SAO PAULO | By Marcus Nunes via Historinhas | If things get worse [for the US economy], that’s the fault of weak growth in Europe and the BRICS, having nothing to do with bad monetary policy by the Fed itself. Keep wearing those rose-tinted glasses and soon everyone will start feeling things couldn’t be better!
BANGALORE | By Srikanth Vasuraj | Coming from a non-believer this is a big change when I say that I am actually glad that Mr. Narendra Modi has taken over the helm in India. He comes across like a breath of fresh air, speaking the language that people of India have been dying to hear for a long time. This is probably one of the reasons why he won with such a huge mandate. But now that the dust of elections has settled and having been in the hot seat for around six months, the honeymoon period is over and people are eagerly looking forward to delivery on all those promises. The people of India have delivered. Now its his turn.
MADRID | By Ana Fuentes | In a blow to PM Shinzo Abe, the Japanese inflation rate fell to its lowest level in over a year in November (0.7% from a 0.9% rise the previous month, according to government data released Friday), complicating efforts of the central bank to end more than a decade of chronic price falls. Does this mean, as stimulus sceptics put it, that the Abenomics are doomed? Advisor to the new government and one of the 100 Most Influential People for Japan according to Nikkei Business, William H. Saito believes we have been quick to judge their strategy. As he explained to me, they have “many plan B’s left.”
MADRID | The Corner | Spain’s final CPI in November was exactly the same as preliminary estimates: -0.4% yoy and -0.1% per month. The inter-annual rate has registered its fifth month in deflation, whereas the month-on-month rate was recorded as negative for the first time in 4 months. Throughout 2014, there were only three months with negative rates. Both the acceleration of the fall in oil prices and the stability of the dollar/euro explain these figures.
SAO PAULO | By Marcus Nunes | As soon as you mention “market monetarist”, NGDP comes to mind. While for most the all-encompassing variable is inflation, to MMs the “target” variable is NGDP being kept at a steadily rising trend level.
MADRID | The Corner | Internal demand is recovering within the euro area, activity is getting back on track and experts believe that companies are about to start investing, hiring more workers and boosting consumption. However, credit flow, the production gap and unemployment are still major challenges. Analysts at Cortal Consors think that Spain and Portugal are the Eurozone countries most at risk of a “prolonged period of low inflation or mild deflation.”
The European Union (EU) is a group of sovereign states, who are sovereign in that they are entirely free to leave the EU. This freedom to leave means the EU is not a “super state.” There is no coercive force — and no EU army — to make Britain or any other country remain in the union. Britain enjoys a freedom, within the EU, that colonies did not enjoy within the British or other European empires. Britain is, therefore, entirely within its rights in considering the option of leaving the EU, although that does not mean such a course would be wise.
SAO PAULO | By Marcus Nunes via Historinhas | In The Risks to the Inflation Outlook SF Fed researcher Vasco Cúrdia writes: the median inflation forecast is not expected to return to the FOMC target of 2% until after the end of 2016. The uptick in inflation in the first half of 2014 could lead one to believe inflation is finally on the path back toward its target. However, inflation has shown similar patterns several times before and each time the uptick has never lasted very long. According to this model, we should not see inflation begin to recover more firmly until around the end of 2015.
MADRID | The Corner | In a report by Atradius Credit Insurance, they say that the disinflationary trend is visible across the Eurozone, but not all countries are expected to face the same issues. Countries that have a large output gap and those that still have to implement the most reforms will face the highest disinflationary pressure. To create a list of the countries most likely to be impacted, we first select the Eurozone markets that have a budget deficit larger than 3.0%, as these are subject to the Excessive Deficit Procedure which forces them to implement fiscal and structural reform.
MADRID | The Corner | As expected, the ECB’s Governing Council left the policy rates and the ABSPP, CBPP3 and TLTRO programmes unchanged and expressed its endorsement for increasing the central bank’s balance sheet to its size at March 2012, that is, around €3Tr. Draghi explicitly pointed out that they would evaluate further measures in case that the current purchase programmes are not enough to expand the balance sheet or if the EZ inflation outlook worsens. With policy rates at the zero bound, pressure is mounting on the central bank to act.