Again, we would like to introduce an informal advisor to the firm, Nobuya Nemoto, who brings an economist’s perspective to the team. His biography is provided below. Before diving into his thoughts on the May CPI print, we think it’s important to attach our most recent newsletter, A new dietas it looks like the Fed and other central banks will continue their tightening trajectory.

Now on to his thoughts…

A few quick observations

1) September CPI: The CPI for basic services, the most rigid segment and with the largest weight in the overall basket, increased by +0.8% m/m, which more than compensated for the more favorable prices of raw materials basis, unchanged from August. It is a well-known fact that inflation is a lagging indicator of the business cycle, especially the prices of basic services which tend to exhibit a higher degree of auto-correlation (i.e. the hysteresis). Coupled with the announcement of OPEC’s decision to aggressively cut output, the latest inflation dynamics push the Fed further down the policy path of “higher for longer”.

2) FOMC Minutes: No real new information or ideas beyond what was said to the FOMC presser last month. On the contrary, some investors seem to have taken positive inspiration from the following comment interpreted as a possible impending dovish tilt:

  • “Several participants noted that, particularly in the current highly uncertain global economic and financial environment, it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on economic outlook.”

But it should be noted that “several” does not constitute a majority, while the latter’s point of view was summed up as follows:

  • “Many participants pointed out that the cost of taking too little action to reduce inflation likely outweighs the cost of taking too much action.”

In addition, hawkish minority views were expressed as follows:

  • “Several participants stressed the need to maintain a restrictive stance for as long as necessary, with a few emphasizing that historical experience has demonstrated the danger of prematurely ending periods of restrictive monetary policy aimed at lowering the ‘inflation.”

In other words, the minutes revealed a broadly balanced split of opinion around the consensus focused on risk management, but the latest CPI release and OPEC decision likely tipped the scales towards camp. hawkish ahead of November’s FOMC. .


Nobuya Nemoto has a background in macroeconomic and quantitative research. Nobuya was one of the founding partners of Washington-based Potomac River Capital LLC (“PRC”; a macro hedge fund) as head of strategy and quantitative research, and helped the fund grow twenty-fold. assets under management in more than 10 years. Prior to PRC, Nobuya was Managing Director at Citigroup Asset Management (“CAM”), leading its capital markets research in charge of developing CAM’s global asset allocation platform and was a senior member of the Asset Management Committee that produced key asset allocation decisions for company-wide balanced products. Prior to joining Citigroup, Nobuya was Chief Economist for Japan at Nomura Securities, repeatedly ranked among the top three research teams by Institutional Investor Magazine. He holds a BA in International Economics from the University of Tokyo and pursued doctoral studies in economics at Columbia University under the sponsorship of Nomura. Nobuya resides in London, UK with his wife and two cats.

Best regards,
The Auour Investments team


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