Ian Reynolds
In Case You Missed It
BOA | Goldman
In a Friday note to clients, Bank of America economists led by Michael Gapen said the Fed will raise the federal funds rate by 25 basis points at the next three meetings of its policy-setting panel, now projecting a pause in hikes will commence in July instead of June.
“Resurgent inflation and solid employment gains means…the Fed might have to hike further if inflation, job growth, and consumer demand refuse to soften,” Bank of America economists wrote, referring to a flurry of economic indicators that show inflation the U.S. economy is softening at a slower pace than many hoped, headlined by the closely followed consumer price index’s release Tuesday that revealed higher than expected prices.
In a Thursday note, the Jan Hatzius-led Goldman group also altered its forecast to include a 0.25% rate increase in June, predicting peak interest rates of 5.25% to 5.5%.
The terminal federal funds rate projected by Bank of America and Goldman’s would be its highest level since early 2001.
FED At First Base But That Doesn't Mean Rates Have Peaked
Yellen says U.S. inflation fight 'not a straight line' after price rise data
Fed Officials Flag Risk of Sticky Inflation as PCE Comes in Hot
Uh oh, Powell's new (invented) metric of "Core PCE services less Housing Services" soared in January to 0.58%. As this chart shows, this is one of the highest readings ever. Powell says this metric is 55% of core inflation. And it is highly sensitive to wage and labor.
AUD / USD Trade Update
Short 0.7000
Short 0.7100
Stop 0.7225
As we speculated (!) last week the reversal at the double top has pushed price down to 0.6726. It took a bit of time to close below the fib at 0.6873 but once there, AUD got poleaxed. Stronger dollar on higher for longer, with the PCE update last week, leaves us looking for next fib level just above 0.6600.
We're hoping for a rally towards 0.6873 to put on the final short position. At that point we'll be looking to bring our stop down.
Australia
RBA Governor Philip Lowe appeared before the House Economics Committee. He was questioned on high inflation rates and the cost of living.
Lowe: "No moderation of goods price inflation Q4 in Australia unlike rest of the world". He's expecting it to fall but what if it doesn't and it reverses everywhere else?
Labor super cap ‘could force a property and asset sell-off
NAB says Australia risks recession this year amid rising interest rates
Key Economic Indicators This Week
