Post by David Grana, Head of North American Media, Clear Path Analysis
What do the President of Boston’s Federal Reserve, Eric Rosengren, and Patriots quarterback, Tom Brady, have in common? Besides both being employed in New England, they’re under a lot scrutiny. Super Bowl Championships aside, Brady has drawn a lot of unwanted publicity for deflation – of footballs, that is – and is currently serving a four game suspension. On the other hand, Rosengren may be a key factor in the recent deflation of markets, which could continue after the Federal Open Market Committee meeting this week. The historically dovish Boston Fed president sent markets reeling a couple of weeks ago when he indicated he was in favor of raising interest rates.
While Rosengren’s comments about the U.S. economy’s resilience in light of the June Brexit vote and a struggling global economy are valid reasons for a hike, other figures are pointing to some bumps in the road. The transportation numbers, which are a good gauge for measuring the health of the economy, are suggesting the beginnings of a slowdown. The ISM manufacturing index is showing a similar downward move, having gone negative for the first time since February. The services gauge fell to its lowest level since early 2010, and the August retail sales and employment numbers also showed declines.
For investors thinking that the data may be their savior, the CPI numbers released last Friday may spoil their plans for continued low rates. The CPI rose to an annualized pace of 2.3 percent. That’s above the Fed’s target mandate of 2 percent. It would appear that the Fed is facing a critical fourth down situation. Maybe Fed Chair Janet Yellen is wondering what Tom Brady would do…
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