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For the first time in years, the Fed announced a new approach to inflation targeting. The central bank will now focus on price levels rather than the rate of change. Moreover, the Fed will put a higher emphasis on the health of the labor market.
The markets reacted by pushing longer-term Treasury yields higher in anticipation of rising inflation ahead. The Treasury curve steepened. Inflation expectations climbed further, with the 10yr inflation swap approaching 2% again.
Given the Fed’s new tools on inflation, the probability of the central bank taking rates below zero has diminished. The market-implied fed funds rate trajectory is now entirely in positive territory.
Just how accommodative is the Fed’s policy. One way to assess it is by comparing market-implied longer-term real rates to the “neutral” rate. By this measure, the current monetary policy is the most accommodative in decades (market rates are well below the neutral rate).
The Q2 GDP was revised higher. Nonetheless, it was still the worst quarter in recent history.
The Kansas City Fed manufacturing index rocketed higher in August.
The regional Fed surveys point to further improvements in factory activity at the national level (ISM)
Pending home sales are up over 15% from a year ago. Home price appreciation has accelerated, according to AEI Housing Center. Lower-tier homes continue to outperform.
The share of renters with missed payments is expected to climb, according to Oxford Economics.
Millennials now account for more than half of new mortgages.
Retail and housing have led the recovery in economic activity.
More than a million Americans a week still file for unemployment. Small businesses are shedding jobs.
Bloomberg’s Buying Climate Index resumed its recovery.
The CFIB small/medium-size business sentiment ticked lower this month.
The dip came from the retail sector, which tends to be volatile. Most other sectors continued to rebound.
With the Fed’s dovish tilt on inflation, the loonie keeps climbing against USD.
The pound continues to advance.
“Eat out to help out” has been working.
French manufacturing confidence is recovering faster than expected.
Italian industrial orders are improving rapidly.
The euro-area broad money supply year-over-year growth exceeded 10% last month.
Household liquidity spiked. Will it translate into more spending?
Loan growth has been more modest.
With the Fed announcing a new approach to addressing inflation, the CME EUR/USD futures volume spiked.