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Feb 14 (Reuters) - U.S. President Joe Biden is expected to name Federal Reserve Vice Chair Lael Brainard as his top economic policy adviser as early as Tuesday, a source familiar with the matter said, as the 2024 elections approach. Brainard, an experienced fiscal and monetary affairs official, would replace White House National Economic Council (NEC) Director Brian Deese, who has announced his resignation. In addition, Biden confidant Jared Bernstein is expected to replace Cecilia Rouse as chair of the Council of Economic Advisers, the source said. The White House declined to comment. Biden's overhaul of his top economic team comes as the Fed is still trying to glide inflation down without causing a recession.

LONDON, Feb 10 (Reuters) - The two investment obsessions of the year so far - artificial intelligence and super-tight labour markets - meet head on. Far from relaxing, should office or home-based workers now fret that we're in for anything but a tight jobs market over the coming years? Morgan Stanley's thematic research team said this week it was inundated with enquiries about generative AI during its recent client visits. Much like the pandemic, fear of automation could have as big an economic impact as its actual spread. US jobs growth by sectorMcKinsey chart on automation worldwideFathom chart on US vs China AIThe opinions expressed here are those of the author, a columnist for Reuters.

Wall Street giant Goldman Sachs - often a market mover with its big macro calls - is a good example. Last month's Bank of America survey of fund managers around the world still had net 68% expecting recession this year. Rates markets reared up to price Fed rates back above 5% and now expect them higher at yearend than they are today. And yet market volatility gauges have stayed peculiarly serene. Bond market volatility (.MOVE) remains well above its 20-year mean - but it has retreated sharply to two-thirds of last year's peaks.

LONDON, Feb 3 (Reuters) - For all intents and purposes, financial markets think the brutal central bank tightening cycle is done. That may seem like a leap of faith after 36 hours in which three major central banks lifted their main policy interest rates yet again - and warned of more to come. Elsewhere, the Bank of Canada already signalled last month that it's pausing its rate rises. Jason Draho, head of asset allocation Americas at UBS Global Wealth Management, reckons "there's little investment value in over-analyzing a central banker's mindset." And if the central banks themselves seemed inclined to allow markets to do their own thing this time around, then it was left to the IMF to act as head teacher.

The Act states the Fed should conduct monetary policy "so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." On that basis, the average core PCE inflation rate since 2010 is exactly 2.0% - even after the recent scare and with the monthly rate ebbing again fast. At 1.25%, real 10-year yields - measured by market inflation expectations rather than prevailing inflation - are far above sub-zero post-pandemic troughs and are also some of the highest in over a decade. And hence the cat and mouse game between Fedspeak and market pricing - rather than a material change to investors' assumption that the Fed is nearly done. U.S. Fed has missed the mark on inflationThe opinions expressed here are those of the author, a columnist for Reuters.

Although Britain saw the same easing of wholesale energy prices, UK industry - by stark contrast - continued to contract this month. More than two thirds of the 42 economists polled by Reuters this month expect another hefty 50 basis point rate rise to 4% next week, while their average 'terminal rate' forecast implies yet another quarter point rise to 4.25% after that. Despite economic funk, the implied peak BoE rate derived from money and swaps markets shows almost another full percentage point of hikes to 4.5% before the Bank calls it quits later this summer. Either way, the eventual outcome leaves the BoE and the pound in something of a half way house. Reuters Graphics Reuters GraphicsUK vs Euro zone economic surprise gapThe opinions expressed here are those of the author, a columnist for Reuters.

As it stands, a frantic Fed tightening campaign that supercharged the buck looks to be nearing an end amid evidence of steady disinflation. Taken in isolation, that would appears to have lopped more than 10% off the buck over the past three months. "Global growth is showing signs of buoyancy, macro and inflation uncertainty are waning, and the dollar is rapidly losing its carry advantage." DXY halves gainsU.S. import price inflation and the dollarReal yields, inflation and the dollarLESS CROWDEDTo what extent investors are already positioned for this ongoing slide is less clear. Policy pushback from the Fed always has the power to check prevailing dollar moves - but the flipside of dollar strength overseas could be even more powerful as European economies and Japan have to cope with volatility in dollar-priced energy and commodities.

And as the worst economic fears recede, global investors are rapidly rethinking historical underweights in euro zone assets. "One of the main sources of downside risk for economic activity in the euro zone is dissipating," said UniCredit economist Edoardo Campanella. Euro zone economic surprisesUnicredit chart on EU gas storageEuro natural gas prices plungeWEIRD WEATHERThat's not to suggest the problem is gone. Although back below 2021's peaks, year ahead natural gas prices in Europe are still three times the average of 15 year up to the pandemic. But there's little doubt Europe at large is weathering the winter storm better than most had imagined only a few months ago.

[1/2] A Brazilian flag is seen through broken glass following the anti-democratic riots, at Planalto Palace, in Brasilia, Brazil, January 10, 2023. What many banks point to is the assumed risk premium already built in to Brazilian real interest rates. But beyond Brazilian markets, the wide global markets calm surrounding the weekend events was equally curious. After all, Brazil is the 12th largest economy in the world and one of the biggest food and raw materials exporters. Among the 10 biggest risks it lists by likelihood is emerging markets political risks that threaten political institutions.

☆ Janet Yellen is staying put to oversee billions in climate spending
▼ + stars: | 2023-01-10 | by ( Andrea Shalal | ) www.reuters.com time to read: +5 min

WASHINGTON, Jan 10 (Reuters) - U.S. Treasury Secretary Janet Yellen is digging in to oversee billions of dollars in federal climate and infrastructure spending that she believes will transform the economy, close associates say, defying demands from Republicans to step down. Yellen told CNBC late last year that she was "in good company" in misjudging inflation, and that Biden's COVID spending plans were needed to boost the recovery. White House and Treasury officials say inflation was spurred by supply chain problems and exacerbated by Russia's invasion of Ukraine, but note that inflation is now easing and investments in manufacturing will reduce future supply chain log-jams. Treasury had no comment on the Republican concerns, but officials have previously said the department's policies are overdue and urgently needed. In addition to advancing Biden's domestic climate agenda, Treasury officials say another key priority for Yellen in 2023 will be advancing reforms of the World Bank and other multilateral lenders to free up more resources for countries to address climate change and other priorities.

☆ Inflation was 2022's big theme. These could be next year's megatrends
▼ + stars: | 2022-12-26 | by ( Weizhen Tan | ) www.cnbc.com time to read: +3 min

This year, markets have been ruled by hot inflation, with investors flocking to stocks that benefit from rising prices. "The surge in inflation has been a dominant—if not the dominant—financial market theme of 2022," said Wells Fargo in a note, noting that global consumer inflation accelerated to multi-decade highs. "Globally, we see inflation peaking in 4Q this year, with disinflation driving the narrative next year," said Morgan Stanley in its 2023 Global Economics Outlook report. Wells Fargo expects global consumer price index inflation to "slow meaningfully" to 5.2% in 2023 from a projected 7.2% this year. But Europe, including the U.K., could be the exception — the bank expects that the effects of rapid inflation and rising rates there will "linger for some time."

And much like the COVID pandemic, calling the big event wouldn't necessarily have made your year-ahead financial market forecast much better or your bottom lines any fatter. Forecasts are a lifeblood in markets because no one can take a position without at least some conviction about what might happen next. The Federal Reserve's quarterly economic and policy rate projections for three years hence are a case in point. For context, the 4 point error range on unemployment rate forecasts is a difference of almost 6 million jobs and a 4.6 point range on GDP is more than a trillion dollars of output. The European Central Bank is more explicit about what market price assumptions it uses in staff forecasts.

LONDON, Dec 16 (Reuters) - The Bank of England looks like it's being outed as the weakest link. The primary reason was that two of the nine-person MPC voted to end the Bank's rate rise campaign right away as the recession the Bank thinks is already underway will get entrenched next year. But with the median economist forecast for the Bank's terminal rate somewhere around 4.25%, markets still seem aggressively positioned for a hawkish surprise and the pound may be more vulnerable to that revision as the winter progresses. Significantly, the implied Fed terminal rate edged higher to 4.9% after its policy setpiece on Wednesday - even if is still below the 5.1% the Fed indicated. Reuters Graphics Reuters GraphicsReuters GraphicsReuters Graphics Reuters GraphicsThe opinions expressed here are those of the author, a columnist for Reuters.

LONDON, Dec 14 (Reuters) - The Federal Reserve, investment world and wider economy now have a major sequencing problem. With headline annual CPI ebbing to 7.1% last month, and core rates undershooting forecasts too to just 6.0%, most economists seem confident inflation did indeed peak around midyear. Equivalent public readings from New York Fed surveys are on the wane too. Fed Futures See Lower Rates End-23Reuters Graphics Reuters Graphics"TAIL SCENARIO"Sounding something of a klaxon for most asset markets after the CPI number, the peak or terminal Fed funds rate that futures markets implied by May was dragged firmly back below 5%. Apart from verbal guidance, one important signal markets will watch on Wednesday will be the Fed's economic projections that include policy rate assumptions for the year.

LONDON, Dec 9 (Reuters) - With world markets in thrall to the final big three central bank meetings of a tumultuous year next week, the parallel world of fiscal policy takes a back seat. The UK's disastrously botched giveaway budget in September set out for many the limits of what's possible in a world of double-digit inflation. Loosen the public purse strings any further and the commensurate level of interest rates needed to then get inflation back to 2% targets balloons, and risks melting the economy down in other ways. OECD chart on fiscal outlook'BRUTE FORCE'All of which begs the question of whether central banks will have to conduct the inflation fight on their own. And likely severe recessions from historically modest interest rates just force central banks to quickly return to so-called quantitative easing, undermining their own longer-term inflation battle.

By contrast, the median forecast for a similar poll on the U.S. Federal Reserve is exactly where futures currently price the Fed's terminal rate next year - 5.0%. Any reversion of terminal rate pricing to consensus or below could see the pound wobble again. "That said, we have been stressing downside risks to our terminal rate projection, given the constant dovish messaging from the MPC. BoE poll question on Terminal Rate Risks? Central Bank Rate Hike CampaignSterling volatilityThe opinions expressed here are those of the author, a columnist for Reuters.

But neither incoming hard economic numbers nor many senior policymakers have fully bought into the recession idea just yet. But not all think a soft landing is out of the question. JP Morgan's Bruce Kasman said his "baseline" is the lagged effect of Fed tightening does eventually drag the U.S. economy into recession late next year. But he also said it was a "mistake to rule out a soft landing scenario." by Mike Dolan, Twitter: @reutersMikeD; Editing by Lisa ShumakerOur Standards: The Thomson Reuters Trust Principles.

A debate on lifting central banks' inflation targets re-surfaced this week - feeding speculation about just how much economic pain monetary policymakers are willing to inflict to drag decades-high inflation back to largely arbitrary 2% goals. Former International Monetary Fund chief economist and long-term advocate of higher inflation targets Olivier Blanchard thinks 3% could and probably should be the new 2%. That prodded central banks into extraordinary asset purchases, negative interest rates or both just to try and get inflation back up to 2%. And counter-intuitively for some he emphasised that higher inflation would not imply looser policy. So good and bad news - a potentially more balanced economy, with better wage distribution but higher nominal interest rates that may spook financial markets trying to parse the trajectory for Fed or European Central Bank interest rates years hence.

REUTERS/Aly Song/File PhotoLONDON, Nov 29 - A look at the day ahead in U.S. and global markets from Mike Dolan. They also cheered a relaxation of regulations on developer fundraising that eases the smouldering property sector bust. A crackdown on demonstrations happened simultaneously, with Chinese authorities making inquiries into some protesters as police flooded the city's streets. Strikingly, hawkish Dutch central banker Klaus Knot also said forecasts of recession may be overdone and fears of "overtightening" policy were a "joke". His boss European Central Bank President Christine Lagarde said euro zone inflation, which is expected to ease this month but remain above 10%, has not yet peaked, encouraging speculation of another swingeing 75 basis point interest rate rise next month.

But you have to go back centuries in some cases to get anything nearly as bad as 2022 for 'safer' sovereign bonds. "2023 will be the year of the bond," claimed Chris Iggo, chair of the AXA IM Investment Institute. "Road to recession - bullish bonds and quality credit," was how SocGen entitled their view. And while stock volatility makes forecasters nervy, there's a clear attraction for long-term funds in seeking both the fixed income as well as the lift to bond funds when sub-par price discounts disappear into maturity for most high-quality names. "Long high quality bonds in the U.S. and Europe seems like an obvious strategy for 2023," said hedge fund manager Stephen Jen at Eurizon SLJ Capital.

REUTERS/Richard Carson/File PhotoLONDON, Nov 23 (Reuters) - You can sometimes buck the market - for a time at least. Even mention government or central bank intervention in financial markets to many professionals and you elicit a tirade on such futility against forces beyond control. Against that, this year was marked by three very different examples of direct financial market intervention that appear to have succeeded in their narrow and targetted goals at least - despite many doubts whether they would or even could work. And it was at least in some part due to the SPR intervention, even if that was aided by central bank tightening and slowing world demand. All three examples of market intervention had their own dynamics and drivers.

And for financial markets it begs the question as to whether the extent of the monetary or fiscal tightening currently assumed will ever actually happen. The OBR reckons UK consumer price inflation has now peaked and will back off to a full-year rate of 7.4% next year. But assuming standing market forecasts for energy prices and BoE rates, it then sees inflation fall below zero for eight quarters from the middle of 2024. The BoE also expects headline inflation to plummet into 2024 - and its 'fan chart' of the range of possible outcomes also has an outside chance of deflation then too. Delaying spending cuts until after an election won't help much in that regard if indeed they're seen necessary at all.

LONDON, Nov 16 (Reuters) - If financial markets bore the brunt of this year's interest rate shock, housing now stands in the firing line. With long-term U.S. fixed mortgage rates above 7% for the first time in 20 years, and more than double January rates, U.S. housing sales and starts are already feeling the heat. "We see a relatively greater risk of a meaningful rise in mortgage delinquency rates in the UK," Goldman said this month. While Australia and New Zealand have higher variable mortgage rates, British mortgage holders also have a higher vulnerability to rising joblessness. All of which bodes ill for UK house prices - although forecasts are still far from apocalyptic.

☆ UBS says disinflation is on the way — and shares 8 global stocks to play it
▼ + stars: | 2022-11-14 | by ( Ganesh Rao | ) www.cnbc.com time to read: +2 min

After a year of double-digit inflation in many countries, UBS is now forecasting "sharp" disinflation in 2023. The bank screened for stocks it expects to be positively impacted in such an environment. The table below shows two stocks across four regions that UBS says will benefit the most from disinflation. British healthcare companies Genus and Hikma Pharmaceuticals ranked highly among the stocks UBS says will benefit from disinflation in the United Kingdom. "The negative payoff from getting our disinflation call wrong is large," strategists led by Arend Kapteyn warned.

LONDON, Nov 11 (Reuters) - Defusing this year's single biggest shock to the world economy could catalyze a rebound in global markets many investors feel is overdue - but may also raise other uncomfortable conundrums. Murmurs about some endgame in the 9-month-old Russian invasion of Ukraine - suggestions of anything from 'talks about talks' to some negotiated ceasefire - have swirled in media over the past week. All were watched as intently by global investors as much as politicians or military strategists. Western sanctions slapped on Moscow seeded an energy and food price explosion that compounded and elongated the post-pandemic inflation spike around the world. US Geopolitical RiskUS inflation, Fed rates and marketsThe opinions expressed here are those of the author, a columnist for Reuters.

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