The Global Markets Weekly – 6/13/14

New FOMC Dynamic?

The arrival of newly confirmed Federal Reserve Board members Stanley Fischer and Lael Brainard promises to shake FOMC discussions out of any rut that they might have settled into.  These very substantial policymakers will surely weigh in on many issues, and have immediate credibility across the full spectrum of their FOMC colleagues—from the professors to the hands-on former business executives.[private]

Fischer, an elder statesman in the economics profession, revered for his wide-ranging  academic and policy accomplishments, will have the floor whenever he desires—and will be listened to most seriously. Brainard, though not quite of Fischer’s stature, is an experienced hard-driving financial diplomat, with a Harvard economics Ph.D., and will not be a shrinking violet.

The most important effect on the ongoing FOMC discussion will surely result from the new presence of two formidable international economists with heavyweight policy experience.   No senior Fed official can avoid international issues, but the new players have been totally immersed in them, at top levels, for decades—and can only have a greater sense of the effects on foreign economies, and on U.S. relations with those countries, when the Fed throws its weight around.

• U.S.: The FOMC meeting statement, updated projection materials, and Yellen press conference (Wed) will be the clear highlight.
• Eurozone: The coming week has little key data.  There are final numbers for May HICP inflation—likely to confirm that inflation fell back clearly.  More focus should be on what may be more upbeat Consumer Confidence signals.
• UK: Although he merely said that the decision would be very much data driven, the fact that Governor Carney used a high-profile speech this week to suggest that the first rate hike could come sooner than markets expected will put much more emphasis on MPCminutes (Wed).
• Japan: The schedule is very thin, with the only significant item the release of May merchandise trade data (Wed).
• Emerging Markets/Regions: For China, no data of macroeconomic significance appear.  In India, May WPI numbers arrive, with a slight increase in the annual rate expected (Consensus: 5.4% Y/Y; DE: 5.5% Y/Y) compared to April’s 5.2%.  This is likely a temporary up-tick.    For Mexico, April retail sales are due.  Expectations favor a small negative (-1.3% Y/Y) to follow a small positive (+1.7%) with the trend about flat and fluctuations due to calendar effects. Brazil sees formal-sector job creation data (Mon), which thus far have been strong enough, owing to the expansion of services activities, to underpin real GDP growth even as exports and capital spending struggle.   In Turkey, only the much lagged (March) unemployment rate is due—likely to move sideways, and, given all other data already incorporated into the analysis and forecasts, adding little to the picture.

gmw_0613[/private]