Archive

HEW: Resilient Data Test Dependency

• UK wage data extended their tendency to exceed headline expectations, although the BoE seems unfazed. Premature rate cuts risk stoking a financial bubble and policy reversal, similar to 1998. The UK doesn’t enjoy the EA’s disinflationary data.
• Next week is heavy on monetary policy speeches, with rate decisions from the RBNZ, Indonesia, Korea and Chile. UK inflation data are our macro highlight, although we align with the current CPI consensus, and Thursday’s flash PMIs are also important.

By Philip Rush

Waller - Payments Innovation, Technical Standards, and the Federal Reserve's Roles

In this speech, Christopher Waller discusses the importance of technical standards in the evolving payments technology landscape. He emphasizes that technical standards contribute to the safety and efficiency of payment systems and promote interoperability among different payment products. Waller provides historical examples of how the adoption of technical standards improved the efficiency of payments in the past. He acknowledges the rapid pace of technological innovation in payments today and the need for coordination and collaboration among stakeholders to establish standards for integrating new technologies. Waller also highlights the Federal Reserve's role as a convenor, provider of payments expertise, and adopter of standards in its own payment systems. The speech emphasizes the Federal Reserve's commitment to fostering a safe, efficient, and innovative payment system through the adoption and promotion of technical standards.


Positivity Score: 85
Uncertainty Score: 20

EA Inflation Eases ECB Cut in June

• The final EA HICP inflation print confirmed the unsurprising stability at 2.4% in the April flash release. Energy price base effects will probably push it higher again in May.
• Underlying inflationary pressures have continued falling, with most statistical measures under 3% y-o-y with monthly impulses at or slightly below the ECB’s target.
• Like the consensus, we expect inflation to stay close to 2%. This outlook and subdued underlying pressures will likely ease the ECB’s decision to start cutting rates in June.

By Philip Rush

L Mann - Cost of capital and UK business investment: Measurement challenges and research opportunities

Economic Statistics Centre of Excellence Annual Conference at Alliance Manchester Business School

In her speech, Catherine L. Mann discusses the under-performance of UK business investment and productivity growth. She highlights the centrality of interest rates to investment theory and introduces a new framework that considers three actors and their analytical perspectives in influencing business investment. Mann emphasizes the different measures of the cost of capital and their relevance to business investment, as well as the roles of firms, managers, and financiers in affecting the cost of capital. She also discusses the factors determining cash flow, the influence of discount rates and horizons, and the existence of alternative uses of funds. Additionally, Mann explores the role of managers in providing guidance and the decision-making process of financiers in evaluating investments. She notes the variation in cost of capital over time and between different measures. Lastly, Mann discusses the prevalence of hurdle rates among large and externally financed firms, the importance of sales surprises in driving UK investment, and the positive impact of unexpected sales growth on gross investment.


Positivity Score: 80
Uncertainty Score: 60