NEW YORK | By Ana Fuentes | The U.S. Federal Reserve has been the talk of the town for weeks because of the tapering soap opera. But how much do we really know about the central bank on its centennial anniversary? An exhibit called “The Fed at 100” opened this Wednesday in New York, aiming to explore the Fed’s pivotal role throughout the history of American finance. And -that’s what we preferred- its response to economic crises.
MADRID | The Corner Team | Spain’s borrowing costs dropped at a double bond auction on Thursday after the U.S. Fed announced it will not start tapering yet. The 3-year bonds were sold at an average yield of 2.225%, compared with 2.636% seen at the previous auction. Madrid expects that this will leave some margin to offset possible negative deviations elsewhere or to better fulfill the country’s deficit target (6.5% for 2013).
By Barry Knapp (Barclays) | There is a key difference from the surprisingly low volatility Septembers in 2009-12. In that period, the Fed was either buying assets or had pre-announced a new program; this year, it is preparing to weaken the portfolio balance effect. In our view, for equities to overcome unfavorable seasonality and another round of fiscal concerns, fundamentals, which have been mediocre for over a year, due primarily to weakening global and soft domestic growth, will have to improve considerably.
MADRID | By J.P. Marin Arrese | When it comes to make a decision, a central banker is not supposed to hesitate, otherwise bewilderment and dismay will take in and lead to utter economic disarray. Mr Bernanke is bound to keep his word about tapering. And he has very little time to deliver before leaving office.
BEIJING | By Hong Hao via Caixin Magazine | The answers to how the Fed’s tapering will impact the market seem a little too obvious: the consensus is that tapering will jolt market interest rates substantially higher and thus provide headwinds for the market. Further, there is the belief that given China’s closed capital accounts, tapering will be inconsequential for its markets. I beg to differ.
By Johannes Müller (Deutsche Asset & Wealth Management) | Fed’s tapering will be the beginning of a normalization of financial markets. The U.S. central bank is beginning to lift the foot off the accelerator, but it is unlikely that Bernanke and company will imminently step on the brake.
MADRID | By Francisco López | Mark your calendars. For the first time in quite some time two major events for the future of markets and EU’s banking union are taking place in less than a month: the Fed’s meeting next Wednesday and the German elections on September 22. Is the tapering starting and by how much? Will Angela Merkel have to find a new political partner?
MADRID | By The Corner Team | Ibex 35 exceeded 9,000 points and markets were all in green this morning thanks to the withdrawal of Larry Summers as Bernanke’s substitute.
SAO PAULO | By Marcus Nunes | In a recent post John Taylor leans on Bob Hall to criticize NGDP Targeting. He goes: “In his paper at the recent Jackson Hole conference, Bob Hall criticized nominal GDP targeting, citing his 1994 paper with Greg Mankiw. Bob argues that “A policy of stabilizing nominal GDP growth would require contractionary policies to lower inflation when productivity growth is unusually high. Such a policy might easily trigger a spell at the zero lower bound.”