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LGT Navigator: Fed likely to remain on moderate easing course

October 7, 2019

Slightly lower than expected employment growth in the USA and relatively weak wage increases should keep the Fed on course to loosen interest rates again before the end of the year. On the financial markets, reactions to the mixed US labor market report and the prospect of lower key interest rates were cautiously positive.

According to data released last Friday, job growth in the US economy in September was somewhat weaker than analysts expected on average. With 136,000 new jobs created, employment growth fell short of the consensus forecast of 145,000. However, the figures for the two previous months were revised upwards by 45,000 cumulatively. Meanwhile, the unemployment rate calculated in a separate survey fell from 3.7% in August to 3.5% in September, the lowest level in 50 years. Despite the historically low unemployment rate and the still relatively solid growth in employment, wages in September rose by +2.9% year-on-year, the lowest rate for more than a year and significantly weaker than expected (consensus +3.2%). Together with the continuing geopolitical uncertainties and unknown implications for the global economy, nothing should stand in the way of a further monetary easing by the US Federal Reserve (Fed) on 11 December.

Memorandum against Draghi's low interest rate policy

Shortly before the end of the term of office of ECB President Mario Draghi, the central bank's policy, which has recently been fully geared back to expansion, has been sharply criticized. Several former members of the ECB wrote a memorandum in which they attacked Draghi's low-interest policy. As former central bankers and European citizens, the signatories are observing the ECB's ongoing crisis mode with increasing concern. With the resumption of the purchase of government bonds, the suspicion suggests that the intention behind this is to protect heavily indebted governments from a rise in interest rates. From an economic point of view, the ECB has already crossed the line on financing national budgets. The authors include Helmut Schlesinger, former head of the Bundesbank, Christian Noyer, former head of the French central bank, Nout Welling, former head of the Dutch central bank, and the two former ECB chief economists Otmar Issing and Jürgen Stark.

Johnson considers extension of Brexit deadline

The British Prime Minister Boris Johnson actually wanted to implement Brexit without a treaty if necessary, but a law passed by parliament obliges him to ask the EU for an extension. Johnson has now confirmed that if no agreement is reached with Brussels by the EU summit on 19 October, he will ask for an extension of the Brexit deadline. Meanwhile, a recent survey by the British Chambers of Commerce's (BCC) confirmed that the British economy weakened significantly in the third quarter in the face of Brexit uncertainties. Industrial sales in Q3 had not fallen as sharply as since the end of 2011. The slowdown was also noticeable in the service sector. The results of the survey of around 6,600 companies indicate a worrying decline in economic activity, commented the Chamber of Commerce. According to the proposal submitted by Prime Minister Boris Johnson in Brussels, it remains completely open whether it will still be possible to guarantee Britain a regulated withdrawal from the EU.

India's central bank still on easing course

The weakest economic growth in around six years in the second quarter of this year and the increasing signs of weakness in the global economy as a result of the trade conflict are also weighing on India's economy. Against this backdrop, the Indian central bank lowered the key interest rate for the fifth time on Friday by a further 25 basis points to 5.15%. The central bank continues to see scope to loosen interest rates further in order to respond to current growth concerns. At the same time, the central bank also reduced its growth forecast for the current year from 6.9% to 6.1%.

Economic Indicators October 7

MEZ Country Indicator Last
08:00 GE Factory Orders (y/y) -5.6%
10:30 EZ Sentix Investor Confidence Index -11.1

Earnings Calendar October 8

Country Corporate Period
SZ Aryzta Y



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Source: LGT Bank (Switzerland) Ltd.

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Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi, +41 44 250 78 59, E-Mail:
Quelle: LGT Bank (Schweiz) AG
Core Personal Consumption Expenditure
MEZCountryIndicatorLast08:00DERetail Sales (y/y)-1.7%08:45FRConsumer Prices EU Harmonized (y/y)1.4%09:00ESGDP (y/y)2.4%09:55DEUnemployment Rate5.0%11:00EUGDP (y/y)1.2%11:00EUCore Consumer Prices (y/y)1.1%11:00EUUnemployment Rate7.5%11:00ITConsumer Prices EU Harmonized (y/y)0.8%12:00ITGDP (q/q)0.12%14:15USADP Employment Report102k20:00USFederal Funds Target Rate2.5%