J.L.M. Campuzano (Spanish Banking Association) | The increase in the size of the central banks’ balance sheet has without doubt been one of the untraditional measures of the financial crisis. But the president of the ECB has anticipated that probably at its next meeting in October a scheme will be worked out to progressively reduce the asset buying programme.
Benjamin Cole | With the announced mid-October resignation of U.S. Federal Reserve Vice Chairman Stanley Fischer, Donald Trump has a chance to do what Presidents Obama and Bush never did: appoint growth-oriented members to control nation’s central bank.
Stan Fisher the Fed’s vice president has decided to resign at mid-October for personal reasons. This will dramatically change the internal equilibrium of the Fed’s board.
On the whole, the Jackson Hole symposium provided very little in the way of fresh indications on either the Fed or the ECB’s monetary policy, market experts say.
Currently, even yields on European high-yield bonds are below equity dividend yields, making investment in stocks a better way of generating income. For US bonds, the focus is on the Fed’s planned balance sheet normalisation.
The global economy is not yet back to normal after the crisis. The real figures continue to show that Larry Summers and his “Secular Stagnation” hypothesis are right. We are not strong. And every time we want to break the pessimism, the indicators are weak.
US Fed chair Janet Yellen and ECB President Mario Draghi will both be speaking at the Jackson Hole conference later this week. They will be under close scrutiny from investors for any clues on future monetary policy decisions. Analysts believe the Fed should matter more than the ECB at this week’s event.
The minutes released by the FED and the ECB last week shared concern about how to inform about their monetary stance. They fear unsettling the markets should investors wrongly interpret the messages conveyed to them. When you lack a clear policy perspective, the best thing you can do is to manage communication in a fairly tight way.
The minutes of the Fed’s late July meeting released yesterday reflect ongoing concern about muted inflation data, as well as the fact there seems to be some discrepancy amongst FOMC members over when would be the right time to begin the normalisation of the central bank’s balance sheet.
The summer lull may continue to dampen stock market activity during the month of August, but there are two key events on the investor agenda this week. German GDP figures for Q2 and the minutes of the Fed’s late July meeting.