US: Govt Shutdown Risk Ticks Up As Schumer Withholds Dem Support From House CR

Mar-13 09:37

The chance of a government shutdown on Saturday increased after Senate Minority Leader Chuck Schumer (D-NY) said Democrat senators should withhold their votes from the full-year funding measure that passed the House of Representatives this week.

  • Schumer said on the Senate floor: “Funding the government should be a bipartisan effort but Republicans chose a partisan path… Because of that, Republicans do not have the votes in the Senate to invoke cloture on the House CR,”
  • Schumer said he would endorse a plan for a shorter CR through April 11 to allow time for appropriators to work on a bipartisan omnibus. A shorter CR could theoretically be included as an amendment to the House package, although Republican leadership have dismissed this option.
  • Senate Majority Leader John Thune (R-SD), who needs eight Democrat votes to clear the Senate filibuster, has teed up a preliminary vote on the House measure for Friday morning. Without Schumer's consent, the package cannot be advanced to a full vote where Thune hopes to peel off enough Dems.
  • The prevailing view is that Congress will find a solution. Democrats are traditionally uneasy with government shutdowns and as a shutdown next week would hand more power to the White House Office of Management and Budget - the agency Democrats are trying to restain - it is difficult to see how a shutdown is in Democrats' interest.
  • However, progressive Democrats believe this bill provides the only leverage for Democrats to push back against the GOP’s government reform agenda so brinksmanship may nudge Congress right up to the Friday deadline. 

Figure 1: Government Shutdown in 2025, %Implied Probability 

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Source: Polymarket

Historical bullets

BOE: Mann on why activist policymakers still needs discipline

Feb-11 09:37

"It is not just the immediate policy decision that needs to be communicated. Providing insights on the future path matters for the activist policy maker. Notwithstanding the 50 basis point cut now, structural impediments to achieving the target on a sustained basis are not yet fully purged. The activist policymaker needs to maintain policy rate discipline and restrictiveness even after this immediate decision. This ensures that, as we move through the inflation hump, expectations remain anchored both in the near and longer term."

EQUITIES: EU Bank call option trade

Feb-11 09:33

SX7E (20th Jun) 175c, bought for 2.90 in 6k.

NORWAY: Offsetting Productivity and Compensation Impacts From Q4 GDP Report

Feb-11 09:28

The Q4 GDP print had mixed implications for the March MPR rate path from an income/productivity perspective. Although mainland real productivity per hour growth was -0.5% Q/Q (vs 0.5% prior), annual wage growth was below Norges Bank’s December MPR projection at 5.0% Y/Y (vs 5.2% forecast, 5.7% prior). 

  • Whole-economy employment growth was 0.2% Q/Q (in line with the Q4 Regional Network Survey) and 0.6% Y/Y (in line with the December MPR projection). Meanwhile, hours worked grew 0.1% Q/Q on a whole-economy and mainland basis.
  • These productivity, compensation and hours worked dynamics have offsetting impacts on overall unit labour cost growth.
  • The weak productivity reading takes some of the shine off last quarter’s upward productivity revisions going back to 2022, but we don’t want to overstate its impact. We noted earlier that headline GDP weakness (-0.6% Q/Q) was largely due to a pullback in inventory investment, and a good deal of that would’ve bled into the mainland GDP reading too (and thus weigh on productivity growth).
  • Taken alongside the GDP expenditure breakdown covered earlier, with think the Q4 GDP report should still be a dovish factor in the March MPR rate path. Governor Wolden Bache will likely reaffirm guidance for a 25bp March cut at her annual address on Thursday.

 

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