Yellen moves to the middle ground
United States: Rate differentials continue to drive FX
The Week Ahead: Eurozone Bank Lending along with US GDP key focus
One of the team is just back from a short trip to the States and if what was seen in the bars, cafes and shops of NYC, Chicago and a hilariously debauched day in South Beach Miami, the US economy is living up to its 4% growth number!
This puts it up to the Fed, in a way. I say ‘in a way’ because if inflation remains low, then there’s nothing to worry too much about. But this too will change, as prices always rise if there’s enough money to go around.
In its July 30th policy statement, the FOMC reaffirmed its view that a “highly accommodative stance of monetary policy remains appropriate”. But how sustainable is this message in the face of the improving economic outlook? Assuming continued recovery in the labour market, and although modest, building price pressures, the Fed will be forced to change its message in the months ahead. Basically, its going to have to explain what an “appropriate” degree of policy accommodation is, or what a “lessened” degree of accommodation means in English rather than Fed-speak.
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