US OUTLOOK/OPINION: Market Moves Give Powell Room To Say "Transitory" Again(2/2)
Apr-03 18:03
Similarly, 1Y zero coupon inflation swaps are soaring (up 50bp since late March to 3.50%), but 5Y have been steady for months at around 2.5%.
- In other words, market-based medium/long term inflation expectations remain calm even as short-term implieds have jumped and rate cut expectations have risen.
- That's probably a combination of expectations that the price level will see a one-off jump from tariffs as opposed to anything lasting, though more worryingly, probably also reflects expectations of weaker demand as real incomes suffer under tariffs and businesses remain hesitant to reinvest amid uncertainty, not to mention other considerations such as foreign retaliation on US exporters.
- The longer-term expectations remaining anchored are the key for Powell and multiple colleagues who have spoken on the topic - so long as they remain well-behaved, the Fed doesn't have to be overly concerned about near-term inflation developments.
- Powell in March: "it can be the case that it's appropriate sometimes to look through inflation if it's going to go away quickly without action by us. If it's transitory. And that can be the case in the case of tariff inflation. I think that would depend on the tariff inflation moving through fairly quickly, and it could depend critically as well on [longer-term] inflation expectations being well anchored."
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EUROPEAN FISCAL: French Deficit Starts 2025 On A Better Note
Mar-04 18:02
The central government cash balance in January saw a budget deficit of E17.3bln, a sizeable improvement from the E25.7bln in January 2024 and its smallest January deficit since 2018.
- A E17bn deficit equates to 12% of the E139bn central government deficit forecast for 2025, a better start to the year than in Jan 2024 when it equated to 16.5% of the ultimately realized E156bn. It’s close to the 12% seen in 2023 and 10.5% in 2022.
- Translation to a general government basis is difficult so early in the fiscal year, particularly given there is uncertainty from ongoing negotiations around pension reform (France's pension-related expenditures are among the highest in the EU).
- Focusing on these central government data, roughly two thirds of the improvement came from lower total expenditure at E37.9bln (from E43.4bln in Jan 2024) with the remainder from higher revenue at E24.4bln (vs E20.8bln in Jan 2024).
- The year-on-year increase in revenue was driven by a rise in tax receipts (E23.6bln from E20.0bln in Jan 2024), whilst non-tax revenues were stable (unchanged at E0.5bln).
- All key sub-components of tax revenues increased over Jan 2024 values, especially other tax revenues at E6.1bln (vs E4.1bln in Jan 2024).
- The lower expenditure meanwhile was largely due to intervention expenses (only E5.3bln vs E11.3bln) although this appears a temporary improvement. The press release notes it was "due to the shift in certain payments for intervention expenditure borne by social ministries and the calendar of operating expenditure". For example, the housing access assistance "first payment is spread over the months of January and February 2025" whereas in January 2024 full payment was made.
- The balance of special accounts recorded a deficit of E3.8bln (vs E3.1bln in Jan 2024), this is mainly due to an allocation to pensions of E0.3bln (vs a inflow of E0.5bln from pensions in Jan 2024).
- Note INSEE’s total government estimate of the 2024 deficit is expected to be published on 27th March. Recall that last year’s central government deficit of E156bn (5.4% GDP) came in lower than latest estimates of 169bn but was still larger than the initially forecast E147bn. It narrowed from 6.1% GDP in 2023.
MNI EXCLUSIVE: MNI Interviews Head of Canadian Homebuilders' Association
Mar-04 17:47
- MNI interviews head of Canadian Homebuilders' Association on tariffs, rate outlook -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com
MNI EXCLUSIVE: MNI Interviews Ex-Fed Board Economist
Mar-04 17:07
- MNI interviews ex-Fed board economist on monetary policy -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com
Trending Top
Dec-05 15:48
