by Chris Becker
As the countdown approaches to September’s Federal Reserve meeting – where expectations of the first rate hike in nearly a decade are actually on the table – here comes a great chart from John Kicklighter at DailyFX, plotting the “doves” (want interest rates lower) and “hawks” (higher) amongst the central banks of the world:
This is clearly a consensus view with the Kiwis, Aussies and Canadians on or near the bottom of the monetary policy curve, which seems pre-emptive to say the very least. All three commodity exposed countries are nearing recession like conditions and are unlikely to creep up the other side of the hawkish curve for years yet. But it’s perceptions that matter with markets, although macro reality catches up eventually.
On the hawkish side, apart from the inflation print last night in the UK that came in dead flat, expectations are the BOE will start hiking somewhere in the first half of 2016, which has seen Cable rally through 2015 after its shocking previous year. For all its foibles, the US economy remains the strongest which gives the hawks some ammunition although last night’s dwindling industrial production, slack retail sales and poor manufacturing prints put paid to the notion that no weakness remains.
Tonight’s CPI print in the US, which also includes the equally important average earnings print will be key to tomorrows Fed meeting. Currently, inflation remains well contained in the ‘States with the higher USD and lower gas prices helping both sides of the ledgers: