Bundesbank President Joachim Nagel said, “We must resolutely raise our key rates further and adopt a restrictive stance… We cannot stop here. Further decisive steps are necessary.”
“We should start reducing the size of our bond holdings at the beginning of next year by no longer fully reinvesting all maturing bonds,” Nagel added.
ECB President Christine Lagarde said in a speech, “the ECB will ensure that a phase of high inflation does not feed into inflation expectations, allowing too-high inflation to become entrenched.”
“We have acted decisively, raising rates by 200 basis points, and we expect to raise rates further to the levels needed to ensure that inflation returns to our 2% medium-term target in a timely manner,” she said.
“But if we want to rebuild our supply capacity and strengthen domestic sources of growth, other policy areas need to refocus. Most importantly, they need to direct investment towards the transitions that will define our future – and the financial sector needs to be able to actively support these transitions,” she added.
UK retail sales volumes rose 0.6% mom in October, above expectation of 0.3% mom. Ex-fuel sales volume was up 0.3% mom, below expectation of 0.6% mom.
In the three months period to October, comparing with the previous three months, sales volume was down -2.4% while ex-fuel sales volume was also down -2.4%, continuing the down trend started since summer 2021.
In value term, headline sales was up 1.8% mom while ex-fuel sales was up 1.0% mom. Comparing the three month periods, headline sales value was down -0.7% while ex-fuel sales value was down -0.1%.
Japan headline CPI rose from 3.0% to 3.7% yoy in October, above expectation of 2.7% yoy. CPI core (all item ex-fresh food) rose from 3.0% to 3.6% yoy, above expectation of 3.5% yoy. That’s the highest level in 40 years since 1982. CPI core-core (all item ex-fresh food and energy) rose from 1.8% yoy to 2.5% yoy, above expectation of 1.9% yoy.
BoJ Governor Haruhiko Kuroda said that core inflation was rising “quite a bit” but he expects it to slow back to below 2% in the next fiscal year.
“Raising interest rates now could delay Japan’s economic recovery,” Kuroda told the parliament. “I’m not saying the BOJ cannot raise rates indefinitely. I’m saying that it’s inappropriate to raise rates now, in light of current economic and price developments.”
“It’s difficult to sustainably achieve our 2% inflation target unless nominal wages rise steadily,” Kuroda said. “We’ll continue with our monetary easing to support the economy and achieve our 2% inflation target in a sustained, stable fashion backed by wage growth.
SNB board member Andrea Maechler said yesterday, “our mandate is to bring down inflation and we will use the tools we have to do so… If we see our inflation forecast above 2 percent, we will continue to raise rates.”
“Inflation started with shocks but it’s no longer just shock-driven,” Maechler said. “We see inflation as having the risk of being more persistent.”
“It’s very important that we maintain the focus on implementing the policies to reach price stability in a consistent and sustainable way.”
Regarding Swiss Franc exchange rate, she said the appreciation “has been actually helping us keep our inflation much lower than in some of our neighboring countries.”
Yet, she added, “We’re willing – if the exchange rate were to rise too rapidly, too high – to use intervention to buy foreign exchange… We’re also willing, if the exchange rate were to become too weak, to sell exchange rate but we’re not yet ready to reduce our balance sheet as a policy in itself. This is not the right time.”
Minneapolis Fed President Neel Kashkari said yesterday, “I need to be convinced that inflation has at least stopped climbing, that we’re not falling further behind the curve, before I would advocate stopping the progression of future rate hikes,” adding, “we’re not there yet.”
Kashkari acknowledged that October CPI data provided “some evidence that inflation is at least plateauing.” Yet, “we cannot be overly persuaded by one month’s data.”
“It’s an open question of how far we are going to have to go with interest rates to bring that demand down in the balance,” he said.
St. Louis Fed President James Bullard said, “even under these generous assumptions, the policy rate is not yet in a zone that may be considered sufficiently restrictive”. And, “to attain a sufficiently restrictive level, the policy rate will need to be increased further.”
“Thus far, the change in the monetary-policy stance appears to have had only limited effects on observed inflation, but market pricing suggests disinflation is expected in 2023,” Bullard said.
US initial jobless claims dropped -4k to 222k in the week ending November 12, above expectation of 220k. Four-week moving average of initial claims rose 2k to 221k.
Continuing claims rose 13k to 1507 k in the week ending November 5. Four-week moving average of continuing claims rose 31k to 1482k.
Eurozone CPI was finalized at 10.6% yoy in October, up from September’s 9.9% yoy. CPI core (all item ex energy, food, alcohol, & tobacco), was finalized at 5.0% yoy, up from prior month’s 4.8% yoy. The highest contribution to annual inflation rate came from energy (+4.44%), followed by food, alcohol & tobacco (+2.74%), services (+1.82%) and non-energy industrial goods (+1.62%).
EU CPI was finalized at 11.5% yoy, up from September’s 10.9% yoy. The lowest annual rates were registered in France (7.1%), Spain (7.3%) and Malta (7.4%). The highest annual rates were recorded in Estonia (22.5%), Lithuania (22.1%) and Hungary (21.9%). Compared with September, annual inflation fell in eleven Member States, remained stable in three and rose in thirteen.
Australia employment rose 32.2k in October, above expectation of 15.0k. Unemployment rate dropped from 3.5% to 3.4%, below expectation of 3.5%. Participation rate was unchanged at 66.5%. Monthly hours worked in all jobs rose 2.3% mom.
“Although employment in seasonally adjusted terms rose 0.2 per cent in October 2022, the underlying trend estimate was monthly growth of around 0.12 per cent. This was below the average for the 20 years prior to the pandemic of 0.16 per cent,” Bjorn Jarvis, head of labour statistics at the ABS said.
“This indicates that while employment has continued to grow, the rate of growth has slowed to below the longer-term average. It has been below this average for the past 5 months.”
Japan’s exports rose 25.3% yoy to JPY 9.00T in October, after shipments of cars and electronics components increased. Imports rose 53.5% yoy to JPY 11.16T, hitting a historical high, as led by crude oil, liquefied natural gas and coal.
Trade deficit came in at JPY -2.16T, a record for the month. Also, Japan has seen as record trade deficit for each month in the past six months, on rising energy and raw material costs, as well as weak Yen exchange rates.
US-bound exports rose 36.5% yoy to JPY 1.78T while imports rose 47.1% yoy to JPY 1.06T. Exports to China rose 7.7% yoy to JPY 1.72T while imports rose 39.3% yoy to JPY 2.39T.
In seasonally adjusted term, exports rose 2.2% mom to JPY 8.91T. Imports rose 4.2% mom to JPY 11.21T. Trade deficit came in at JPY -2.30T.
BoJ Governor Haruhiko Kuroda told the parliament that it may “take a long time” to achieve the “price stability target, involving wage hikes”. He reiterated that the central bank needs to continue with its monetary easing to support a fragile recovery.
At the same session, Executive Director Shinichi Uchida said it was too early to discuss exit from monetary stimulus. “When exiting, the point will be adjusting long-term and short-term policy rates and the BoJ’s balance sheet,” Uchida said. “The order and mixture of those factors would differ depending on economy, prices and financial situations at the time.”
Fed Governor Christopher Waller said in a speech that while the slowdown in CPI in October was “welcome news”, “we must be cautious about reading too much into one inflation report”
“I don’t know how sustained this deceleration in consumer prices will be,” he said.And, it’s “way too early to conclude that inflation is headed sustainably down”
Despite raising interest rates from near 0% to 3.75-4.00% in nine months, “policy is barely in restrictive territory today, so more interest rate hikes are needed to get inflation down,” he said.
“The Committee will reach the terminal rate well before inflation reaches 2 percent because of the abundance of evidence that it takes months, and perhaps even longer, for the full effects of a rate increase to work through the economy.”
“Looking toward the FOMC’s December meeting, the data of the past few weeks have made me more comfortable considering stepping down to a 50-basis-point hike. But I won’t be making a judgement about that until I see more data, including the next PCE inflation report and the next jobs report.”
San Francisco Fed President Mary Daly told CNBC that “consumers are preparing for slower economy, that’s a good start.” She added that Fed wants to see “economy slow” to “get inflation down”, and “slower inflation, labor market are encouraging “.
She also said “pausing” the tightening cycle is “not part of the discussion” right now. The focus is on “level of rates”. She added, “I still think 5% is reasonable” as an “ending place for rates”. Also, “a range of 4.75% – 5.25% is reasonable for policy rate end-point.”
BoE Governor Andrew Bailey said in a Treasury Committee hearing, “The economy was hit by a huge shock in terms of the pandemic. What we’ve had since then is a series of supply shocks, which have reduced the supply capacity of the economy relative to demand. There was a supply chain shock in the recovery from Covid. We see some evidence of that shock coming off.”
Bailey added that the job market remains “tight”. But, “employers have now begun to say that they are seeing some reduction and competition for hiring,” he added. “As yesterday’s labor market statistics demonstrated, it’s still a very tight labor market.”
Deputy Governor Ben Broadbent said, recession in the UK “could quite easily turn out to be a little bit shorter or a little bit longer. “There’s a lot of uncertainty, including about the length. We could well be in another quarter of contraction right now.”
MPC member Swati Dhingra warned, “There is a risk of overtightening. There’s already about a fairly sizable chunk of the previous rate rises that have got to take effect in terms of what they do to GDP.”
Dhingra also noted, “it’s undeniable” that “we’re seeing a much, much bigger slowdown in trade in the UK compared to the rest of the world” and “we’re definitely performing below trend in terms of the exports numbers in terms of the inputs, even probably a bit bigger than that.”
Canada CPI was unchanged at 6.9% yoy in October, slightly below expectation of 7.0% yoy. Excluding food and energy, prices slowed slightly from 5.4% to 5.3% yoy.
On a monthly basis, CPI rose 0.7% mom, below expectation of 0.8% mom, largely driven by the 9.2% mom rise in prices for gasoline.
Comparing to 5.6% you rise in average hourly wages, on average, prices rose faster than wages.
US retail sales rose 1.3% mom to USD 694.5B in October, above expectation of 0.9% mom. Ex-auto sales rose 1.3% mom, above expectation of 0.4% mom to USD 565.1B. Ex-gasoline sales rose 1.0% mom to USD 630.4B.
Comparing with October 2021, total sales were up 8.3% yoy. Total sales in the three months through October were up 8.9% yoy.
Kansas City Fed President Esther George told the WSJ, “‘I have not in my 40 years with the Fed seen a time of this kind of tightening that you didn’t get some painful outcomes”.
“I’m looking at a labor market that is so tight, I don’t know how you continue to bring this level of inflation down without having some real slowing, and maybe we even have contraction in the economy to get there.”
ECB Vice President Luis de Guindos said, “we will discuss about the reduction of our balance sheet,” at December meeting.
“I think this is important in terms of both to reduce the excess liquidity that we see in the marketplace, and secondly as well to alleviate the situation of scarcity of collateral,” he added.
De Guindos also noted, “it’s very difficult to have financial stability without price stability,” adding that “the main risk now for financial stability, for growth, is to have inflation at very high levels.”
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Fed Collins: Latest data not reduced my sense of what sufficiently restrictive may mean
Boston Fed President Susan Collins “restoring price stability remains the current imperative and it is clear that there is more work to do.”
“I expect this will require additional increases in the federal funds rate, followed by a period of holding rates at a sufficiently restrictive level for some time,” she said.
“The latest data have not reduced my sense of what sufficiently restrictive may mean, nor my resolve,” she added.
Nevertheless, “there is a pathway to reestablishing price stability with a labor market slowdown that entails only a modest rise in the unemployment rate.”
“At the Fed we are committed to returning inflation to the 2 percent target in a reasonable amount of time. Only when inflation is low and stable can the economy in general — and the labor market in particular — work well for all Americans,” Collins said.