November 21st Financial News
FastBull Featured
5 hours agoNew Zealand's economy contracts more than expected; Nvidia's Q3 results beat expectations; UK inflation rebound might just be the beginning...
[Quick Facts]
1. New Zealand's economy contracts more than expected.
2. Nvidia's Q3 results beat expectations.
3. Collins says the Fed should avoid moving too quickly on rate cuts.
4. Fed's Bowman calls for a cautious approach to interest rates.
5. Fed's Cook sees a pause on rate cuts if inflation progress slows.
6. UK inflation rebound might just be the beginning.
[News Details]
New Zealand's economy contracts more than expected
The latest evidence points to a likely further downgrade to the Treasury's economic and fiscal forecasts, said Dominick Stephens, Chief Economic Advisor at The Treasury, New Zealand. Recent data indicates a deeper economic contraction and a slower recovery than projected in the 2024 budget.
New Zealand is currently running a structural fiscal deficit, with expenditure exceeding revenue. Economic growth falling short of expectations has been making it harder for the Government to bring the books back into balance. The unexpected contraction in the second quarter has hit manufacturing and services, while consumer spending remains weaker than a year ago. Business confidence about trade prospects is still pessimistic, putting pressure on tax revenues as the Government seeks to reduce its budget deficit.
Nvidia's Q3 results beat expectations
Nvidia reported third-quarter revenue of $35.1 billion, up from $18.12 billion a year earlier, an increase of 94%. It surpassed the market forecast of $33 billion. Net profit rose to $19.31 billion from $9.243 billion a year ago, also exceeding expectations.
Collins says the Fed should avoid moving too quickly on rate cuts
While more rate cuts may be needed as the policy remains restrictive, policymakers should avoid moving too quickly, though moving too slowly could also harm the labor market, said Boston Fed President Susan Collins on Wednesday.
The terminal rate in the easing process remains uncertain. Monetary policy is well-positioned for economic prospects, and the Fed's decisions will be made meeting by meeting. Any further slowdown in the labor market is undesirable, with risks largely balanced. Inflation is returning to 2%, and robust productivity suggests wage growth won't trigger inflation. However, the road toward the 2% target may be bumpy.
Fed's Bowman calls for a cautious approach to interest rates
While significant progress has been made in reducing inflation since early 2023, recent months show signs of stagnation, Fed Governor Michelle Bowman said on November 20. Before achieving inflation targets, Bowman prefers a cautious approach to cutting policy rates to better assess the distance from the ultimate goal, while closely monitoring labor market changes.
The current neutral rate is likely much higher than pre-pandemic levels, suggesting the Fed may be closer to a neutral policy stance than anticipated. We also cannot rule out the risk that the policy rate may reach or even fall below the neutral level until the price stability objective is achieved.
PCE inflation has hovered around 2.7% on an annual basis since May, with limited improvement expected in October.
At the Fed's September policy meeting, Bowman was the sole dissenter against a 50-basis-point rate cut and the first Fed Governor to vote against a rate decision since 2005.
Fed's Cook sees a pause on rate cuts if inflation progress slows
Fed Governor Lisa Cook noted significant progress in disinflation when speaking at the University of Virginia. But she warned that there is still a long way to go before achieving the 2% target as core inflation is picking up.
Most price indicators show improvement, but bumps along the road are expected. Both headline and core inflation rates are projected to fall to 2.2% next year, and slower wage growth strengthens confidence in sustained disinflation.
The labor market is in good condition, with a balanced supply and demand for workers, and it is no longer a source of inflationary pressure in the economy.
If the labor market and inflation continue to develop as I forecast, it would be appropriate to gradually lower interest rates toward a neutral level over time, Cook said. However, if inflation progress slows while the labor market remains strong, I believe we may pause policy rate reductions. Alternatively, if the labor market weakens significantly, faster policy easing could be warranted.
Overall data indicate that inflation is steadily coming down, and the labor market is gradually cooling. The rate cuts so far are an important step toward easing policy constraints. The scale and timing of future rate cuts will depend on upcoming data, the economic outlook, and the balance of risks. The policy is not predetermined. Current risks are roughly balanced. Core inflation remains slightly elevated, but the economy is in a good position.
UK inflation rebound might just be the beginning
The UK's Office for National Statistics reported that CPI rose 2.3% year-on-year in October, up from last month's 1.7%, which is in line with expectations. Core inflation increased to 3.3%, higher than 3.2% in September.
The rebound was driven by higher energy prices and the UK government's adjustments to the energy price cap. Since October, average monthly energy costs for typical UK households have risen by about £150 as the government raised the energy price cap.
The recent rise in CPI may just be the beginning. The expansion of UK government spending starting from the end of this year could lead inflation to consistently exceed the Bank of England's 2% target.
According to the Office for Budget Responsibility (OBR), various direct and indirect factors influencing the fiscal budget could result in UK inflation for 2025 being 1.1 percentage points higher than the March forecast, and 0.6 percentage points higher in 2026. This data suggests that despite the evident slowdown in the UK's economic growth, the rising CPI and service inflation could make the central bank more cautious when considering rate cuts.
[Today's Focus]
UTC+8 16:00 Reserve Bank of Australia Governor Bullock Speaks
UTC+8 16:30 ECB Governing Council Member Holzmann Speaks
UTC+8 21:00 ECB Vice President Luis de Guindos Speaks
UTC+8 23:00 U.S. Annualized Existing Home Sales (Oct)
UTC+8 01:25 Chicago Fed President Goolsbee Participates in a Q&A
UTC+8 05:40 Fed Governor Michael Barr Participates in a Forum Event
