Powell’s Renomination Reinforces Belief that Fed Interest Rate Liftoff Will Happen Sooner Rather than Later

November 23, 2021

Of the two finalists for chairperson of the Federal Reserve, Powell was considered likelier than Brainard to secure the earlier initial hike of the federal funds rate. Both candidates remain on the Federal Reserve Board of Governors, Brainard as Vice Chairman, and Biden still has three vacancies to fill and thus additionally shape future monetary policy. With either Powell or Brainard, a rate hike wasn’t considered an imminent possibility, but at the margin, the choice of Powell has been taken as a sign of a more responsive Fed reaction to higher-than-anticipated inflation.

The rise of U.S. sovereign debt yields has pulled yields higher in other countries as well. The ten-year German bund and British gilt yields, for instance, rose five and three basis points. Stock markets in the Pacific Rim fell 1.2% in Hong Kong, 0.7% in Indonesia, 0.8% in Taiwan, and 0.5% in South Korea. Larger drops in Europe amount so far to 1.2% in Germany, 1.0% in France and 0.4% in the U.K.. The Australian and New Zealand stock markets rose by 0.8% and 0.6%. U.S. stock futures are little changed.

Among commodity prices, oil is down 1.3% and gold has fallen 0.6%. The weighted dollar index has edged 0.1% lower. Major bilateral dollar rates are likewise little changed, but the Turkish lira tanked about 7% further overnight.

Tuesday’s data menu is dominated by preliminary November purchasing manager survey results.

In Euroland, the composite, service sector, and manufacturing PMI indices each rose to two-month highs and exceeded analyst expectations. Output price subindices posted at record highs, however. Germany’s manufacturing PMI fell to a 10-month low of 57.6, but strengthening service sector activity nudged Germany’s composite PMI to a 2-month high of 52.8. The French composite, services and manufacturing PMIs printed at 4-, 46- and 2-month highs of 56.3, 58.2, and 54.6.

The British composite and service sector PMI scores fell to 2-month lows but remained well above the 50 breakeven threshold at 57.7 and 58.6. The manufacturing PMI surpassed expectations at a 3-month high of 58.2.

Australia’s composite, manufacturing and services PMI readings were at 5-month highs and each 55.0 or better.

In other data news, CPI inflation in Singapore rose 0.7 percentage points to a 103-month high of 3.2% in October.

South Korean consumer confidence imporved to a 5-month high in November.

Irish consumer sentiment fell to a 7-month low in November.

Retail sales in New Zealand dropped by 8.1% on quarter and 5.2% on year during 3Q 2021.

On-year rises in Taiwanese industrial production of 11.3% and in retail sales of 6.6% during October represented 8- and 6-month highs.

Polish retail sales increased 5.4% on month and 14.4% on year, the latter being a 5-month high.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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