Archive

HEW: Trump Trade Trends Trump Value

• The US dollar and rates kept trending higher over the past week, dragging UK yields up despite disappointing unemployment and GDP data. EUR weakness looks too stretched. US inflation data kept a December Fed cut alive, albeit still data-dependent.
• Aside from Bank Indonesia's decision on Wednesday, it’s another quiet week ahead for monetary policy decisions. UK inflation’s uncontentious jump on regulated energy price changes is our main event, but we also await flash PMIs and final HICP data.

By Philip Rush

Mexico: 25bp Rate Cut To 10.25% (Consensus 10.25%) in Nov-24

• Banco de México reduced its overnight interest rate by 25 basis points to 10.25%, matching market expectations and signalling a shift from a restrictive stance amid stabilising core inflation trends.
• Future rate decisions will be data-dependent, considering global disinflation patterns, geopolitical risks, domestic currency volatility, and potential economic slowdown in 2025.
• The inflation trajectory, with projections for convergence to target by Q4 2025, underpins a cautious policy outlook with risks biased to the upside due to persistent core pressures and potential foreign exchange impacts.

L Mann - The Great Moderation 20 years on

Catherine L. Mann reflects on the last forty years of the ‘Great Moderation’. She compares and contrasts arguments that ‘good policy’ or ‘good luck’ may have brought about more macroeconomic stability. She then discusses the likely sources of higher volatility in the future, including climate change, global trade fragmentation, financial market volatility, and policy volatility. Catherine concludes by outlining the appropriate monetary policy strategy in a more volatile world.

Catherine L Mann's speech revisits the concept of the "Great Moderation," a period characterized by reduced macroeconomic volatility, frequently attributed to improved monetary policy and good economic fortune. She suggests that the stability enjoyed during that period may not continue into the future, anticipating elevated volatility due to various global challenges, including climate change, protectionist policies, and domestic factors like demographics and technological change. Mann argues that monetary policy remains a crucial tool for stabilizing economic growth and maintaining public trust in central banks. She also notes the significant role of global shocks in influencing domestic inflation, particularly for the UK as a small open economy. Drawing lessons from history, she stresses the importance of robust monetary policy frameworks and the need to adapt to new economic conditions while maintaining credibility and stability.

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- Positivity: 70
- Uncertainty: 80

Kugler - Central Bank Independence and the Conduct of Monetary Policy

Governor Adriana D. Kugler's speech highlights the key role of central bank independence in crafting effective monetary policy necessary for long-term economic stability and low inflation. She underscores the historical context of high inflation in different regions and its impact on policy decisions today. The speech sheds light on how the Federal Reserve's dual mandate of maximum employment and price stability necessitates a balanced approach to economic challenges. Governor Kugler cautions that although there has been significant disinflation, particular areas like housing and certain services still pose risks to achieving inflation targets. The cooling labor market reflects the Fed's delicate balancing act of moderating inflation without hampering employment growth. Moreover, the speech addresses the importance of transparency and credibility in central banks, which play a crucial role in stabilizing market expectations about long-term inflation. Overall, the speech provides an understanding of how autonomy in monetary policymaking contributes to stable economic conditions.


Positivity: 70
Uncertainty: 60