Argemino Barro | The Conference Board is a non-profitable organisation set up just over half a century ago by 12 big corporations to soften their public image during a time of social unrest. Nowadays it offers analytic tools for different sectors of the economy and has 1,200 companies from 60 countries as partners. Its chief economist, Gad Levanon, analyses here the situation of the US economy in the Trump era.
There are still divergences between the monetary policies of the Fed and the ECB. But if Draghi meets expectations for progressive withdrawal of the stimuli from September and rate hikes in the first few months of 2018, a new “currencies war” is not on the cards in the near future.
Trump’s attempt to get rid of the Obamacare health scheme has turned into a complete fiasco, and a similar fate might await his plans to revamp public expenditure. Trump’s own party mates share his will to reduce corporation tax, but have expressed deep concern about huge deficits. So much of the presidential agenda might end up in the dustbin.
I believe central banks don’t control long-term rates – which are decisive for investment – and that they can influence them in what we would call normal circumstances, namely when GDP is expanding and inflation is at its optimum level. The central bank trys to control the private market’s expectations, but it doesn’t always succeed.
J.L Campuzano (Spanish Banking Association) | What is clear from ECB President Mario Draghi’s speech last Thursday is that investors consider we are closer than farther away from the start of monetary normalisation against a backdrop of economic optimism.
Santander will not have to take the Fed’s qualitative stress test. From this year, only those banks with over $250 billion on their balance sheet. Its US holding has just $142 billion in assets. Not having to take the qualitative part of the test will increase Santander’s flexibility for implementing its plans to reward shareholders (dividends and/or share buybacks).
The key point about the Fed’s exit strategy is not so much the pace of rate hikes which will be very gradual or just gradual, but also how it will reconfigure its balance.
Analysts are predicting a positive 2017 for European equities, not least because they are currently undervalued compared with US stocks. But there are risks on the horizon due to political instability (elections in France, Germany and Holland, plus the effects of Trump and Brexit), and uncertainty over the timing of the Fed’s rate hikes.
The Fed has increased its daily interest rate to 0.75%, saying it predicts three further hikes in 2017. This is called active and persuasive monetary policy. But the central banks are no longer the masters of the economy, whipping it into a place they want.
Natixis AM | The Fed decided On Wednesday to increase its main rate by 25 bp. The US central bank had mentioned so many times this hike that it has to do it. But what will happen now?