US initial jobless claims fell -6k to 213k in the week ending November 16, below expectation of 220k. Four-week moving average of initial claims fell -4k to 218k.
Continuing claims rose 36k to 1908k in the week ending November 9, highest since November 13, 2021. Four-week moving average of continuing claims rose 5k to 1879k, highest since November 27, 2021.
Richmond Fed President Tom Barkin told the Financial Times he would not “prejudge” the rate decision at the December meeting. He acknowledged the dual challenges of elevated inflation and labor market strains.
“If you’ve got inflation staying above our target, that makes the case to be careful about reducing rates,” he said. “If you’ve got unemployment accelerating, that makes the case to be more forward-leaning.”
Barkin emphasized growing vulnerability to cost shocks which he said was higher than it might have been five years ago. He also pointed to business concerns over potential inflationary pressures stemming from President-elect Donald Trump’s proposed tariffs and deportation policies
However, he added that Trump’s plans to boost domestic energy production could have a counteracting “disinflationary” effect.
While businesses are apprehensive about economic policy changes under the new administration, Barkin underscored that the Fed would not preemptively adjust its policy.
“We shouldn’t try to solve it before it happens,” he remarked.
Greek ECB Governing Council member Yannis Stournaras expressed strong support for further monetary easing, suggesting a rate cut at every meeting moving forward until the policy rate reaches the “neutral rate,” estimated at around 2%.
Speaking with Bloomberg TV, Stournaras described the proposed quarter-point reduction in December, which would bring the deposit rate to 3%, as the “right response” to current economic and inflation conditions.
He refrained from ruling out a larger 50 basis-point cut, and emphasized that external factors, including market reactions and the Fed’s actions, remain uncertain.
Stournaras also downplayed concerns over the sharp third-quarter rise in negotiated wages, the highest since the euro’s inception in 1999, stating, “We expect that to fall in the months to come. We thought it’s one blip but not a permanent increase.”
French ECB Governing Council member François Villeroy de Galhau, speaking at a conference today, emphasized a cautious and pragmatic stance on monetary policy, downplaying the significance of recent stronger-than-expected wage data.
He described the Q3 surge in negotiated wages as a “backward-looking” indicator, primarily reflecting the “lagged effects” of earlier negotiations in Germany, which were already factored into the ECB’s September projections.
Villeroy highlighted a shift in risks, stating that the balance for both growth and inflation now tilts to the downside. He also noted that potential US tariffs are “not expected to alter significantly the inflation outlook in Europe”.
Against this backdrop, Villeroy reaffirmed the ECB’s commitment to “continue to reduce the degree of monetary policy restriction,” while underscoring that the pace must be guided by “agile pragmatism” and “full optionality” in future decisions.
At a forum today, BoJ Governor Kazuo Ueda admitted that the central bank takes exchange rate movements “seriously” when forming its economic and inflation outlook. He also stressed the importance of understanding the factors driving current exchange rate changes and their broader implications.
On monetary policy, Ueda reiterated that decisions would be made “meeting by meeting,” based on the most up-to-date information. With a month remaining until December meeting, Ueda noted that additional data would provide greater clarity for the central bank’s deliberations.
Commenting on potential impacts from the policies of US President-elect Donald Trump, Ueda admitted that it was too hard to predict. He affirmed that “as soon as the new administration announces new set of policies, we would like to incorporate into our economic outlook.”
Boston Fed President Susan Collins stated in a speech that “additional policy easing is needed” as monetary policy remains “at least somewhat restrictive.”
She acknowledged that the “final destination” of policy adjustments is “uncertain”, and emphasized the importance of a “careful and deliberate” approach. FOMC should take the time to “holistically assess” data and evaluate its implications for the economic outlook and balance of risks.
Collins described the economy as being in a “good place overall,” with inflation on track to return to Fed’s 2% target, albeit unevenly. She noted that while the labor market is healthy, job growth is becoming increasingly concentrated in fewer sectors. Collins warned that “any further slowing in hiring would be undesirable”.
Fed Governor Lisa Cook said in a speech that the US economy is in a “good position”. She remains “confident” that inflation is moving sustainably toward Fed’s 2% objective, while acknowledging that the path may be “occasionally bumpy.” Cook observed that employment risks are weighted to the downside but have “diminished somewhat” in recent months.
Cook reiterated that the direction for monetary policy remains “downward” but stressed that the “magnitude and timing of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
Highlighting the need for flexibility, she emphasized that monetary policy is not on a “preset course” and that she is prepared to respond to changing conditions.
Fed Governor Michelle Bowman expressed concerns over the recent slowdown in inflation reduction efforts, emphasizing that while there has been “considerable progress in lowering inflation since early 2023,” this progress “seems to have stalled in recent months.”
While acknowledging the complexity of monetary policy decisions, Bowman expressed particular concern about the price stability side of the Fed’s dual mandate, given that unemployment remains at historically low levels. “I see greater risks to the price stability side of our mandate, especially while the labor market remains near full employment,” she said in a speech.
Bowman is known for her hawkish stance on monetary policy. In September FOMC meeting, she dissented from the majority decision to cut rates by 50bps, advocating instead for a smaller 25bps reduction. Her comments reinforce her cautious approach toward easing monetary policy further, especially given the risks of persistent inflation in a strong labor market.
BoE Deputy Governor Dave Ramsden expressed support for the MPC’s cautious approach to easing interest rates, citing economic uncertainties tied to recent fiscal measures and labor market data. Ramsden emphasized the need for a “watchful and responsive” strategy given lingering questions about the effects of higher employer taxes and potential misrepresentations in labor statistics.
However, Ramsden suggested he might endorse a faster pace of rate cuts if uncertainties ease and disinflationary pressures become more evident. He noted, “Were those uncertainties to diminish and the evidence to point more clearly to further disinflationary pressures… then I would consider a less gradual approach to reducing Bank Rate to be warranted.”
BoE has projected that inflation will remain above its 2% target until early 2027, driven in part by fiscal stimulus and higher minimum wages under the Labour government. Ramsden acknowledged this scenario as “plausible” but also placed significant weight on an alternative outlook where inflation declines more quickly. This could occur through “more symmetry in wages and price setting, with less domestic inflationary pressure.”
Looking ahead, Ramsden predicted that employers are likely to implement pay settlements at the lower end of the 2–4% range, which could lead to inflation staying closer to 2% in the early part of the forecast period. However, under this scenario, inflation could dip “more materially later on, lower than in the MPC’s published forecasts,” he added.
Greek ECB Governing Council member Yannis Stournaras emphasized at an event overnight that inflation in Eurozone is now projected to reach the 2% target “sooner than earlier expectations,” likely by early 2025 rather than the fourth quarter as previously anticipated. This shift suggests the ECB’s policy focus may increasingly pivot to ensuring “we don’t undershoot our inflation objective”.
Stournaras highlighted markets are “extremely sensitive” to disappointing growth readings. He warned, “If negative surprises for growth come in and we fail to unwind our restrictive monetary-policy stance at the appropriate pace, unnecessary market turbulence could be induced.”
While he acknowledged that the September inflation reading of 1.7% marked a success in controlling price pressures, he cautioned it should also serve as a “wake-up call.” Prolonged monetary restrictions, he warned, could risk “undershooting of our inflation target over the medium term and impede growth”.
UK CPI reaccelerated from 1.7% yoy to 2.3% yoy, above expectation of 2.2% yoy. Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.3% yoy, ticked up from prior month’s 3.2% yoy and above expectation of 3.1% yoy.
CPI goods annual rate rose from -1.4% yoy to -0.3% yoy, while the CPI services annual rate rose from 4.9% yoy to 5.0% yoy.
On a monthly basis, CPI rose by 0.6% mom, above expectation of 0.5% mom.
Australia’s Westpac Leading Index moved decisively into positive territory in October, rising from -0.20% in September to +0.26%.
This marks a significant shift, as the index had been hovering in slight negative territory, between -0.3% and flat, for most of the past year. The October reading is not only the first clear above-trend result since November 2023 (+0.16%) but also the strongest since July 2022 (+0.63%).
The improvement in the index provides a “constructive signal” for the economy’s future momentum. Westpac’s outlook aligns with this shift, forecasting an acceleration in economic growth from a nadir of 1.0% in mid-2024 to 1.5% by year-end and 2.4% by the end of 2025.
Japan’s exports rose 3.1% yoy in October, reaching JPY 9,427B, a strong recovery from the -1.7% yoy decline in September, which marked a 43-month low.
This rebound was primarily driven by a 1.5% yoy increase in shipments to China, buoyed by strong demand for chipmaking equipment. However, exports to the US, Japan’s largest trading partner, fell -6.2% yoy, reflecting weakness in auto shipments.
On the import side, growth remained modest at 0.4% yoy, totaling JPY 9,888B. This resulted in a trade deficit of JPY -461B for the month, the fourth straight month of shortfall.
Seasonally adjusted data showed exports declining -0.7% mom to JPY 8,882B, while imports ticked up 0.2% mom to JPY 9,239B, leading to a seasonally adjusted trade deficit of JPY -358B.
Kansas City Fed President Jeffrey Schmid highlighted in a speech overnight the decision to lower rates this year as a reflection of the “growing confidence” in inflation’s moderation.
This optimism, he explained, stems from signs that “both labor and product markets have come into better balance in recent months.”
While acknowledging this progress, Schmid cautioned, “It still remains to be seen how much further interest rates will decline or where they might eventually settle.”
Schmid also addressed concerns about the implications of large fiscal deficits on monetary policy. He emphasized that such deficits are not inherently inflationary, as long as Fed maintains its commitment to the 2% inflation target.
However, he warned that this approach could necessitate “persistently higher interest rates,” creating tensions with political authorities. He noted, “History has shown that efforts to avoid higher interest rates by accommodating deficits often result in higher inflation.”
Canada’s inflation accelerated in October, with the annual headline CPI rising to 2.0% yoy, slightly above expectations of 1.9% yoy and up from September’s 1.6% yoy. Slower decline in gasoline prices was a key driver, with prices falling -4.0% yoy compared to a sharper -10.7% yoy drop in September. Excluding gasoline, the all-items CPI maintained a steady rate of 2.2% yoy, consistent with August and September.
Goods prices saw a modest rebound, rising 0.1% yoy following -1.0% yoy decline in September. Services inflation moderated to 3.6% yoy, the smallest increase since January 2022. On a monthly basis, CPI rose by 0.4% mom, reversing a similar decline from the previous month.
Core inflation measures also exceeded expectations. CPI median increased from 2.3% yoy to 2.5% yoy, CPI trimmed rose from 2.4% yoy to 2.6% yoy, and CPI common ticked up from 2.1% yoy to 2.2% yoy. All three exceeded consensus forecasts.
BoE Governor Andrew Bailey highlighted in a parliamentary committee hearing today that the Labour government’s tax increases, outlined in the Autumn Budget, support the central bank’s gradual approach to easing monetary policy.
He explained, “There are different ways in which the increase in employer National Insurance Contributions announced in the Autumn Budget could play out in the economy.” This cautious approach, he said, will allow the Bank to observe how these fiscal changes interact with other inflation risks.
Bailey also cautioned about persistent wage pressures, with firms surveyed by the BoE expecting wage growth of 4% over the next year, even as the labor market shows early signs of loosening. He emphasized the importance of carefully monitoring these developments.
Italian ECB Governing Council member Fabio Panetta emphasized today that restrictive monetary policies are “no longer necessary”, given inflation’s proximity to the target and sluggish domestic demand.
Panetta noted, “In the current phase, we should focus more on the sluggishness of the real economy,” highlighting the risk that a lack of recovery could drive inflation well below target, creating challenges for monetary policy to counteract.
He advocated for normalizing the ECB’s stance and moving toward a neutral or even “expansionary territory” if necessary, stressing, “We are probably a long way from the neutral rate.” Panetta also reminded that lowering rates below neutral at the bottom of a cycle aligns with standard policy frameworks historically followed by both ECB and Fed.
Separately, Estonian ECB Governing Council member Madis Muller shared that, “I wouldn’t ever want to say anything is a done deal,” but he expressed confidence that “we can again reduce interest rates in December.”
Eurozone inflation was finalized at 2.0% yoy in October, a rise from September’s 1.7% yoy. Core CPI, excluding volatile components such as energy, food, alcohol, and tobacco, held steady at 2.7% yoy. Among contributors, services had the largest impact, adding +1.77 percentage points to the overall rate, followed by food, alcohol, and tobacco (+0.56 pp) and non-energy industrial goods (+0.13 pp). Energy, on the other hand, exerted downward pressure, subtracting -0.45 pp from the headline figure.
Inflation across the broader EU came in at 2.3% yoy, up slightly from September’s 2.1%. Member states showed a wide divergence in inflation rates. Slovenia recorded no inflation at 0.0%, while Lithuania and Ireland posted modest increases of 0.1%. At the other end of the spectrum, Romania led with the highest annual rate of 5.0%, followed by Belgium and Estonia at 4.5% each. Compared to September, inflation rose in 19 member states, remained stable in six, and declined in two.
In the minutes from the November meeting, RBA emphasized “minimal tolerance” for a prolonged period of high inflation, acknowledging the already “lengthy period” of elevated prices. They underscored the need to observe “more than one good quarterly inflation outcome” before concluding that a sustainable disinflation trend was underway.
Members discussed various scenarios that could challenge the forecasts, necessitating adjustments in policy.
One critical scenario revolved around weaker consumption. If consumption proved “persistently and materially weaker” than anticipated and threatened to significantly lower inflation, RBA suggested that a rate cut might be warranted. Conversely, stronger recovery in consumption could mean the current monetary stance would need to “remain in place for longer”.
The labor market also featured prominently in deliberations. Should employment conditions ease more sharply than expected, resulting in rapid disinflation, the Board acknowledged that looser monetary policy might become appropriate. On the other hand, if the economy’s supply capacity turned out to be “materially more limited” than assumed, a tighter stance could be required.
External risks were also assessed, including potential major shifts in US economic policy following the presidential election, uncertainty around the scope of China’s anticipated stimulus measures, and the broader implications of rising global government debt levels.
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Australia’s PMI composite falls to 49.4, second contraction in three months
Australia’s PMI Manufacturing improved sharply from 47.3 to 49.3 in November, marking a six-month high but remaining in contraction territory. Conversely, PMI Services index dropped from 51.0 to 49.6, hitting a 10-month low and signaling contraction. PMI Composite fell from 50.2 to 49.4, its lowest level in 10 months, indicating a slight overall contraction in private sector output for the second time in three months.
Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, highlighted the significance of the services sector’s slowdown. “The November S&P Global Flash Australia PMI posted the lowest reading since January, bringing the fourth-quarter average thus far below that of the prior quarter,” Pan said.
The report also noted that easing capacity pressures and subdued activity contributed to slower employment growth, which fell further below the long-term average. In addition, selling price inflation eased as businesses showed caution in raising charges. This combination of softer employment growth and reduced price pressures supports expectations of lower interest rates.
Full Australia PMI release here.