Bank Research Consensus Weekly 02.07.11
Whither the MPC?
Charles Goodhart, Global Economics Team, Morgan Stanley
Three major news events: In the last week-and-a-half, there have been three major UK news items that are particularly relevant to the assessment of the MPC's future decisions on policy rates.
Arne Lohmann Rasmussen, Senior Analyst, Danske Bank
Since 13 January when the ECB made the market aware that its focus was once again on inflation, the euro has strengthened substantially, with EUR/USD climbing from below 1.30 to 1.38. For now it seems that the ECB is right in turning its attention to inflation with eurozone inflation jumping to 2.4% in January, albeit boosted by energy and food prices.The hawkish tone of the ECB is in stark contrast to the US central bank’s message on interest rates last week. The FOMC made it clear that it has no plans to roll back the current accommodative stance on US monetary policy. With unemployment still high and underlying inflation tracking south, the outlook is for the current Treasury buyback programme is not to be terminated ahead of time and for the first rate hike to be still a long way off.
Jobs Disappoint, But Baby It’s Cold OutsideJohn E. Silvia, Chief Economist, Wachovia The job report for January revealed that nonfarm payrolls grew only 36,000 in the month. The number was weaker than the consensus had expected, but it appears likely that this winter’s snowstorms are distorting the data as job growth in sectors such as construction is held back because of bad weather. Aggregate hours slipped 0.2 percent, but here as well, the snow seems to be the culprit. It is not uncommon for bad weather to keep workers at home in January. On average over the past five years, 282,000 workers were unable to work due to bad weather in January. This January, that number spiked to a whopping 886,000 workers who were snowbound.
United States – Another Busy Week for the U.S. Market Christos Shiamptanis, Economist, TD Bank Financial Group There has been no shortage of market action this week both at home and abroad. Internationally, democracy appears to have scored a big victory, as a rising tide of protestors has all but forced Egypt’s authoritarian President Mubarak to resign. In the long-run, this could have any number of repercussions for the region. But, its most immediate affect has been to sustain upward pressure on global food and oil prices, as markets fear the turmoil could spread throughout the region.
Markets Braced for Payrolls and PMIs
Lloyds Bank Corporate MarketsDespite the World Economic Forum, the State of the Union address and the FOMC announcement, it was the UK that provided most shockwaves to markets last week with the startling collapse in Q4 economic activity, followed by news that the MPC nest contained another hawk. This week the focus shifts back to the international scene with US non-farm payrolls claiming the usual top spot on the economic calendar, closely followed by the ISM surveys and comments from Fed Chairman Bernanke. The ECB also makes its policy announcement, with usual interest in President Trichet’s press conference, following January’s preliminary inflation release. But UK news should prove interesting.
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