Ignacio de la Torre | The ECB’s deposit rate, which is now at -0.4%, will move to -0.2% during 2019 and later to 0%. At the same time, during the second half of 2019 the logical thing is for the ECB to begin to raise interest rates. These two factors should fuel a progressive rise in the Euribor from the summer of next year.
In his first press conference, Jerome Powell baffled both the experts and the markets. After reading the hawkish introductory statement, he defused all fears for a harsh and swift monetary tightening.
We need to be aware of the existence of regulations over and above the well-known Taylor Law, starting with this regulation adjusted to establishing a downward limit on rates of 0%, which is very important in the US Fed’s case.
“If we analyse the data from the last 25 years, there is very little inflation. Underlying inflation in the US has never really fallen below 1% which means that the secular dynamism in the labour market is reducing inflation, via technology and globalisation,” explains Bruce Kasman, chief economist at JP Morgan.
In his first congressional testimony, Jerome Powell delivered an upbeat appraisal of the US economy. In his own words, headwinds have turned into tailwinds. While avoiding any commitment on the plausible monetary stance, markets have discounted a faster pace in rate hikes, pushing bond yields to fresh highs.
Benjamin Cole | The last filmy slips of fabric have been stripped away, and macroeconomists must now view the once-romanced US Congress in flagrante delicto with a real paramour: Mr. Big Bucks Deficits. From here, a premise of Federal Reserve monetary policy must be that it takes place alongside $1 trillion annual deficits.
Jerome Powell is bound to have a crash landing in the Federal Reserve. From the very beginning of his mandate, pressure is mounting on him to raise rates. An unpalatable choice for someone who hoped to follow Janet Yellen’s wait-and-see stance for as long as he could.
After nearly a decade of easy money, the financial markets and the economy have not just become addicted to debt, but also indifferent to the continued growth in global debt.
The trend in inflation is confusing those in charge of monetary policy. After a significant uptick in the last part of 2017, it has really stagnated, in stark contrast with the growing dynamism of the economy.
How do I see the year 2018? Low growth and productivity, a declining working population, and an unsustainable rise in animal spirits. Everything comes to an end, and the longer it takes, the worse it is.