Week in review
- Australia’s monthly inflation series falls to 6.8% y/y in February
- Australia retail sales increase 0.2% m/m
- China PMI for manufacturing
- RBA policy rate decisions
- Australia housing finance and building approvals
- U.S. nonfarm payrolls and unemployment rate
Thought of the week
How tight is too tight? That’s the debate in the market at present. U.S. equities have recovered the losses from the ‘mini’ banking crisis at the index level and markets are pricing cuts in the Fed’s policy rate from the middle of the year. The suggestion is that the policy is now tight enough to slow the economy and bring inflation back towards target. Based on the latest Fed forecasts in the Statement of Economic Projections, the Fed thinks this will take one more rate hike, but no cuts this year. However, just how much financial conditions tighten in the interim may be what swings the Fed towards the market view. The Federal Reserve of San Francisco publishes a proxy fed funds rate based on a broader range of financial variables. This series diverges from the official target from 2008 as forward guidance and the Fed’s balance sheet became an increasingly familiar part of the policy tool kit. But it’s proxy measures like this that suggest the Fed has already done enough, the risk is that they keep going.
What’s my rate again?
Fed funds rate and the San Francisco Fed proxy fed funds rate