US economy: last week in a nutshell - Nomura

Analysts at Nomura summarised the USA last week in a week's snapshot of key takeaways.

Key Quotes:

Monetary Policy The September FOMC minutes reinforced our view for a December rate hike. 

"However, the minutes revealed a robust debate around inflation and policy, highlighting a group of participants that will likely condition their decision on an increased degree of confidence about the underlying trend of inflation." 

"Thus the CPI data add a bit more uncertainty for a December hike, although we still believe a rate hike is the most likely outcome."

"As noted in the minutes recap, FOMC members appeared to fall into three camps on a December rate hike: "many" expecting a rate hike this year if the "medium" term outlook remain unchanged; "several others" conditioning a December rate hike on the degree of their "confidence" in the inflation outlook; and "a few" arguing to wait for confirmation that inflation is "clearly" on a path towards 2%. 

We categorized FOMC participants into these three buckets based on our judgement. 

Given today’s weak inflation data, the “several” group will be the ones to watch in the weeks ahead to see if their views on inflation and policy evolve."

President Trump interviewed John Taylor for Fed Chair. Taylor, a professor at Stanford and widely known for the “Taylor rule” in monetary policy, would represent a clear break from the current leadership. However, we still view the two most likely candidates as Warsh and Powell. 

Finally, Chair Yellen will deliver a speech on Sunday morning (9:00 EDT) on “The Economy and Monetary Policy”. We think it is unlikely the speech will contain language materially different from that in her recent public appearances. However, given her placement in the “several” group above, we believe her language on inflation will be worth noting."