“Economic Update: Paris Bourse, Biden-McCarthy Deal, and Monetary Policy”

The Paris Bourse started in the green on Monday, before returning to its marks on Friday, with no possible ripple effect from Wall Street or even from London, which will not reopen their doors until tomorrow, due to Memorial Day in the United States and Late Spring Bank Holiday in the British. At midday, the Cac 40 symbolically yields 0.12%, to 7,310.32 points, in a trading volume of around 400 million euros.

This weekend, President Joe Biden and his Republican counterpart in the House of Representatives Kevin McCarthy found common ground on raising the federal debt ceiling. ” We have reached an agreement in principleSpeaker of the House of Representatives Kevin McCarthy said on Capitol Hill on Saturday. We still have a lot of work to do, but I think this deal is worthy of the American people. It would include, in exchange for a suspension of the cap until 2025, a strict maintenance of spending at its current levels for 2024 with a slight increase in defense and for veterans, before a rise capped at 1% the Next year. The funds not used within the framework of the Covid will be reinstated, for nearly 30 billion dollars.

Joe Biden, for his part, called the agreement ” important step forward that cuts spending while protecting essential programs for workers and growing the economy for all (…) It protects my top legislative priorities and achievements and those of Congressional Democrats (…) This is about ‘a compromise, which means not everyone gets what they want ».

Back to monetary policy

All is not yet settled. The text was to be finalized on Monday so that it could be presented to Congress on Wednesday. It remains to have it adopted, therefore to convince the Democrats as well as by the voting Republicans. The deadline before a payment default by the country, that of June 1, was moved to June 5 on Friday evening by Treasury Secretary Janet Yellen. It won’t be easy, especially on the Democratic side, with the agreement stating (it’s a victory for Republicans) that Americans between the ages of 49 and 54 on food assistance will have to meet certain work requirements. they are valid and without dependents.

No meeting is on the agenda. On the other side of the Atlantic, we are mainly awaiting, on Wednesday, the publication of the Fed’s Beige Book, a preparatory document for the next monetary policy meeting of the central bank on June 13 and 14, and on Friday by the employment figures for the month of may.

After the agreement in principle found on the debt ceiling, this question of the monetary policy of the major central banks will very quickly come back to the fore given the sticky inflation in the United States and in Europe. In April, the PCE core index, the Federal Reserve’s preferred measure of inflation, rose 0.4% on a month, 0.1 points above expectations, and 4.7% on a year, marking a reacceleration compared to 4.6% in March. According to the tool developed by CME Group on the basis of future contracts on Fed funds, the central scenario is that of a further rise of a quarter of a point at the next FOMC, with a probability of 67%, against 25% it a week ago.