Analysts at ANZ New Zealand bank explained the key themes and views from overnight.
Key Quotes:
REJECTED:
“Reports that the European Commission is likely to reject the Italian budget saw risk pare back and Italian yields lift double digits yet again. If deemed inconsistent with Italy’s budgetary obligations, the EC can reject the budget proposals within 14 days. In Italy’s case that is Oct 29. Rome then has three weeks to amend its proposals (Nov 19), giving Brussels another three weeks to respond (Dec 10). If unresolved by then the excessive deficit procedures could kick in. Uncertainty appears set to continue for a while yet.”
SPEND LESS:
“Trump has advised media he will ask each secretary to cut spending by 5% (possibly in relation to the Fed flagging fiscal stimulus as one of the reasons for rising rates). President Trump has been vocal about his desire to keep rates low.”
FEDERAL UNRESERVED:
“FOMC minutes revealed a number of officials want to push rates above neutral in order to minimise the risk of inflation running above 2% and “significant financial imbalances”. And a few expect policy will need to turn modestly restrictive for a time. Indeed, speeches since the last Fed decision have been on the hawkish side and today’s minutes didn’t provide much challenge to that.”
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