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Fed's Lockhart: Thoughts on Rates Should Wait Until 'Waters Clear'
The US central bank should remain "cautious and patient" when it comes to increasing interest rates, until the Brexit fallout clears up, Atlanta Federal Reserve (Fed) President Dennis Lockhart said on Thursday.
". . . the consequences of Brexit may play out over a number of years, and the associated uncertainty could become an economic headwind," Lockhart, who has no voting rights at the FOMC this year, told an audience in prepared remarks at the Eighth Annual Rocky Mountain Economic Summit in Idaho.
In a survey conducted by Lockhart's staff after the referendum, a third of businesses said it "made their sales outlook more uncertain. They indicated they would be more cautious in hiring and capital spending decisions as a result of Brexit."
source
Fed's Bullard: 'Really no rush' to raise US interest rates
Federal Reserve's Bullard speaking with reporters
The Atlanta Fed GDPNow estimate rises to 2.4%
NY Fed estimate also rises slightly
Overnight press: Fed officials more confident of hike before year end
This is not new, its from early morning US time
Brexit Darkness Imprisons Outlook for UK Businesses
Activity in Britain's manufacturing and services sectors markedly cooled in July, a private survey from IHS Markit showed on Friday, as the uncertainty stemming from the country's decision to leave the European Union weighed on the economy.
Markit's Purchasing Managers' Index in manufacturing fell to 49.1 points during the seventh month of the year, down from the 52.1 in June, when it had rebounded from its second-lowest level in the past 15 months and booked a fresh five-month top.
That's a 41-month trough.
Market consensus had been for a 50-point print in July.
"July saw a dramatic deterioration in the economy, with business activity slumping at the fastest rate since the height of the global financial crisis in early-2009," Chris Williamson, chief economist at Markit, commented in the release.
"The downturn, whether manifesting itself in order book cancellations, a lack of new orders or the postponement or halting of projects, was most commonly attributed in one way or another to Brexit," Williamson added further.
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ECB not worried about shortage of QE bonds for now
ECB officials were earlier reported to see no urgency to change QE rules in order to meet the quota of 80 billion euros per month. Market watchers have long noted that with so many bonds yielding below the -0.4% ECB deposit rate, that there wasn't enough supply.
But for now, that isn't a problem. The ECB's Nowotny spoke to APA today and said "it will be decided in the fourth quarter of 2016 which signals will be given to the markets as to the further developments of the purchase program."
The program is currently slated to end in March 2017 but many economists see a 6-9 month extension.
What's not clear is if Nowotny is referring to expanding/extending the program or some of the technical tweaks needed to ease the shortage. In any case, both reports seem to argue there is no rush.
PIMCO says the Federal Reserve is 'silent' on September
Commentary from Richard Clarida, PIMCO's global strategic advisor
Moody's say severe recession would deplete capital of UK banks but from a higher starting point
US ratings agency out with a note on UK banks post-Brexit 28 July
In his recent testimony to the UK parliamentary committee Carney urged banks to lend the money they've been gorging on in cheap conditions. If Moody's are right then there's going to be no rush to lend even if rates were cut next week.
To quote our friend and eminent economist John Hearn from a tweet this morning
"Lower interest rates necessary to boost the economy": any evidence that low rates can do this? No but they do blow bubbles"
Full Moody's report hereUS GDP kicks a September Fed hike further into the distance
The advance GDP numbers have pulled the rug from under September expectations
Yesterday the FFR implied probabilities had Sep at a 28% chance of a hike. That's down to 12% according to Fed funds futures now.
Inventories dropped for the first time since 2011 and that's already being viewed as a booster to come for the rest of the year.
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The negative Brexit effect on EU GDP
It's not only the UK that looks set to suffer from Brexit 30 July 2016
Just browsing through some articles to find some week-end reading for you all and I came across this one from Bloomberg which highlights the Brexit fallout on its EU trading partners.
Says the article:
"Growth will be hit for virtually all of Britain's most important trading partners over the next few years, according to Bloomberg's economic surveys. The worst affected will be across-the-pond in Ireland, which has seen a combined 0.9% shaved off its 2016 and 2017 Bloomberg consensus GDP forecasts in the five weeks since the Brexit vote.
The euro area, which shares $472 billion in trade with the U.K., has seen its growth forecast for the next two years fall by 0.5% since June 23
The U.K.'s largest single-country trading partner, Germany, is expected to grow 1.5% this year and 1.3% next year, down a combined 0.5% since the Brexit vote. Other EU country forecasts have been similarly revised down as concern mounts that more referendums about EU membership could spur another euro area crisis.
More from Bloomberg here