Feb 16. FOMC minutes this afternoon
Retail sales were a bit weaker than expected yesterday. Today’s news includes Housing starts, expected 540k, PPI +0.7 with +0.2 Core and Industrial Production expected +0.5 with Capacity edging up to 76.3. FOMC minutes released this afternoon.
–Interest rate futures were weak early yesterday but firmed into the close, with greens +4.0 (strongest part of the curve). Probably a bit of downside risk today associated with stronger than expected PPI. Also, Goldman apparently had a note that expressed the possibility of “exit strategy” discussion in FOMC minutes.
–While the economy seems to be improving, there are constant reminders of headwinds going forward. In terms of housing, mortgage rates have risen (mortgage applications down another 9.5% this morning), and I saw a blurb in the WSJ about banks wanting higher downpayments. Fiscal policy in states and municipalities remains contractionary, with CA Gov Brown calling for a hiring freeze for example. I saw a note in my local community about the need for pension reform. Many new fees and taxes are just starting to bite this year. On a personal note my new property tax bill went up 13% on one parcel and 19% on another…even though assessed values were lower. My perception is that federal stimulus is being completely offset elsewhere. (Without even taking higher food prices into account).
