The price of
oil is holding in the low 60s, it seems the effects of Hurricane Katrina will be
less than feared and Mr Bush is to visit China. China and the US will be
working hard to reduce trading imbalances – one US investment bank has today
predicted a 9% revaluation of the yuan over the next year,
incidentally.

The US Federal Open Market Committee (FOMC) meets on 20/9 and on current
indications this will be against the background of “the world returning to
normal” as one pundit put it during a morning meeting today.

Henry’s view is that the Australian economy is stronger than that kindly
supplied (see link below) by the National Australia Bank. The housing slowdown
has not turned into a debacle, business investment is strong, the terms of trade
are still rising and employment growth is extraordinarily strong.

Inflation is the risk, combined with an excessive current account
deficit. Financial markets have taken away the expectation of a rate
cut, and before long rate hikes will again be on the menu.

Read more at Henry’s website here.