Macro Highlights December 14th 2015

Economic outlook - 12/14/2015

The markets could turn more volatile between now and year’s end. China is unshackling the yuan from the dollar. US capital investment is not going to increase anytime soon. The SNB should have lowered its deposit rate. In the end the news was wrong: Japan avoided recession.

THE ENDGAME NEARS

On Wednesday 16 December the US Federal Reserve (Fed) is expected to raise its key lending rate by 25 basis points to 0.50% Investors have been waiting eagerly for this moment all year, the end of a game that has seen considerable seesawing, and it is finally coming—in the closing days of 2015.

 

THE YUAN IS BEING CUT LOOSE FROM THE DOLLAR

As we expected (see the 1 December issue of Macro Highlights & Strategy), shortly before the yuan was included in the IMF’s basket of global reserve currencies in late November it started dropping vs the US dollar. Unsurprisingly, as soon as the Chinese currency received its membership card political pressure on Beijing to shield it from undue volatility subsided.

 

GOOD CAPITAL INVESTMENT IS HARD TO FIND

US GDP is set to grow above trend in 2016. But while this will mainly be thanks to robust consumption and a booming real estate market, business spending—an essential driver of healthy expansion—will create drag.

 

A MISSED NOTE IN THE SNB’S INACTION

The Swiss National Bank (SNB) last week decided to leave its monetary policy unchanged. As a consequence the interest rate on commercial banks’ deposits was not lowered further into negative territory and remains at -0.75%.

 

THE RECESSION THAT WASN’T

The second estimate of Japan’s Q3 GDP marks a good opportunity to point out the problem of trying to analyse "raw" or only half-baked economic data.

Elément complémentaire