San Francisco Federal Reserve President John Williams earlier this year got so sick of answering reporters’ questions about when the U.S. central bank would raise rates that he had his son design a Tee-shirt that he could just give out.
US interest rate liftoff, so far at least, has been the sort of damp squib markets-wise that the Fed had been praying for after trailing the move for more than a year. Volatility surrounding last night’s announcement has been modest, most stock markets on Wall St and around the world are 1-2 pct firmer, the US yield curve has flattened with 2-year rates nudging just above 1.00 pct while 10-year yields actually fell back a bit. And as doveish as the message on “gradual” rate rises from here was, the Fed’s own assumptions on where rates go over the next year (from between 0.25-0.50 today to 1.25-1.50 in a year’s time) is still almost twice what the market’s is pricing over that horizon.
So much for forward guidance. The largest proportion of Britons on record — almost a quarter — have “no idea” where interest rates are heading over the next 12 months, according to the Bank of England’s quarterly survey of the public’s views on the economy.
Another month, another round of disappointing British trade data.
German imports fell sharply in October and exports also weakened, suggesting Europe’s largest economy is still struggling to shake off the impact of a slowdown in China and other emerging markets. Meanwhile Britain’s Chambers of Commerce is lowering its forecasts for UK economic growth over the next three years, with the slowing world economy again the root cause. That comes before the Bank of England’s latest rate-setting meeting on Thursday: no change seen for now, but BoE chief Mark Carney could use the publication of the meeting’s minutes to tweak expectations for when the hike could come (currently seen as much as a year or more away).
The U.S. November jobs report is expected shortly, and in all likelihood it will be a solid one. But forecasts around future employment are not quite so optimistic.
Finally there’s some good news on an economic statistic that really matters for the euro zone’s future – unemployment.