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Christophe Barraud🛢 Profile picture
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Jan 27 • 12 tweets • 8 min read
🇺🇸 #FOMC (1) | Statement and other releases were mostly in line with Street expectations, which had been looking for signal to lay groundwork for March liftoff.
🇺🇸 #FOMC (2) | However, at press conference, #Fed Powell tried his best to send hawkish signals.
🇺🇸 #FOMC (3) | Powell press conference was clearly more aggressive than the statement, suggesting that he could be more on the hawkish side of the committee.
🇺🇸 #FOMC (4) | My guess is that #Biden is putting heavy pressure on him as his approval rating is falling like a knife ahead of midterms (mainly because of #inflation).
🇺🇸 #FOMC (5) | As a reminder, #Biden has been very nervous since several days and was caught on a hot mic appearing to insult the Fox News journalist Peter Doocy after he posed a question about #inflation.
🇺🇸 #FOMC (6) | I still think that #Biden econ. advisors and most of U.S. econ. have made huge mistakes about #inflation since mid-2020 and still don’t understand the current dynamic.
🇺🇸 #FOMC (7) | As an example, #rents (and also #housing prices) have been a key problem since several months and weren't clearly targeted yesterday.
🇺🇸 #FOMC (8) | Several inflationary forces also came from fiscal policy mistakes and can’t be solved by hiking short term rates by 125-150bps in 2022. Powell could have been more efficient by focusing on MBS reduction in the balance sheet.
🇺🇸 #FOMC (9) | Fed Fund Futures extend slide with market now pricing almost 5 hikes (of 25bps) by Dec. 2022. The move is affecting all the economy without targeting housing.
🇺🇸 #FOMC (10) | Treasury curve (5s30s) is now the flattest in almost three years pointing to a recession risk (or at least a sharp slowdown) and implying that long-term rates (the key monetary tool to curb housing) are not fully reacting to Powell move.
🇺🇸 #FOMC (11) | In a context where real PCE are expected to slow, financial markets have fallen sharply and geopolitical tensions have skyrocketed, Powell move clearly raises the probability of a sharp slowdown in the short term.
🇺🇸 #FOMC (12) | U.S. GDP consensus for 2022 is clearly too optimistic (+3.8%e), be prepared for downward revisions.

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More from @C_Barraud

Christophe Barraud🛢 Profile picture
Jan 20
🇪🇺 Christine Lagarde sent a clear warning to the market which suggests that the #ECB is still unlikely to hike rates anytime soon.

🇪🇺 🇺🇸 There are at least four big divergences with the U.S.:

1/ Most of #inflation comes from #energy prices (~50%) as the EU is more dependent. After winter and/or if geopolitical tensions ease, the effect should reverse creating huge negative base effects in 2H22.
2/ In Eurozone, market #rents are not rising by 15% or more YoY and it will never happen ⚠ with several cities already implementing caps.

3/ Positive base effect from the spike of German VAT will normalize.
Read 4 tweets
Christophe Barraud🛢 Profile picture
Jan 14
🇺🇸 Americans expect #inflation to rise 4.9% over the next year, matching the highest since 2008, the Michigan report showed - Bloomberg
*They expect prices will rise at an annual rate of 3.1% over the next five to 10 years, the most since 2011.
3/4 of consumers ranked #inflation, compared with unemployment, as the more serious problem facing the nation. Given that inflation's impact is regressive, the Sentiment Index ⬇ 9.4% among households with total incomes <$100K, but ⬆ 5.7% among households with incomes >$100K.
The same split was observed for prospects for the national economy, with lower income households more negative, and higher income households holding a more positive outlook.
*Link: bit.ly/33CnQfB
Read 5 tweets
Christophe Barraud🛢 Profile picture
Jan 6
🇺🇸 #FOMC (1) | Latest minutes show that #Fed policymakers look more concerned about #inflation, in line with recent speeches from Powell.
federalreserve.gov/newsevents/pre…
🇺🇸 #FOMC (2) | In my opinion, the risk of a wage-price spiral is now real with low-income families asking for more wage increases.
*Quits rate in low-wage sectors is well above the average (already at record high in the private sector)
🇺🇸 #FOMC (3) | For different reasons, right now, the labor is tighter than indicated by the unemployment rate (4.2% in Nov. 2021).
Read 8 tweets
Christophe Barraud🛢 Profile picture
Nov 25, 2021
🇺🇸 #Fed Update (1) | PCE #inflation rose 5.0% YoY (highest since Nov. 1990; vs 4.4% prior).
*Core was 4.1% YoY (highest since Jan. 1991; vs an upwardly revised 3.7% prior).
🇺🇸 #Fed Update (2) | FOMC minutes revealed that once again, doves were completely wrong about #inflation noting that “the most sizable price increases may have already occurred.”
*Link (p.8): federalreserve.gov/monetarypolicy…
🇺🇸 #Fed Update (3) | That view was proved wrong by the CPI reading released a week later and the PCE inflation figures released yesterday.

Read 7 tweets
Christophe Barraud🛢 Profile picture
Nov 25, 2021
🇺🇸 #Macro Update (1) | Latest data confirmed that growth will accelerate in 4Q as the latest wave of Covid-19 reached a peak in mid-Sep.
*Oct. figures suggest that households started using accumulated excess savings (since Feb. 2020).
🇺🇸 #Macro Update (2) | Hurricane Ida hit the U.S. in late Aug./beginning of Sep. and affected activity in 3Q.
*Therefore, a positive normalization is expected in 4Q as suggested by the rebound in Industrial Production (especially the Mining component).
*Chart from Bloomberg ⬇
🇺🇸 #Macro Update (3) | Supply chain disruptions have eased a bit since the beginning of 4Q.
*On Tuesday, President Joe Biden said that bottlenecks in the U.S. supply chain are seeing relief.
*It was coherent with the recent retracement of Bloomberg "Supply Constraint Indicator".
Read 5 tweets
Christophe Barraud🛢 Profile picture
Nov 25, 2021
🇨🇳 #China #Macro Update (1) | Economic data point to a slowdown and even a contraction in several sectors in November.
*Restrictions linked to #Covid_19 affected activity (same as August) as suggested by Airportia data.
*Link: bit.ly/3CUNAjo
🇨🇳 #China #Macro Update (2) | On a YoY basis, the expected slowdown in Nov. could be amplified by a calendar effect given that October figures were artificially boosted by one more business day (compared to Oct. 2020).
🇨🇳 #China #Macro Update (3) | On the positive side, over the quarter, the bottom is probably behind us as the latest #Covid_19 wave seems to be under control.
*Link: bloom.bg/3r6hcIe
Read 7 tweets

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