The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1427 ET - Chairman Kevin Warsh's speech today at Jackson Hole was hawkish as he described inflation pressures that went beyond temporary price shocks, says Loretta Mester, Former Cleveland Fed President and Adjunct Full Professor of Finance at the Wharton School, in an interview with WSJ. "He pointed to some data that showed...it's not just about tariffs or the oil prices." At his speech, Warsh said that while this summer's PCE and CPI readings were better than expected, they do not show signals that underlying trends have meaningfully improved. "I thought it was quite hawkish in terms of his views," Mester says.(jessica.coacci@wsj.com)
1419 ET - Canada's economy emerged from 2Q on a solid footing, but is it strong enough for the trade war with the U.S.? Chartered Professional Accountants of Canada's David-Alexandre Brassard says 2Q growth was encouraging not only because it reached an annualized rate of 3.3% but because it extended across nearly all of the economy. As well, manufacturing in June reached the highest level since tariffs were introduced last March, the economist says. Brassard says this is genuine resilience, but no immunity from a trade war. Canada remains closely tied to the U.S. economy. "We should recognize the progress without underestimating the downside risks." (robb.stewart@wsj.com; @RobbMStewart)
1313 ET - The underlying Canada GDP report for 2Q suggests underlying inflation is well contained, say economists at National Bank of Canada. They point to the personal-consumption expenditure deflator, which rose 1.9% in 2Q. The PCE deflator measures price changes in a broader range of household expenditures but excludes food and energy. The reading suggests "higher oil prices have yet to spill over into broader price pressures," National Bank says. "Against that backdrop, the Bank of Canada can afford to remain patient, particularly given the renewed escalation in trade tensions with the US." BOC issues its next policy decision on Wednesday. The central bank's task is to keep and maintain inflation at 2%. (Paul.Vieira@wsj.com)
1309 ET - Chicago Fed President Austan Goolsbee said in a CNBC interview that he agreed with Chairman Warsh's inflation analysis in his Jackson Hole speech. Goolsbee said he was comfortable holding rates steady in July to further assess any improvements in services inflation. Regarding the latest inflation prints, Goolsbee noted a bit of an improvement in services inflation in June, and a bit more give back in the latest report. "I am fine with let's wait and see," Goolsbee said later in the interview. (jessica.coacci@wsj.com)
1257 ET - Chairman Kevin Warsh didn't describe his own reaction function today, but it may take time, said Richard Fisher, Jefferies senior adviser and former Dallas Fed president. "I don't think he's ready to lay it out yet what his reaction functions likely to be, we got hints of it, but not much," Fisher said. At Warsh's Jackson Hole speech, he said that providing forecasts to illustrate the Fed's reaction function works better in theory than in practice. The reaction function describes how the Fed may adjust policy when responding to economic developments. (jessica.coacci@wsj.com)
1218 ET - Technical trouble at Statistics Canada has some economists grumbling. The data agency's website went down Friday morning, unfortunately just as people were clicking in for the latest GDP figures. "Someone needs to take charge and fix tech at StatCan. The site was down for an extended period starting right off the release," Scotiabank's Derek Holt said as a kicker to his analysis of the GDP figures, which showed a solid 3.3% annualized expansion for Canada's economy in the second quarter and upward revisions for the first quarter. BMO Capital Markets' Douglas Porter also made a note of the issue, saying the release of his analysis had been delayed by the website crash, which also led to him using estimates for some figures. (robb.stewart@wsj.com; @RobbMStewart)
1210 ET - Canada had the fastest growing economy in the Group of Seven during the second quarter, and there looks to be solid momentum into 3Q, Scotiabank's Derek Holt says. The economist says the underlying details in the latest GDP data were impressive, including the drivers of the 3.3% expansion and positive revisions for the first quarter. "The broad takeaway is that with the kind of growth we're seeing in the interest sensitive sectors, the last thing that the Bank of Canada would wish to do would be to throw kerosene onto the economy by cutting rates--in fact quite the opposite." Holt says that is the case even with the U.S. having started a trade war that is having minimal effect to date. (robb.stewart@wsj.com; @RobbMStewart)
1117 ET - Fed Chairman Warsh has now positioned himself more firmly in the group of centrists on the FOMC that include Governors Waller and Cook, who have indicated that they are prepared to hike absent meaningful near-term progress on inflation, Capital Economics analysts say. "Hikes are not guaranteed, but Warsh is now at least suggesting he is on board with them if economic growth remains strong and monthly core PCE price growth remains a bit too firm, as we expect," says the firm. Warsh's comments leave the door open to a hike earlier than their current forecast of December, if the forthcoming price data are firm. (patrick.sheridan@wsj.com)
1054 ET - The bond market seems to be reading Fed Chair Kevin Warsh's speech at Jackson Hole as hawkish. The 2-year Treasury yield recently traded at 4.31%, up from about 4.23% before the speech. Warsh signaled that the central bank may not be done fighting inflation. While some recent inflation "readings were better than expected, they do not tell me that underlying trends have meaningfully improved," Warsh says. He stopped short of saying whether he would support raising rates when the Fed meets next month and offered no path for policy, in keeping with his approach to how the central bank should communicate less about coming moves. (patrick.sheridan@wsj.com)
1054 ET - The bond market seems to be reading Fed Chair Kevin Warsh's speech at Jackson Hole as hawkish. The 2-year Treasury yield recently traded at 4.31%, up from about 4.23% before the speech. Warsh signaled that the central bank may not be done fighting inflation. While some recent inflation "readings were better than expected, they do not tell me that underlying trends have meaningfully improved," Warsh says. He stopped short of saying whether he would support raising rates when the Fed meets next month and offered no path for policy, in keeping with his approach to how the central bank should communicate less about coming moves. (patrick.sheridan@wsj.com)
1030 ET - Expectations of a Federal Reserve interest-rate hike in September have increased after Chairman Kevin Warsh signaled that the fight against inflation wasn't over. Money markets last price a 48% probability of a rate increase at next month's meeting, from around 35% earlier in the day, according to LSEG data. Speaking at Jackson Hole, Warsh said financing conditions didn't look restrictive to him and that better price readings recently hadn't convinced him the trend was improving. (emese.bartha@wsj.com)
1027 ET - The 2-year Treasury yield reverses earlier declines as Fed Chairman Kevin Warsh's delivers a speech in Jackson Hole. The 2-year yield is sitting around 4.31% -- up from 4.24% before the speech began. The 10-year yield is largely unchanged, sitting around 4.69% (up from 4.68%). Warsh signaled the central bank may not be done fighting inflation.
Comments