The Fed Skipped, the ECB Will Hike

I have NO idea why you would skip but still signal two more hikes to come. It makes no sense to me except maybe they want to see how it goes as Treasury restarts issuance?  

The FOMC said: "Holding the target range steady at this meeting allows the Committee to assess additional information and its implications.... In determining the extent of additional policy firming that may be appropriate... the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments".  

I don’t really know what this means except – we think maybe won but would like to keep a couple of hikes up our sleeves...5% core inflation peasants – be happy! And as I say, issuance restarts with a deluge of bond sales…so it’s the hawkish pause = markets were uncertain how to take it.  

Powell did lean against cuts, stressing that "not a single person on the Committee wrote down a rate cut this year, nor do I think it is at all likely to be appropriate if you think about it". Duh. Higher for longer is the message. 

Chinese Economic Movements 

Elsewhere, China cut its Medium Term Loan Facility rate by 10bps to 2.65%, from 2.75%, the first cut in 10 months, whilst China IP and retail sales slowed and real estate and fixed asset investment both fell.  

European Market Reactions 

European stocks moved a little to the downside after a mixed bag on Wall St – the Dow fell, the Nasdaq rallied. The dollar is off its lows this morning, whilst oil is a bit lower at $69 after Spot WTI made a stab at $70 yesterday. 

UK Political Controversy 

Boris deliberately misled parliament, says the privileges committee whose own Bernard Jenkin appears to have ‘forgotten’ about a party he attended during lockdown....the rule of law is absent not just from powers that be but also from the ‘custodes’. These people make our laws and they are not fit to enter my house. As I noted yesterday, a Banana Republic. 

We Soda's IPO Pullback 

We Soda pulled its IPO – be assured this has ZERO to do with London as a venue and in fact it’s certainly a good thing that UK investors gave this one short shrift. The PR is hilarious...”extreme investor caution” = “lots of interest on the short side!” All kinds of red flags and London showed it out.