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September 2016

Fed’s Brainard warns not to rush an interest rate decision

Published: Tuesday 13 September 2016

  • Fed’s Brainard warns not to rush an interest rate decision
  • Chinese economic activity improved in August
Yesterday was very quiet in terms of economic data and the only real event of the day was from the Federal Reserve’s most dovish member, Lael Brainard, who delivered a previously unannounced speech.  In summary, Brainard said that the Fed should not rush to increase short-term interest rates given that inflation is below target, risks from overseas and a limited arsenal to counter future economic setbacks.  She set out a series of arguments in favor of caution, reinforcing her existing dovish stance.  Despite caution, she did point out that the economy is moving towards achieving the Fed’s goal of maximum employment and 2% inflation.   With traders already pricing relatively low odds of a September rate hike, Brainard’s comments could make it even harder for Fed’s hawks to seal the deal for an increase next week. 
Overnight we’ve had Chinese Industrial Production which came out higher than previously and in line with forecasts at 6.3%. We have inflation figures from UK and its set to rise for the third month in a row to 0.7%, building on rises in June and July when the cost of living hit 0.5% and 0.6% respectively.  Analysts expect upward pressure to come from growth in import prices following the Pound’s collapse since the referendum and that retailers have been quick to pass on rising import costs to consumers.
Later we have German ZEW economic sentiment which is expected to increase from 0.5 to 2.8. European Central Bank Chief Mario Draghi is speaking later today and in light of major data out of the region the speech will be followed very closely.


A man died and went to The Judgment, they told him, “Before you meet with God, I should tell you — we’ve looked over your life, and to be honest you really didn’t do anything particularly good or bad. We’re not really sure what to do with you. Can you tell us anything you did that can help us make a decision?”
The newly arrived soul thought for a moment and replied, “Yeah, once I was driving along and came upon a person who was being harassed by a group of thugs. So I pulled over, got out a bat, and went up to the leader of the thugs. He was a big, muscular guy with a ring pierced through his lip. Well, I tore the ring out of his lip, and told him he and his gang had better stop bothering this guy or they would have to deal with me!”
“Wow that’s impressive, “When did this happen?”
“About three minutes ago,” came the reply.

Today's Major Economic Releases 

Market BST Data/Event Previous Expected
GBP 09:30 UK: CPI y/y 0.6% 0.7%
GBP 09:30 UK: PPI input m/m 3.3% 0.6%
GBP 09:30 UK: RPI y/y 1.9% 1.8%
GBP 09:30 UK: Core CPI 1.3% 1.4%
EUR 10:00 ECB President Draghi speaks    
EUR 10:00 German ZEW economic sentiment 0.5 2.8
EUR 10:00 ZEW economic sentiment 4.6 6.7
EUR 10:00 EU: Employment change q/q 0.3% 0.2%
NZD 23:45 New Zealand: Current account 1.31b -0.30b

Daily Currency Analysis by Joe De Berniere

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