In an ideal world, three simultaneous gradual adjustments would happen. The U.S. eliminates the budget deficit, China revalues by 30 percent and China works to rebalance growth more to consumption and less to exports. Of course none of this will happen and the pressure for protectionism from Congress grows.
More Quotes from Ethan Harris:
I think that (high inflation readings) would be almost the last straw to convince the Fed.Ethan Harris
But the obvious effect is on utility consumption, which will affect industrial output in the economy. People consume more electricity, that places more demand on natural gas, coal, power, and electrical systems.
Ethan Harris
We see a number of reasons for the Fed to drop its 'measured pace' language.
Ethan Harris
This has been a fundamental problem with the Fed's whole approach to policy making, ... By changing their language so frequently, they make it impossible to figure out what they're doing.
Ethan Harris
They'll wait to see how Christmas shapes up, and if it's weak, they'll give another rate cut in January.
Ethan Harris
Everyone is all zeroed in on the consumer now, but the truth is that the consumer isn't the driver now. Confidence is picking up, but still at average levels. Wage growth is slow and the bulk of the tax cut is already in place. Finally, with all the debt people have taken out over the past several years the burden of paying monthly bills is leaving less for discretionary spending.
Ethan Harris
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