BoAML Research | One reason the Federal Reserve has been so dovish recently has been a lack of conviction in wage and price inflation. Fed Chair Janet Yellen ’ s speech earlier this week confirmed that she is not convinced that the recent rise in core inflation would “ prove durable ” and stated that more adverse -than -expected foreign developments could slow the pace of labor market improvement, and with it, “ growth in both wages and prices.
Fernando Rodríguez | Peter Walton, Emeritus Professor at the Open University Business School thinks that “regulations which were drawn up for Deutsche Bank cannot work for a small company that manages three supermarkets in Birmingham”. The solution would be to divide the market up.
Caixin | Creating a new problem to address an old one may trim the real estate glut in the short term, but it will cause headaches for the economy in the long run.
James Alexander via Historinhas | Hamlet without the Prince would not be a very good play. Janet Yellen’s March 29th speech features a world economy without the Fed. It’s not a very good description of the world economy.
UBS | The 2016 stress test is the first of the more standardised, cyclical annual exams intended to help set sector capital requirements. These incorporate a broad downturn at home and abroad which compares with a domestically -focussed 2014 test and an EM -driven downturn in 2015’s.
Citi | ECB Executive Board member Benoit Coeuré gave an interview to Politico on March 23, published on 30 March and featuring on the ECB’s website. Mr. Coeuré begins by explaining that the package announced on March 10 was “very potent, both in intensity and sheer volume”. On the subject of monetary policy tools at the ECB’s disposal, Mr. Coeuré notes that “negative interest rates are not our main instrument, they just support our overall policy. And looking ahead, we’re not short of instruments – our choice is quite large. We will be able to deal with adverse situations if necessary”.
In economic theory, “one person’s spending is another person’s income,” which drives aggregate demand in the economy. Often, this cycle breaks due to flawed economic policymaking that ends in economic crisis.
AXA IM | International trade volume1 is not expanding as fast as before the Global Financial Crisis (GFC). The average annual growth rate in international rate volumes almost halved to 2.4% in 2009-2015 from 5.1% in 2001-2008. For the first time in over four decades, international trade is growing less than world real GDP (the latter recorded at 4.2% in 2001-2008 and 3.3% in 2009-2015).
If Telefonica approves the choice of current CEO José María Álvarez-Pallete to replace Cesar Alierta as Chairman, he will be the first Executive Chairman not to be appointed by the Spanish government. Alvarez-Pallete will face two main challenges: securing European Commission approval for the sale of O2 and dealing with the weakness of the LatAm economies, particularly Brazil.
UBS | On Thursday the Basel Committee released a consultation on ” Reducing variation in credit risk-weighted assets “. A surprise gift before a long weekend. Our read is that in the pursuit of reducing variability in bank capital backing similar portfolios at different banks, the Committee intends doing away with models for certain books of business and specifying inputs into others.