CHILE: Goldman Sachs Says BCCh May Raise Real Neutral Rate Estimate
Sep-03 17:22
- Following tonight’s interest rate decision, the BCCh is scheduled to release its September monetary policy report tomorrow, in which it is expected to revise its growth and inflation forecasts, particularly for this year.
- Goldman Sachs sees the central bank downgrading its 2024 real GDP growth estimate due to weaker-than-expected Q2 growth and the expectation of a softer external impulse ahead. On inflation, GS expects the BCCh to bring forward the shock to electricity tariffs to H2 2024 and H1 2025, compared to the more back-loaded shock anticipated in the June IPoM. In GS’ assessment, higher inflation at year-end could result in a more persistent inflationary process due to backward looking indexation mechanisms.
- All in, GS expects the BCCh to revise their end-2024 headline inflation forecast to 4.5%-4.7% from 4.2% in June and leave their 3.6% forecast for end-2025 unchanged. GS also sees the central bank incorporating something closer to three Fed cuts in a revision to their macroeconomic baseline scenario. Finally, GS anticipates that the MPC could revise their estimate of the real neutral interest rate higher by at least 25bp from the current 1.0% estimate.
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US: MNI U.S. Weekly Macro Wrap: Weak Payrolls Put Recession Concerns In Focus
Aug-02 20:04
Our wrap of the week's US macroeconomic developments is available here (PDF):
- July’s much-weaker-than-expected employment report capped a series of cooling labor market indicators this week that have put the term “recession” firmly into the discourse, by way of triggering the “Sahm Rule”.
- Even before from the weak NFP payroll gains and surprisingly large jump in the unemployment rate, this week's data included softer employment cost data, higher job openings, and the highest continuing jobless claims since November 2021. ·
- Meanwhile, following on from last week's solid Q2 GDP reading, the latest activity data hasn't been encouraging, with a sizeable ISM manufacturing survey miss (lowest since Nov 2023) this week.
- Recession talk may be overwrought, and requires further confirmatory evidence, not least because there may have been some weather-related effects at play in the payrolls report.
- But there is no doubt that the Federal Reserve is under increasing pressure to cut rates as it is seen to be behind the curve, only days after Chair Powell indicated a September rate cut “could be on the table as soon as September”, and the Committee changed its policy statement to acknowledge increasing concern over fulfilling its full employment mandate (MNI meeting review here).
- By the end of last week, markets had priced a first 25bp cut for September, with a total of almost 3 cuts seen by year-end. As this week concludes, markets are leaning toward a 50bp September cut (with the possibility of an inter-meeting move), and 100 to 125bp in total reductions through year end.
- Until the July CPI data on August 14, there won’t be much more evidence to go on. Next week’s data calendar is very light, but a failure by July’s ISM Services index to rebound as expected from June’s contraction will be taken as another signal that recession may be nigh.
USDCAD TECHS: Bullish Trend Structure
Aug-02 20:00
- RES 4: 1.3977 High Oct 13, 2022
- RES 3: 1.3951 1.0% 10-dma envelope
- RES 2: 1.3899 High Nov 1 and a key resistance
- RES 1: 1.3889 High Aug 1
- PRICE: 1.3845 @ 15:40 BST Aug 2
- SUP 1: 1.3766 Low Aug 1
- SUP 2: 1.3766 20-day EMA
- SUP 3: 1.3718 50-day EMA
- SUP 4: 1.3367 Low Jul 17
Trend conditions in USDCAD remain bullish and Thursday’s gains reinforce this condition. Recent gains resulted in a break of 1.3792, the Jun 11 high, and more recently, a print above key resistance at 1.3846, the Apr 16 high. The trend condition is overbought, however, the break of 1.3846 strengthens the bull theme and opens 1.3899, the Nov 1 ‘23 high and a key resistance. Firm support lies at 1.3718, the 50-day EMA.
US OUTLOOK/OPINION: Nomura Adds 25bp Fed Cut To 2024, 50bp Sept Cut "Possible"
Aug-02 19:57
Another Fed rate call change, this one by Nomura - who are still a little more conservative on the pace and magnitude cuts than some others in the wake of the July employment report. They now see:
- Three consecutive 25bp cuts through end-2024 (previously had seen cuts in just Sept and Dec)
- Four 25bp cuts quarterly in 2025
- "A 50bp rate cut in September is possible, but would only become our base case if evidence of layoffs pick up further or financial conditions tighten unexpectedly. If acute stress materializes, an easing cycle could resemble past recessions, including larger easing increments."
