Market outlook points
(1) Basically,the next report on 2021/11/12
◎Important◎ Global monetary policy surprises - Kecofin Investment Information - GogoJungle
Since the Australia monetary policy meeting on November 2, 2021, expectations for early rate hikes in the U.S., U.K., and other countries have been denied, and rates in various countries have fallen.
The currencies that were bought on expectations of rate hikes are being sold more.
Australia cites low wage growth as a reason why inflation does not soar.
The UK expects wage growth, but emphasizes concerns about growth slowdown rather than inflation rising.
ECB President Lagarde warned on November 3 that market expectations for rate hikes were premature.
U.S. Chair Powell says meaningless things.
・Wage growth continues, but there are no signs yet of a wage-price spiral.
・Inflation is above 2%, but they aim to bring it to an average of 2% over the long term.
・Even with a low unemployment rate, it may not be full employment. It might be full employment even if pre-COVID employment levels are not restored.
At this time, Powell had not yet been reappointed, and he was cautious with Democratic senators, so his true stance was unclear. The truth is that
・Wage growth continues. There are concerns about a wage-price spiral rising.
・Inflation remains above 2%, but they intend to prevent it from becoming persistent.
・Job openings and wages indicate labor market tightness. It might be full employment even if pre-COVID employment levels are not restored.
(2a) Powell and Yellen reversal (not reversal in the literal sense)
Powell had argued inflation was "temporary" until late August, but since hinting at beginning tapering at the Jackson Hole meeting in August, signs of change have appeared.
Testimony at the Senate Banking Committee on November 30 after Powell was reappointed.
・The appropriate time to stop describing inflation as "transitory" has arrived
・Rising inflation risks could threaten full employment recovery
・The threat of higher inflation is increasing
・At the next FOMC, consider accelerating tapering (reduction of large-scale asset purchases)
・The Fed's preferred inflation target set by the Fed Funds Rate might be met in the coming months
・As for the Omicron variant, at this point it is not included in our outlook
(2b) Powell and Yellen reversal (not reversal in the literal sense)
I think Secretary Yellen is a supporter of Powell (perhaps out of the frustration of being replaced after one term). She suddenly says such things.
On December 2, at a Reuters-hosted conference, Yellen said avoiding wage-price spirals is the responsibility of financial authorities.
While there are no signs of wage-price spirals at present, indicators such as historically high quit rates suggest the labor market is tight.
(3) December 3 U.S. Employment Report
(A) Unemployment rate
(B) Employment level
(C)One of the strangest statistics
What this means: U.S. jobs data are based on two surveys: establishment survey and household survey. In November, the establishment survey reported only a 210,000 increase in employed persons, while the household survey showed a substantial increase of 1.10 million.
But this is not unusual. Household survey is highly volatile. In the end, it settles where it settles.
Regardless of how you view this employment report, the labor market remains tight. As seen in the ISM non-manufacturing index, the economy is strong.
The Fed's focus has shifted to inflation. What Powell and Yellen care about is the “wage-price spiral rise.”
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