Federal Reserve’s backseat driver

Politicians acting as backseat drivers to monetary policy is nothing new. The independence of the European Central Bank was enshrined in EU-treaties to prevent political interference. The last senior politician to actively attempt to influence policy-making was the German SPD-finance minister Lafontaine in 1998/99. That did not go well. Italian politicians are now making demands…

Chart 110

Upward trend in German composite PMI continues, but weakness in manufacturing. Export orders lowest in 2 years and inflation pressures building, particularly for services, according to Markit. Consistent with a tight labor market.

Spotlight returns to Rome

After a decade of turmoil and bailouts, Greece finally left the 2015-bailout program on 20 August. Greece remains wobbly and fragile with added uncertainty from the Turkish crisis, but the exit is still a milestone.   The milestone would have been more of a festive occasion if it was not for the Italian government and…

Testing times for emerging markets

On 17 August, credit rating agencies S&P Global Ratings and Moody’s lowered Turkey’s credit rating further into junk (non-investment grade) territory. S&P cited the dire economic outlook as the lira depreciation is set to force through a sharp balance of payment adjustment. The rating was lowered from BB- to B+ with a stable outlook. Moody’s…

Chart 109

It is quite remarkable Germany is now close to having the lowest inflation rate of EUR-big4, despite more than full employment and rising wage costs. For France and Italy it is a sign of persisting structural rigidities, also holding back the potential for growth

Turkey in freefall

It has been a spectacular bad week for the Turkish lira (TRY) with the intraday decline on 10 August at one point hitting 20% against the US dollar. As the dust settled, the lira, which started the year at 3.76 per US dollar, ended the trading week at 6.43 per US dollar; a decline of…

United States: The tariff inflection point

Economy has strong cyclical momentum Increasing cost pressures could lead to higher corporate investments… … But tariffs are boosting inflation and creating an uncertain business environment I expect growth rates to taper off in comings quarters, but uncertainty is high Federal Reserve continues monetary tightening, but with pushback from President Trump   180807 United States…

Chart 107

Large decline in German manufacturing orders in June – primarily caused by investment goods and from the domestic market and euro area. Seasonality could be a factor, but it is not a very good sign after a weak period.