the Fed’s new “stop-and-hold” policy still isn’t fully absorbed in markets (anticipation of the shift will grow ahead of the 11/2 meeting)
- Yellen continues to talk about financial stability risks and on Mon brought up the potential for buybacks of Treasury securities
- “two-sided risks”, “lagged effects”, and “stop-and-hold” likely to feature more prominently in monetary messaging going forward (including at the 11/2 press conf.). This isn’t a full “pivot” in that the Fed won’t ease anytime soon, but the intensity of tightening is about to downshift, w/75bp on 11/2 followed by 50bp on 12/14 and perhaps nothing further in 2023 (assuming the inflation numbers cooperate).
- natural gas prices have collapsed from their highs around the world, creating three big tailwind (reduced input costs, lower inflation, and shrinking leverage for Putin)
- Positively for Europe, the price of Dutch TTF natural gas fell below 100 euros per MWH at 98. It's the lowest since June and for perspective, it was in the low 70s before the Russian invasion.
- The final days of China’s Party Congress went off without many surprises as Xi cemented himself as one of the CCP’s most powerful leaders, w/a new Politburo Standing Committee full of loyalists and without a clear successor in sight (the biggest surprise of the weekend was Xi’s predecessor, Hu Jintao, being unexpectedly escorted out of the congress closing ceremony on Saturday)
- Anyone wanting to “nerd out” on the internals of today’s GDP release, as well as the prior three quarters, dive in
- Bond vigilantes: investors were willing to lend to rich governments for cheap after the GFC and now with inflation roaring, they are pushing against fiscal profligacy - no more free money. Alignment between fiscal authorities and the central bank
- Whoever Follows Liz Truss, Fiscal Conservatism Will Rule Britain
- What the crisis did reveal were the political limits of fiscal policy, at least during times of high inflation. BOE Gov. Andrew Bailey’s interventions were tame because he didn’t want to be seen as abetting the government and, given his mandate to bring down inflation, had a stake in trying to reverse the fiscal push. Crucially, a prime minister is easier to remove than he is.
- The return of austerity to the U.K. will hopefully mean the end of bad economic plans like Ms. Truss’s. Unfortunately, it will also tightly constrain good ones.
- Supply-siders should stop obsessing about tax cuts
- Instead, conservatives should pursue a growth-and-participation agenda that would increase the size of the workforce, boost investment, make workers more productive and increase innovation and dynamism. This agenda would lead to more output and higher incomes — and would give more Americans the dignity, purpose and identity that come from earned success.