FED: Gov Miran: Data Should Push Policy Outlook In A Dovish Direction
Gov Miran on Bloomberg TV says that the incoming data have "come out in accordance with my view of the world", referring in particular to last week's CPI and Employment Situation reports. His view of course includes further rate cuts in 2026.
- Inflation "has steadily come in cooler than expectations", with the unemployment rate having "poked up potentially above where people thought it was going to go", so overall "we have had data that should push people into a dovish direction."
- He acknowledges that the softer-than-expected CPI print included "a couple of anomalies" that suppressed the figures to the downside but "the consequences are not huge", with an impact of "in the neighborhood of 2/10 of a point" for PCE split between shelter data quirks and 2nd half-November collection date effects.
- (Note NY Fed's Williams commented last Friday that "technical factors" associated with the BLS's post-shutdown estimates may have pushed down CPI by around 0.1pp.)
- He repeats previous comments that housing inflation is overstated, and while there was "some downward bias" in the latest report "there's been tons of upward bias" for most of the year and "it's inappropriate to say ok, we have to adjust for the downward bias but we are going to accept the upward bias. That is a deeply biased position."
- He says he hasn't decided on whether to push for a 25bp or 50bp cut at the January meeting - he "could see voting for" 25 given that with rates having come down 75bp at the last 3 meetings "the need for me to dissent for 50 becomes less", but "I do think it's important we continue steadily reducing the policy rate". Of course, that could be Miran's last meeting if he is replaced after his term ends at the end of January.
- "I think there is a lot of people on the Committee who are uncomfortable with rate cuts. I think that's the wrong economic position at the moment... I think you have to give Chairman Powell a credit for having wrangled three cuts out of these guys in succession."
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RATINGS: Moody's Upgrades Italy To Baa2 From Baa3, Still A Notch Below Others
The Moody's upgrade to Italy's credit rating announced late Friday was the first from the agency since 2002 but shouldn't be considered a major surprise. Among the 3 major ratings agencies, Moody's had the lowest rating on Italy - by two notches (Fitch and S&P both BBB+).
- So this upgrade to Baa2 from Baa3 represents something of a closing of that gap rather than a major breakthrough for Italy.
- From the release:
- "The rating upgrade reflects a consistent track-record of political and policy stability which enhances the effectiveness of economic and fiscal reforms and investment implemented under the National Recovery and Resilience Plan (NRRP). It also points to prospects of further policy actions supporting growth and fiscal consolidation beyond the plan's deadline in August 2026. As a result, we expect that Italy's high government debt burden will gradually decline from 2027 onwards."
FED: Heading Into Its Final Weeks, QT Pace Remains At $20B/Month (2/2)
On the asset side of the Fed balance sheet, we saw a $25B drop in assets, of which just $2B could be attributed to QT in one of its final weeks (ends Dec 1).
- Instead it was a $6B drop in dealer repo operations vs a week earlier, and $17B in "other" areas that aren't related directly to monetary policy and typically don't have any significant impact on the size of the balance sheet (such changes are largely due to items such as bank premises, accrued interest, and other accounts receivable.)
- Discount window takeup edged up $0.3B to $6.1B but remains relatively low.
- QT has totaled just under $21B over the last month, around the expected pace, though as noted this will flatline in December with a pickup in net bills as MBS proceeds are rolled over into T-bills.
LOOK AHEAD: US Week Ahead: Retail Sales, PPI & Claims Headline Thanksgiving Week
A Thanksgiving-condensed week sees data highlights from delayed retail sales and PPI reports for September on Tuesday (Nov 25) before a Wednesday release for weekly jobless claims (Nov 26). Aside, the Fed’s Beige Book should also offer another important update on Wednesday for latest liaison reporting, with no Fedspeak currently scheduled around the holiday and the FOMC media blackout due to start on Saturday, Nov 29.
- As we regularly comment in this weekly publication, Redbook and Chicago Fed CARTS indicators point to solid nominal growth in retail sales, something broadly reflected in analyst consensus for the release.
- PPI inflation will offer a useful albeit not overly timely update on input cost pressures.
- Jobless claims will be watched particularly closely, both for latest initial claims for signs of layoffs and a notable update for continuing claims. The latter covers the payrolls reference period for November and will be an important reference point for FOMC members trying to get a sense of latest unemployment rate clues with the next payrolls reports coming after the Dec 9-10 FOMC decision (going into it with this week’s 0.12bp rise to 4.44% back in September).
