"Experience is simply the name we give our mistakes" Oscar Wilde

Economic growth around from the global economies continues to track above expectations, as the preliminary release for GDP in the eurozone economy for the 3rd quarter came in ahead of expectations at 0.6%. That figure took the flash growth rate to 2.5% year on year. On the flip side, inflation came in below expectations, as core inflation slipped to its lowest level since March. The unemployment rate for the eurozone, still high by most developed economies standards, fell below 9% for the first time in 8 years. This was probably the best of outcomes for the ECB, better growth and despite their desire to get inflation to two percent, inflation for September cooled by 0.1% to 1.4%. This will enhance the ECB’s belief that they can continue to maintain the current level of monetary stimulus for an extended period. Macro research Capital Economics is predicting that the global economy will grow in the third quarter 3.6%, which is healthy, however, does fall below the 4% they estimate for the second quarter. 

There was more good news for the US economy which could further encourage the Federal Reserve to adjust rates further in the coming months, possibly even later Wednesday though no-one is predicting that. The Conference Board Consumer Confidence Index came close to a 17 year high in October. 

Later on, Wednesday all eyes will be on the Federal Reserve, partly for the indication as to what the Federal Reserve is likely to do with interest rates. There is mounting speculation in the press that Donald Trump is looking to replace Janet Yellen at the end of her four-year term as Chairperson. The press speculation has been between two candidates John Taylor, more of a hawk and in the dove’s corner Jerome Powell. The odds now seem to favour Mr Powell for the top job. 

The Bank of England monetary policy meet on Thursday and unlike the ECB there is strong speculation that interest rates will go up 0.25% to 0.5%. The pound has once again been gaining ground against the US dollar in the past few days within touching distance of $1.33 again, not quite yet testing the $1.35 it did a few weeks ago. The short end of the yield curve has risen by about 15 basis points in the past month the longer end fallen modestly. However, the current shape would possibly suggest at present the bond market is not forecasting into a recession despite all the Brexit fears. 

Posted on October 31, 2017 .