Below trend growth to continue
In this Weekly we have included trip notes and reflections from Ivan Colhoun, Chief Economist, Markets, who has been visiting clients in the UK, Europe and the Middle East.
In this Weekly we have included trip notes and reflections from Ivan Colhoun, Chief Economist, Markets, who has been visiting clients in the UK, Europe and the Middle East. It’s quite enlightening, offshore investors now holding a uniformly negative view on Australia’s prospects.
For the economy and markets for the week ahead, it’s not a big data week but an opportunity for the markets to absorb “what next” for central banks with the Fed putting off lift-off and key ECB speakers over the weekend threatening to ramp up QE further should there see downside risks on inflation. And there is more central bank speak ahead this week with ECB President Draghi speaks on Wednesday, while in the US, there are several speakers, culminating in Friday’s morning’s speech from Fed Chair Yellen.
Three speeches on Friday reflected again the still wide polarity of views from within the Fed. Two were from well-known monetary hawks, James Bullard who said he would have been a dissenter this month (he isn’t a voter this year, but is next year) and Jeffrey Lacker, who did dissent from last week’s decision. Even John Williams, a centrist and voter this year, and aligned more with Fed Chair Yellen’s views, did acknowledge the uncertainties but worries the Fed might be getting behind the curve. The one thing he did note that was a little different was the Fed was not out of “ammunition” (i.e. more easing) but didn’t feel they would need it. NAB’s forecast calls for the Fed to commence lift-off at its 17 December FOMC, passing the 29 October meeting.
One of the few central bank heads apparently content with the current stance of monetary policy is RBA Governor Stevens. He said Friday in testimony to the House Economics Committee on the RBA’s Annual Report that the question for the RBA is the balance between whether the cash rate is low enough to promote private sector growth without promoting risks in the financial space (read house prices). In his view, he thinks they “have the balance about right”.
Locally, we also start the week with a refashioned Federal Ministry and a new Treasurer Scott Morrison. It’s a light week for local data (see The Week Ahead below for more detail) with interest in China’s Caixin Manufacturing PMI for September out Wednesday. Friday’s China major cities property price data for August revealed 35 cities where prices are rising again, up from 31 in July, prices overall up 1.7% after -0.4% in July.
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