Powell mentioning disinflationary forces means the FED's at first base i.e. they think that most of the work has been done. But why do they think that and how does that compare with the other CBs?
Legendary investor Stanley Druckenmiller
1) Once inflation gets above 5%, it’s never come down unless the Fed Funds rate is higher than the CPI (consumer price index).
2) Once inflation gets above 5%, it’s never been tamed without a recession.
[US] Currently Fed Funds are 4.5 - 4.75% with YoY Core PCE 4.4% so yes at least for now first base so they can afford to wait and see.
[AUS] Cash rate is 3.1% with Trimmed Mean CPI (YoY) 6.9%. A gap of 3.8% to be closed.
[EU] Short rates 3%, YoY CPI 8%, difference 5%
[UK] Base rates 4%, YoY CPI 10.5 %, difference 6.5%
[JAP] Short rates -0.1%, Core Inflation Rate (YoY) 4%. Difference 4.1%
A big assumption in markets is that CPI is coming down, and fast. In the US there has been some confimation.
But 2 big shocks have happened in the past 2 weeks.
It started with the shock Aussie trimmed mean CPI
Then the canary in the mine in Spain
The macro guys were sooooo certain Spanish CPI would come down.
What next? Big currency movements?
Chalmers, 6,000 Words of BS
Australia’s new Treasurer is youngish and has a new approach. I like Chalmers but he's an academic. And he's not listening. UK Prime Minister Truss wasn't listening either.
Danger for Australia
Dr Chalmers has flagged plans for the government to collaborate and co-invest with business and investment funds – including superannuation – to address the clean energy transition, housing affordability, disability support, aged care and education.
He is working on plans to attract banks and superannuation funds to set up a social impact investing fund in the May federal budget to tackle “entrenched disadvantage”.
He wrote 6,000 words for The Australian Financial Revue. There's no legislation yet but business, super funds are all pushing back on this.
Now is not the time for an academic experiment with financial markets.
Crazy NFP Numbers