FED: Powell Eyeing Incoming Inflation Data, "Alternative" Jobs Numbers (2/2)
Oct-14 17:31
Powell in Q&A discusses what data the FOMC is looking at amid the federal gov't shutdown, pointing out that you can for example "add up" state jobless claims reports "and get a pretty decent estimate", and ADP payrolls.
- "I will say generally the alternative data that we look at is better used as a supplement for the underlying governmental data, which is the gold standard. And it won't be as effective as the main course as it would have been as a supplement.... in the employment space, there's some pretty good substitutes, less so in the inflation space and and in the economic activity space."
- On missing federal government data, Powell suggests that "we're going to make our decisions according to the FOMC schedule, but I think it will be a lot better once we start getting, for example, the September employment report is going to be very important report, and we're not on track to have that, there would still be time for us to get that. We will get, of course, the September inflation, the CPI and PPI reports. So that's a positive. But, you know, we don't comment on fiscal matters, but from our standpoint, we'll start to miss that data, and particularly the October data. If this goes on for a while, they won't be collecting it, and it could become
more challenging" - Further to his speech commentary on the balance sheet, Powell says on what they're watching for when considering ending QT: "So we have a we have a nice spider chart and five main indicators, one of which is repo levels. And I think overall what they're showing is that we're still at ... abundant reserves... a little bit above ample reserves. So but we're beginning to see ... a little bit of tightening in money market conditions, particularly repo rates have moved up.... the pace of runoff is now very, very slow. So we're going to be watching all those factors very carefully. And we're not so far away now. But there's a ways to go."
- Asked if the Fed would look at any specific action on MBS to address mortgage rates or housing affordability, Powell says the Fed doesn't target housing prices.
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AUSSIE 3-YEAR TECHS: (U5) Bounces Further Off Support
Sep-12 21:45
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.550 @ 15:36 BST Sep 12
- SUP 1: 96.430/95.900 - Low Sep 3 / Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures are trading off recent lows. A resumption of gains from here would further narrow the gap with resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Any continuation lower would instead strengthen a bearish threat. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would open 96.860, the Apr 7 high.
FED: MNI Fed Preview-September 2025: A Reluctant Return To Easing
Sep-12 21:16
We've published our preview of the upcoming FOMC meeting - Download Full Report Here
- The Federal Reserve is set to resume its easing cycle at the September 16-17 meeting with a 25bp cut to the funds rate range to 4.00-4.25%.
- The decision to cut after a 5-meeting pause was well-telegraphed by Chair Powell, whose Jackson Hole speech described a “shifting balance of risks” toward a weaker labor market that “may warrant adjusting our policy stance”.
- The updated quarterly projections aren’t likely to bring many changes to the macroeconomic variables, but as usual the signal sent from the Fed rate “Dot Plot” will garner attention. A Committee split between expecting one or two further cuts this year is likely, keeping each of the remaining meetings of 2025 “live”.
- The Statement will downgrade the description of the labor market to reflect a rise in the unemployment rate and poor payrolls growth, and is likely to include at least one dissent to the rate decision.
- But with a Committee that is fairly divided on the way forward, Powell will be noncommittal on future action, reiterating that policy is not on a preset course, and upcoming decisions will be data-dependent.
- A key undercurrent is an increasingly activist approach to Fed personnel management from the White House, which leaves the composition of the FOMC uncertain not just over the medium-term but also at this meeting.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Sep 15
RATINGS: Fitch: France Cut To A+ From AA, Portugal Up To A From A-
Sep-12 21:07
Fitch has downgraded France's sovereign rating to A+ (with stable outlook) from AA-. Release here.
- Among other factors in the decision, Fitch cites "High and Rising Debt Ratio", "Political Fragmentation Hinders Consolidation", "Weak Fiscal Record", "High 2025 Deficit", "Uncertain Fiscal Consolidation Path", and "Fiscal Rigidities".
- In "Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade", Fitch cites "Public Finances: A sustained increase in government debt/GDP over the medium term, due to failure to implement fiscal consolidation measures and/or a persistent increase in financing costs" and "Macro: Materially lower economic growth prospects and weakened competitiveness." Conversely, potentially leading to positive ratings action would be "Public Finances: Confidence that government debt/GDP will be put on a downward trajectory over the medium term, for example, due to fiscal consolidation and/or stronger economic growth".
- Fitch also raised Portugal to A (stable outlook) from A-, while elsewhere, S&P raised Spain to A+ (stable outlook) from A.
- As MNI wrote earlier, we expected France to be downgraded to A+ and Portugal to be upgraded to A.
