May 1, 2015 Patrick Oliver-Kelley

US Zone

Fed officials have said they won’t raise rates until they’re confident inflation is on track to rise toward their 2% target, and they want to see the job market keep improving. A stronger currency tends to undermine exports because it makes them more expensive. That slows growth and potentially slows hiring. Meantime, the strong currency holds down the prices of imports and broader inflation.

The dollar’s strength and uneven global economic growth have become an increasingly important part of the Fed’s outlook. The dollar’s appreciation effects are still washing through the economy. Economists have reduced their projections for how fast the economy will grow this year from 3% to 2.7%, thanks in part to the effects of the strong dollar. The collapse of oil prices has led to a reduction in oil and gas drilling. That is hurting investment in the near term, but lower gas prices could boost consumer spending later. Our overly protective immigration policies are at cross purposes to our need for more young workers.


Weak growth in France and Germany offset stronger conditions elsewhere, and falling sales prices suggest a lack of business confidence despite the European Central Bank’s stimulus efforts. Russia’s cage rattling is worrying and wobbly Greece, though a speck on the overall EU budget is commanding the headlines for being Socratic rather than apollonian.

  • Greece still in negotiations with its creditors, as the deadline for an agreement looms on the horizon.
  • It also confronts a triple-threat: a €950m repayment to the IMF due in May, €2.4bn in outlays for pensions and salaries, and €1.4bn of short-term Treasury bonds plus €1bn in notes maturing this week.
  • Although last week it sold €3bn in government bonds, this week it’s trying to sell almost €1bn in short-term bonds.
  • Greek banks’ liquidity is still dependent on help from the ECB.

Asia Zone

China’s manufacturing hit a 12 month low, a disappointing figure despite government efforts to keep the economy growing. China’s maritime land reclamation activities in the South China Sea, especially its creating a large landing field of an island that the Philippines has been publishing has most of the smaller Asian governments nervous. South Korea’s GDP growth of 2.4% beat expectations. The central bank had cut its base rate three times in August.

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