Amni Rusli

Confronting the limits of monetary policy The ability of interest rates to guide prices and the economy is diminishing

on.ft.com/4mQqLEE Confronting the limits of monetary policy

Human beings are members of a whole, in creation of one essence and soul. If one member is afflicted with pain, other members uneasy will remain. If you have no sympathy for human pain, the name of human you cannot retain. ~Sa’adi

#EconSky Wealth effects are enhancing annualised consumption growth, primarily among higher-income households; though will vary under alternative asset prices (equity and home) scenarios, providing either a boost or a drag.

come at the expense of real household income. Either way, it suggests softer demand conditions ahead as the economy continues to adjust to the new tariff regime. // MS

through August suggests we may see a larger positive change in unit prices in the second half of the year. This could create a narrative of moderately firmer hiring and better profitability, though it would

costs into payrolls and margins, it may contribute to an environment where passing on tariff costs to consumer prices becomes more difficult. The outlook though, calls for greater pass-through to prices in coming quarters; recent firming in consumer prices from June

Lack of tariff pass-through to consumer prices doesn't automatically boost domestic demand; less employment or layoffs could slow consumer demand while lower profitability weighs on business spending. Indeed, if nonfinancial companies continue absorbing tariff-related

Efforts to cut unit labour costs included slower hiring, reduced hours worked, boosting productivity in the quarter. If firms persist in absorbing via lower profits and labour costs over prices, earnings for tariff-exposed sectors may suffer, with downside risks to employment.

prices suggesting tariffs began filtering into prices from June, with Q3 data possibly showing a different mix. Non-labour costs rose due to higher taxes on production and imports, less subsidies and transfer payments, contrasting last year when taxes fell and fixed capital consumption rose.

largely absorbed tariffs through higher unit non-labour costs, partially offset by lower unit labour costs, nudging profitability lower. Firms didn't initially push prices higher; relative to 2024, unit price increases were dramatically less in 2025. Data aligns with consumer

pass tariffs to consumers via higher prices, absorb into high profit margins, or offset with cost controls like layoffs. These aren't binary; costs will likely hit consumer prices, profits, equity valuations, or the labour market eventually. In Q2 2025, corporates

(The US customs duties as a percentage of goods imports=annualised effective tariff rate) Non-financial corporate profit margins stand at 14%, down modestly from Covid peaks but still 1.7pp above the 15-year non-recession average. Firms face three choices:

#EconSky 🧵 Tariffs are seen as a timing issue: the US avoids recession, but growth rebound comes later after full absorption. The effective tariff rate hovers around 9%, and should approach the 16% tariff rate in the baseline outlook over the coming months.(1/n)

"Something like a dozen people in the world understand that the "Coase" theorem is not the Coase theorem." www.deirdremccloskey.org/docs/pdf/Art...

Russia’s hybrid war is ‘only the beginning’, warns Danish PM Mette Frederiksen says Nato needs to adjust its response to Russian provocations

on.ft.com/4gKGxze Russia’s hybrid war is ‘only the beginning’, warns Danish PM

Berry-Hausman-Pakes Should Win the Nobel Prize A prize for revolutionizing industrial organization

open.substack.com/pub/nicholas...

guiding forward-looking inflation expectations toward convergence with the central bank's medium-term target, thereby fostering a stable anchoring that mitigates the potential for unmoored dynamics amid prevailing uncertainties.

The primary objective of adopting a restrictive monetary policy posture lies in curbing the entrenched persistence inherent in backward-looking inflation mechanisms, those adaptive expectations that risk perpetuating elevated price pressures (e.g. due to tariffs), while simultaneously

...albeit with a potential emphasis on disproportionate appreciations in procyclical and high-yield currencies relative to low-yielding counterparts within the G10 group. GS

...postponing and prolonging adjustments to longer maturities. Across these envisaged scenarios, avenues towards a depreciated Dollar endure...

In the event of a more vigorous growth rebound, rates could necessitate upward recalibration in line with cyclical expansion; nonetheless, a more accommodative composition of the Federal Open Market Committee might render the short end of the yield curve particularly resilient...

...financial markets are anticipated to shift their focus towards prospects for 2026, wherein inflationary impulses from tariffs and associated uncertainties might be counterbalanced by enhancements from fiscal stimuli and lowered rates, thereby facilitating enduring gains in equities.

...and the economy has progressed beyond the period of heightened vulnerability. As additional time elapses with sustained economic resilience amidst this deceleration...

Should this transpire, there would be considerable latitude for interest rates to decline further, thereby exerting downward pressure on the US Dollar while simultaneously elevating equity market volatility. To date, however, the labour market has merely moderated rather than stalled entirely...

🧵 The ongoing monetary easing cycle may serve as a safeguard against the potential escalation of the current economic softness in the United States into a more pronounced recession. Nevertheless, the principal apprehension remains the possibility of further deterioration in labour market conditions.

Adjusting to the new tariff regime MS #EconSky

Switzerland agrees with US not to manipulate its currency Rare joint statement with US Treasury seen as ‘green light’ for further currency intervention by Swiss central bank

on.ft.com/42kGV1D Switzerland agrees with US not to manipulate its currency

Hedge funds and high-frequency traders are converging Prop shops versus pod shops

on.ft.com/4pLIQpO Hedge funds and high-frequency traders are converging

#EconSky