE, won't stop the Fed easing at the end of this month.
Inflation in the Andean economies ended 2019 well within central banks' objectives, despite many domestic and external challenges.
Data released last week in Argentina reaffirm that President Macri remains in a challenging position ahead of the October 27 presidential election.
In recent client "meetings" we have been emphasizing the idea that a sustained recovery in the economy over the summer depends on the solidity of a three-legged stool.
It's hard to know what to make of the October CPI data, which recorded hefty increases in healthcare costs and used car prices but a huge drop in hotel room rates, and big decline in apparel prices, and inexplicable weakness in rents.
It was no surprise that Banxico cut its policy rate by 25bp to 7.00% yesterday, following similar moves in August, September, November and December.
Markets are looking for the BCCh to remain on hold and the BCRP to ease on Thursday; we think they will be right. In Chile, the BCCh will hold rates because inflation pressures are absent and economic activity is stabilizing following temporary hits in Q1 and early Q2.
In March, CPI rents--the weighted average of primary and owners' equivalents rents--rose by 0.35% month- to-month.
Brazil's central bank again matched expectations on Wednesday, cutting the Selic rate by 100 basis points to 10.25%, without bias. The COPOM s aid that a "moderate reduction of the pace of monetary easing" would be "adequate".
Our forecast of significantly higher core inflation over the next year has been met, it would be fair to say, with a degree of skepticism.
Chile's stronger-than-expected industrial production report for December, and less-ugly-than- feared retail sales numbers, confirmed that the hit from the Q4 social unrest on economic activity is disappearing.
We just can't get away from the deeply vexed question of wages; specifically, why the rate of growth of nominal hourly earnings has risen only to just over 2.5%, even though the historical relationship between wage gains and the tightness of the labor market points to increases of 4%-plus.
The Brazilian Central Bank's policy board--the Copom--met expectations on Wednesday, voting unanimously to keep the Selic rate on hold at 6.50%.
Mexico's inflation is heading down. Wednesday's advance CPI report showed that inflation pressures are finally fading, following temporary shocks in recent months, and the end of the "gasolinazo" effect.
Yesterday's August PMI data in the euro area ran counter to the otherwise gloomy signals from the ZEW and Sentix investor sentiment indices.
While we were out last week, market nervousness over the Covid-19 outbreak intensified, though most key indicators of the spread of the infection continued to improve.
Economic conditions in Brazil are deteriorating rapidly.
Ian Shepherdson, Pantheon Macroeconomics founder and chief economist, discusses the outlook for the global economy with Bloomberg's Julie Hyman, Joe Weisenthal and Scarlet Fu on "What'd You Miss?"
Brazil economic and political outlook is still opaque, but grim, after a vast array of negative news. Impeachment of President Rousseff remains a possibility; the process of fiscal consolidation is messy and politically bloody; rumors that Finance Minister Levy might leave his post next year have intensified; and the latest data showed that the recession worsened in Q3. As a consequence, the BRL and interest rates have been under pressure and we see no clear signs that the turmoil will ease soon.
Higher gasoline prices will lift today's headline October CPI, which should rise by 0.3%. Unfavorable rounding could easily push it to 0.4%, though, and year-over-year headline inflation should rise to 1.6% or 1.7%, from 1.5% in September and just 0.2% a year ago.
The continued modest rate of increase in unit labor costs makes it hard to worry much about the near-term outlook for core inflation.
Barring a disaster, the four-year cyclical upturn in the euro area will continue in the coming quarters. Inflation is a lagging indicator and therefore should rise, and investors should be adjusting their mindset to higher interest rates. But the reality today looks very different. Final inflation data confirmed that the Eurozone inflation slipped to -0.2% year-over-year in February, from 0.2% in January.
A plunge in apparel prices attracted most of the attention after the release of the March CPI report, but it was not, in our view, the most important number.
We can't recall a time when we have disagreed so strongly with the consensus narrative, in both the media and the markets, about the state of the U.S. economy. We think both investors and the commentariat are too bearish on growth and too complacent about inflation risks, and as a result, insufficiently worried about the speed with which interest rates will rise over the next couple of years.
Should you be feeling in the mood to panic over inflation risks--or more positively, benefit from the markets' underpricing of inflation risks--consider the following scenario. First, assume that the uptick in wages reported in October really does mark the start of the long-awaited sustained acceleration promised by a 5% unemployment rate and employers' difficulty in finding people to hire. Second, assume that the rental property market remains extremely tight. Third, assume that the abrupt upturn in medical costs in the October CPI is a harbinger o f things to come. And finally, assume that the Fed hawks are right in their view that the initial increase in interest rates will--to quote the September FOMC minutes--"...spur, rather than restrain economic activity". Under these conditions, what happens to inflation?
Following our note yesterday about upside risks to wage growth and the question of how the Fed will respond, given their sensitivity to labor cost-push inflation risk in the past, we want to address a question raised by readers.
Colombia's worrying inflation picture suggests the Central Bank will likely hike rates at least once more before the end of the year, attempting to anchor expectations. The October 30th BanRep minutes, in which the board surprised the market by hiking the main rate by 50bp to 5.25%--consensus was a 25bp increase--made it clear that the decision was based on fear of increased inflation risks, coupled with an improving domestic demand picture. The 50bp hike was not agreed unanimously, with dissenters arguing that the bank should adopt a more gradual approach due the high degree of uncertainty over the global economy. In addition, those favoring a 25bp hike argued that it would be better to move at a predictable pace to avoid possible market turmoil.
The November FOMC meeting was the definitive holding operation; rates were never likely to rise just six days before a very contentious presidential election, especially with the committee split on the degree of inflation risk facing the economy.
Peru's central bank, the BCRP, kept borrowing costs at 3.25% last week, surprising the consensus forecast for a 25bp increase. This was an unexpected move because inflation risks have not abated much since the previous meeting, when policymakers lifted rates for the third straight month.
The January core CPI numbers are consistent with our view that the U.S. faces bigger upside inflation risks than markets and the Fed believe.
Markets remain convinced that the U.S. faces no meaningful inflation risk for the foreseeable future.
Serious downside risks to growth are mounting...but the fed can't ignore rising inflation risks
It would not be fair to describe the FOMC as gridlocked, because that would imply no clear way out of the current position. Members' views of the risks to the economy, the state of the labor market, and the degree of inflation risk are all over the map, and the chance of a broad consensus emerging any time soon is slim.
Is the Fed Right to Worry About Future Inflation Risk?
In one line: Upside inflation risks are elsewhere.
We've seen some alarming estimates of the potential impact on inflation of the House Republicans' plans for corporate tax reform, with some forecasts suggesting the CPI would be pushed up as much as 5%. We think the impact will be much smaller, more like 1-to-11⁄2% at most, and it could be much less, depending on what happens to the dollar. But the timing would be terrible, given the Fed's fears over the inflation risk posed by the tightness of the labor market.
Markets' judgement that the Monetary Policy Committee--which meets today--will wait until 2017 to raise interest rates overestimates the role that the drop in oil prices and slower GDP growth will play in its decision-making. The inflation risks emanating from the increasingly tight labour market still could motivate a tightening before the summer.
Data this week look set to emphasise that heat is returning to the housing market, again. The Financial Policy Committee--FPC--still has additional tools it could deploy to cool housing demand. But the root cause of surging house prices remains very cheap debt. Alongside the inflation risk posed by the labour market, the case for the MPC to begin to raise interest rates to prevent a widespread debt problem is becoming compelling.
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