Economic policy diversion alongside monetary policy diversion

Last week Fed Chair Powell stated that the Federal Reserve should not rush to scale off interest rates, especially since recent CPI data hinted that annual inflation grew from 2.4% to 2.6% as the skeleton of stubborn inflation remains in the closet. However, he did reckon that the labour market has cooled down reducing pressure on price levels and that the US economy remains resilient. Meanwhile, the 2-day G20 summit kicks off in Brazil with trade, sustainable development and climate change featuring high on its agenda.? Interestingly, President-elect Trump has nominated Christ Wright, a climate-skeptic, oil and gas business tycoon as energy secretary. Chicago Fed president Austan Goolsbee will be talking today. ?Last week he had commented that the Fed may possibly be cutting interest rate by another 25 basis points before the end of this year. The 3-months and 6-months bill auctions shall be taking place in the course of the day. The US dollar is currently trading at 106.67 against a basket of similar currencies, still surfing on the election induced confidence and stubborn inflation.

Speaking last week, ECB board member Luis de Guindos acknowledged that inflation is moving towards the 2% target and that the ECB may well be gearing up for its fourth interest rate cut decision since June. He also cautioned that the Eurozone should be casting a glance towards the other side of the Atlantic with the new Trump presidency which may involve slapping fresh tariffs to hamper trade with the US, reviving the America first policy.? Isabel Schnabel, another ECB board member who spoke last week, cautioned that while addressing interest rates remains the preferred interest rate policy tool of the ECB, asset purchases should be properly controlled as there are currently over EUR 4 trillion worth of euro bonds sitting on the ECB’s balance sheet.? ECB chief Lagarde as well as fellow board members Luis de Guindos and Philip Lane will be making public appearances at distinct event today. Also, Eurozone trade balance figures are due today. The fibre was trading at 1.0541 at the time of writing.