Awaiting Janet Yellen’s Semi-Annual Humphrey-Hawkins Testimony

February 24, 2015

Day One of Fed Chair Yellen’s testimony on the economy and monetary policy begins at 10:00 before the Senate Banking Committee.  On Wednesday, she will reprise the testimony before the House Financial Services Committee.  The testimony comes amid rising Congressional hostility to an independent central bank.  Indeed, a major question before the American people in the 2016 election will be what type of monetary policy might best serve the economy.

The dollar strengthened overnight by 1.1% against the New Zealand dollar, 0.6% relative to the Australian dollar and yen, 0.5% versus the Swiss franc, 0.4% vis-a-vis the loonie but just 0.1% against the euro and sterling.

Ten-year German bunds are unchanged.  The 10-year British gilt firmed a basis point, while its Japanese counterpart slid by a basis point.

Greek share prices recovered 7.6%, and Greece’s 10-year sovereign debt yield eased back three basis points.

Equities advanced 1.1% in Taiwan, 0.7% in Japan, 0.5% in Singapore but fell by 0.6% in New Zealand.  Stocks in Europe are mostly narrowly mixed, with dips of 0.1% in Switzerland and France but upticks of 0.3% in Spain, 0.2% in the U.K., and 0.1% in Italy.  The German Dax is steady.

West Texas Intermediate oil rose 0.8% to $48.85 per barrel.  Comex gold is 0.2% softer at $1,198.80 per ounce.

Revised reports with greater detail were released on eurozone CPI inflation in January and German GDP growth in the fourth quarter.

  • Harmonized consumer prices in Euroland fell 1.5% on month and posted a 0.6% drop from January 2014.  That was the second negative 12-month decline in a row and the largest such drop since July 2009.  The CPI had risen 0.8% in the prior statement year to January 2014.  Seventeen of the eurozone’s 19 members had negative inflation in January, the exceptions being Austria and Malta.  Consumer prices fell more than 1.0% in four members and by at least 0.5% in eight others.  Energy fell 3.2% on month and 9.3% on year versus a drop of 1.2% in the year to January 2014.  Core inflation, which excludes energy, food, alcohol and tobacco, was at 0.6%, down from 0.7% in the three prior months and 0.8% in January 2014. 
  • German GDP advanced 0.7% between 3Q and 4Q, by 1.6% between 4Q13 and 4Q14, and by 1.4% in on-year terms adjusted for the variation in the number of business days.  Personal consumption advanced 0.8%, same as in 3Q, and accounted for 0.4 percentage points (ppts) of the 0.7% of quarterly sequential growth.  Net exports enhanced the growth rate by 0.2 ppts but was offset by the effect of inventory changes.  Government spending and business investment in machinery and equipment each had no effect on growth.  German real GDP on average advanced 1.6% in calendar 2014 versus an uptick of just 0.2% the year before.

All of Turkey’s central bank rates were reduced today.

Interest rate decisions are also awaited today from the central bank of Hungary.

French business confidence slid only a point to 99 in February according to INSEE, which was less deterioration than analysts were forecasting.

Finnish producer prices sank 0.9% on month and by a considerably larger 2.7% on year in January.

Japanese corporate service prices fell 0.5% on month in January on a seasonal dip in advertising costs.  The 12-month pace slid to 3.4% from 3.5% in December and 3.6% in November.  The 12-month increase continues to be inflated by last April’s 3-percentage point consumption tax hike.

The Bank of Japan’s balance sheet stood at 316.7 trillion yen on February 20th, a 46.7% annualized growth from 300.2 trillion yen at end-2014.  BOJ Governor Kuroda reportedly has qualms about the scheduled sales tax hike now planned for April 2017. 

Small business sentiment in Japan, the so-called Shoko Chukin index, recovered to a two-month high in February, but at 46.5 was below the 50 optimism threshold for an eleventh straight time and below 48 for an eighth straight month.

South African real GDP climbed at a 4.1% annualized pace between 3Q14 and 4Q14, twice as fast as the third-quarter pace.  But GDP was only 1.3% greater than a year earlier.

The kiwi got sold after New Zealand’s central bank reported lower expected inflation of 1.1% over the coming year and a rate of 1.8% over the next two years.

Polish retail sales in January were only 0.1% above their year-earlier level.  Poland’s jobless rate rose to 12.0% in January from 11.5% the month before on an unadjusted basis.

Italy posted current account surpluses of EUR 5.2 billion in December and EUR 29.6 billion in 2014, respectively 81% and 91% greater than in the year-earlier periods.

Five scheduled U.S. data releases today are consumer confidence according to the Conference Board, the Richmond Fed manufacturing index, the Case-Shiller house price measure, Markit Economics preliminary service-sector purchasing managers survey, and weekly chain store sales according to Redbook.  All this will be overshadowed by Yellen’s congressional hearings.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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