Toxic Remarks from the Dallas Federal Reserve President

September 24, 2013

The Federal Reserve has become even more embroiled in a politicizing maelstrom.  Dallas Fed President Richard Fisher has aired its dirty laundry in public, with highly critical remarks about 1) President Obama’s poorly handled hunt for a successor to Chairman Bernanke and 2) the Fed’s decision not to taper.  He argued that Fed credibility has been jeopardized, but what he’s done also hurts credibility.  Monetary policy cannot be conducted effectively by a bunch of loose cannons sending diverse signals directly to the public.  Meanwhile, an Obama administration spokesperson said that the president will not be making a formal nomination on Fed Chairman this week.  Yellen is presumed to be the front-runner, but the continuing delay suggests that Obama is not fully confident in that selection just yet.

Austrian central bank president Nowotny, a member of the ECB Governing Council, cautioned that its too early for the ECB to consider tapering its economic support.

The IFO Institute German business climate index improved less than anticipated in September.  Nevertheless, with a reading of 107.7 after 107.6 in August, 106.2 in July, 105.9 in June, 105.7 in May and 104.4 in April, IFO officials affirmed that “the economy made a confident start in the autumn.”  All of the improvement in the latest report involved future expectations as perceived current conditions dropped to 111.4 from 112.0 in August.

Chinese share prices fell 1.2% on rising Chinese market interest rates.  China’s central bank was prompted to inject a greater amount of liquidity into the market, which has been rattled by faster property price inflation.

Investors await the release of potential market-moving U.S. data later today.

So far overnight, the dollar has appreciated 1.1% against the kiwi, 0.5% versus the Australian dollar, 0.3% relative to sterling, but only 0.1% versus the euro, yen and Swiss franc.  The greenback is unchanged against the loonie and yuan.

In the Pacific Rim, share prices also slumped 2.3% in Indonesia, 0.8% in Hong Kong, 0.4% in Australia, 0.3% in the Philippines and 0.1% in South Korea, Japan and Singapore.  Over in Europe, equities have firmed 0.5% in France and Italy, 0.3% in Spain and 0.1% in Germany and Britain.

The ten-year British gilt yield fell back four basis points to 2.87%, while the 10-year Japanese JGB and German bund yields are a basis point lower at 0.67% and 1.91%.

Gold and oil prices dropped 0.6% to $1318.80 per ounce and $103.20 per barrel.

The German IFO Institute also released its service sector climate index, which rose to 19.1 in September from 18.0 in August.  Like the more widely followed business climate index, improvement was entirely attributable to more optimism about the future.  The expectations component of 16.2 after 12.2 was its best reading since July 2011.

According to the British Bankers Association, U.K. mortgage approvals in August totaled 38,228, most since December 2009 and up from 37,428 in July.

The Czech economic sentiment index rose 3.2 points in September to a positive reading of +1.2.  Consumer confident went up 2.7 points, and business sentiment improved by 3.3 points.  Polish retail sales increased by a smaller 3.4% on year in August, but the jobless rate dipped to 13.0% from 13.1%.

Producer prices in Finland rose 0.3% in August but were 0.9% lower than a year earlier.  Finland is one of many economies with negative on-year PPI inflation now.  Finland’s jobless rate climbed to 7.1% in August.  Ireland reported that its producer prices dropped 1.2% between August 2012 and August 2013.

Dutch GDP growth in 2Q13 was revised 0.1 percentage point higher both from 1Q (-0.1%) and from a year earlier (-1.7%).

Supermarket sales in Japan were 0.1% higher in August than a year before.  Vietnamese consumer prices advanced 6.3% in the year to September.

Scheduled U.S. data releases today are the Case-Shiller house price index, the FHFA house price index, the Conference Board’s consumer confidence index, the Richmond Fed manufacturing index and the ICSC and Johnson-Redbook measures of weekly chain store sales.  Canada releases retail sales.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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