FED Officials’ Remarks Major Events and Data Autlook of the Week

At the end of last month, European Central Bank Executive Lien believed that the current inflationary pain in the euro zone was not a trigger for monetary policy actions due to the still weak growth in service prices and wages. The market’s expectations for future interest rates are inconsistent with the European Central Bank’s guidance, that is, there will be no interest rate hikes until inflation stabilizes at 2%.

U.S. Federal Reserve Bank of Philadelphia Huck said last month that the Fed may be close to reaching the inflation threshold set for interest rate hikes, but it may take a year or more to reach the employment threshold at which interest rate hikes can actually begin.

Chicago Fed Chairman Evans said earlier that this year’s inflation rate is expected to be 3.5% or 4%, which will be a challenge. But he pointed out that this is not a monetary policy issue. He is a well-known dovish person and a voting member of the Monetary Policy Committee this year.

Germany’s October ZEW Economic Sentiment Index fell for the fifth consecutive month, further proving that global supply bottlenecks, low natural gas inventories and soaring energy costs are a strong headwind for Germany and Europe as a whole.

Professor Achim Wambach, President of ZEW, said: “The outlook for the German economy is clearly bleak. The further decline in the ZEW Economic Sentiment Index is mainly due to the continued bottlenecks in the supply of raw materials and intermediate products. Financial market experts expect profits to decline, especially in automobile manufacturing and chemicals/pharmaceuticals. Export-oriented industries.”

The European Central Bank hopes to end the emergency bond purchase stimulus plan before March next year and believes that the supply chain bottleneck is temporary. But people are increasingly aware that facts are far more sticky than initially imagined.

European Central Bank President Lagarde said at an event in Lisbon this week that although the market is betting that interest rates will be raised as soon as next October, the possibility of the European Central Bank raising interest rates next year is very small. “In our forward-looking guidance on interest rates, we have clearly stated three conditions that need to be met before starting to raise interest rates. Despite the current surge in inflation, the medium-term inflation outlook is still sluggish, so these three conditions are likely to be met next year. Sex is very small.”

German media criticized Lagarde, accusing her of tolerating rising inflation and ruining ordinary people’s income and savings. This reflects the hostility of the German people towards the European Central Bank. The German people have been skeptical of the European Central Bank’s ultra-loose policy for 10 years.

St. Louis Federal Reserve Chairman Brad previously stated that he hopes to end bond purchases in the first quarter of 2022 so that the Fed can raise interest rates next spring when inflation remains high. He hopes to prepare for the possibility of inflation staying high or rising further in the coming months.

The sharp increase in restaurant prices in the past few months reflects this price transmission process. Andrew Hollenhorst, chief economist at Citigroup in New York, said that looking at the level of inflation depends not only on the inflation data itself, but also on the tightening of the labor market and related wage growth; in addition, companies passing on input costs may also make energy prices rise into inflation. The motivation for the rise.

At the same time, unusually high demand is also a key factor driving up inflation. With more people being vaccinated against the new crown, business reopening, and trillions of dollars in government assistance injected into the entire economy, US spending in the second quarter increased by 11.9%.

Last week, US crude oil inventories increased more than expected, as total US crude oil production increased by 200,000 barrels per day to 11.5 million barrels, and the United States released approximately 1.7 million barrels from its strategic reserves, which is also part of the reason for the increase in overall commercial inventories.

But due to stable demand, gasoline inventories fell to a four-year low. Phil Flynn, senior analyst at Price Futures Group in Chicago, said: “Despite high oil prices, gasoline demand is still strong. Refineries are resuming operations and are operating better than expected, so they have a supporting role.”

The number of employed people in Australia fell by 138,000 in September, mainly due to the closure of cities in New South Wales and Victoria for epidemic prevention. The market had expected that given that the stay-at-home order has now been lifted, the job market should recover quickly.

British Chancellor of the Exchequer Sunak said that Britain is expected to achieve the fastest economic growth since 1973 this year. This year’s fiscal budget will help Britain recover from the epidemic. According to the Office of Budget Responsibility of the United Kingdom, the economic growth forecast for 2021 has been raised from 4% to 6.5%.

GDP forecasts show that the UK economy will reach the pre-covid-19 output level in the first quarter of 2022, three months later than previously expected. The unemployment rate is expected to reach a peak of 5% in the first half of next year, slightly later than expected, but also lower than previously expected. This shows that when the British government’s unemployment support ended last month, it was estimated that about 1 million people were on vacation, and most of them would find jobs.

The survey showed that OPEC’s October oil production increase was lower than the scale planned in the OPEC+ agreement formed with its allies. The involuntary shutdown of some smaller oil-producing countries offset the impact of increased supplies from Saudi Arabia and Iraq.

The White House criticized the decision of major oil-producing countries to maintain stable oil production this week, saying that the Organization of the Petroleum Exporting Countries (OPEC) and its allies appear “unwilling” to use its power to help the global economy recover. He also said that the Biden administration will consider using its comprehensive tools to enhance the resilience of the energy market.

The U.S. consumer confidence index remained low in October, which shows that despite continued supply chain bottlenecks and high inflation, U.S. consumer confidence is still far below the level before the outbreak in early 2020. As 2021 draws to a close, the traditional Christmas in the West is also approaching. American consumers are likely to usher in the most expensive traditional holiday in history.

Many industry companies have warned that they need to shop in advance this Christmas. Due to factors such as continued tension in the supply chain, prices have continued to rise. This situation does not occur because of insufficient supply of goods, but because the goods people need are blocked in ports.

US President Biden delivered a speech in the middle of this month, announcing that the Ports of Los Angeles and Long Beach will implement a 24 hours a day, 7 days a week work system to solve the problem of container congestion in the port and allow cargo trucks in the United States to have better traffic. Smooth night delivery of goods to cope with the tension in the supply chain of consumer goods. U.S. Transportation Secretary Pete Buttigieg subsequently admitted that U.S. supply chain problems “will certainly continue into next year.”