European Periphery Macro Daily 29/11/2018
29 de noviembre de 2018
Macro update
- Fed Chairman’s comments. Yesterday Fed chairman stated that:
i) current rate levels are now just below the neutral range of estimates and hinted that as the economic situation no longer warrants a forced march to neutrality the Fed could take a less aggressive approach to rate hikes;
ii) that the next steps to be decided will take into account how the economic data unfold; and
iii) he still sounded upbeat about the growth outlook in the US and the overall financial health, but a the same time recalled that potential caveats in this outlook still remain.
Our view: the strongly dovish reading the market took of this speech is mostly due to Powell’s reference that the Fed’s rates are close to (albeit below) the range considered as “neutral” (which is set between 2.5% - 3.5% according to the academic material tackled by the Fed), this represents a dovish turn from his previous opinion in October that rates were still far from neutral. This tweak opens the door for a more speculation on the rate path forecast by the Fed members at the 14 December FOMC meeting (when a 25bp rate hike is taken for granted) and more specifically whether the three 25bp additional hikes so far contemplated for 2019 will be maintained or moderated (implicit forward rates have in fact reduced this to no more than one 25bp rate hike throughout 2019). As we have stated in the past, our central scenario contemplates at least three 25bp hikes in 2019 on top of the one at the December meeting, but this forecast may now be increasingly subject to a downward correction.
- US second estimate of 3Q18 GDP. Confirming the advance estimate, US GDP growth increased 3.5% QoQ in annualised terms in 3Q18, below the 4.2% QoQ registered in 2Q18.
- Macro releases today. France second estimate of GDP (3Q18), Spain and Germany flash inflation (November) and FOMC Meeting Minutes (November).
PLEASE SEE IMPORTANT DISCLOSURES ON THE LAST FOUR PAGES OF THE REPORT.
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