Economic Update – Fundamentals Rise, Mnuchin Confirmed, Fed Rate News


New economic data was released today showing a continued rise in fundamentals in both the West and the East.

Here is a rundown of the headlines:

Bloomberg: U.K. Inflation Rate Rises Less Than Expected, Stays Below 2%

  • The increase in the rate to 1.8 percent from 1.6 percent in December fell short of the 1.9 percent estimated in a Bloomberg survey.
  • While less than anticipated, inflation is still running at the fastest pace in more than two years. Rising fuel costs coupled with a weaker pound are set to push it above the BOE’s 2 percent goal soon.

The Business Times: German economy grew 0.4% in fourth quarter: data

  • Germany’s economy expanded by 0.4 per cent in the last quarter of 2016, official data showed Tuesday, confirming that Europe’s powerhouse grew 1.9 per cent over the whole year.
  • Inflation in Germany stood at 1.9 per cent in January, the statistics office said in a separate release, confirming preliminary figures issued last month.

Market Watch: China’s prices rise at fastest pace in years

  • Prices in China climbed at their fastest pace last month in over two years, boosted by rising energy prices and Lunar New Year demand for food.
  • China’s consumer price index increased 2.5% in January from a year earlier, compared with a 2.1% gain in December. The uptick in the key inflation gauge was the highest rate in more than 2 1/2 years.
  • The producer price index, which measures prices at the factory gate, hit a fresh five-year high in January, rising by a faster-than-expected 6.9% year over year last month, compared with a 5.5% increase in December.

Market Watch: India wholesale inflation hits 31-month high

  • Wholesale prices in India accelerated to their highest levels in two and a half years in January driven mainly by costlier fuel, government data showed Tuesday.
  • The wholesale price index rose 5.25% from a year earlier, the highest level since June 2014 and sharply quicker than the 3.39% increase in December.
  • Rising prices of commodities, particulary crude oil, are driving up wholesale prices in India.

Outside of economic data, here are some headlines relating to the Federal Reserve, Steve Mnuchin and a possible March interest rate hike:

Market Watch: Fed’s Kaplan calls for interest-rate hike ‘sooner rather than later’

  • The Federal Reserve should raise interest rates “sooner rather than later” to avoid having to step on the gas and push rates sharpy higher, said Dallas Fed President Rob Kaplan on Monday.
  • “It is my view that moving sooner rather than later will make it more likely that future removals of accommodation can be done gradually — that is, reduce the likelihood that the Fed will get ‘behind the curve’ and feel the need to remove accommodation more rapidly,” Kaplan said.
  • Kaplan, who keeps a close eye on oil and gas markets in the U.S., said he expects the price of oil to “continue to firm.” As a result, he forecast that U.S. crude oil production is likely to “steadily increase” as the year unfolds. He said this estimate is based on oil prices ranging between $55 and $60 per barrel. Fed has limited view on Trump economic policies as Yellen heads to Congress

  • Federal Reserve Chair Janet Yellen goes to Congress on Tuesday for the first time since Republicans took control of the White House and both houses of the legislature with less clarity on the direction of U.S. economic policy than at any time of her three-year tenure.
  • Possible new taxes on imports and increased infrastructure spending could boost inflation and send the dollar soaring, uncertainties that make it unusually difficult for the Fed to chart a course for interest rate policy.
  • On Tuesday, Yellen will likely face renewed pressure from lawmakers to set rate policy with a publicly disclosed mathematical formula. The head of the financial services committee in the House of Representatives has said he will resubmit a proposal to make the Fed adopt a policy rule. Yellen has publicly opposed the proposal, saying it would damage the Fed’s ability to respond to crises.

The Guardian: Steven Mnuchin, former Goldman Sachs exec, confirmed as treasury secretary

  • The US Senate on Monday confirmed Steven Mnuchin as Donald Trump’s treasury secretary, elevating a former Goldman Sachs banker to one of the administration’s highest roles in shaping economic policy.
  • Mnuchin was approved on a mostly party-line vote of 53-47 with Joe Manchin, a senator facing re-election in 2018 in conservative West Virginia, acting as the lone Democrat to vote in Mnuchin’s favor.
  • Mnuchin, who served as Trump’s campaign finance chairman, was accused by Democrats of overseeing a “foreclosure machine” while at the helm of OneWest bank from 2009 to 2015.

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