monetary policy

Fiat Money

From Egypt To Mexico, From The Czech Republic To Ghana… The Burden Of Tightening Monetary Policy Around The World

Francisco Vidal (Intermoney) | In China, the authorities insist that they will support a scenario of solid economic growth with their actions. However, the week began in the Asian giant with the 1 and 5-year LPR rates remaining at 3.7% and 4.6%, respectively. And while in China we are witnessing new promises of support for activity which do not materialise in immediate action, in many other countries we are witnessing…

world naranja

2022 To See Monetary Decoupling Between West And East

Alicia García Herrero (Natixis) | This has not been an easy year despite the strong fiscal and monetary support to Covid-struck economies, especially in the Western world. Such support has allowed the North American and European economies to grow above potential amid repeated waves of Covid-19 and related mobility restrictions even if less severe than in 2020. On the other hand, the emerging world has grown below potential this year…

Bank of Canada

Australia And New Zealand To Follow Canada In Tightening Monetary Policy

Intermoney | The progress made in the economic recovery has prompted the Bank of Canada to reduce net purchases of Canadian government debt by 1,000 thousand. CAD 1,000 billion to CAD 3,000 billion as of next week. A move that was supported by a very positive forecast for the world economy, projecting global GDP growth of 6.8% in 2021, 4.1% in 2022 and 3.3% in 2023. 

ECB Lagarde signing

Monetary Policy And Fiscal Policy Merge

Flosbach von Storch | National debt-to-GDP ratios have already reached historic highs. Gross national debt will likely exceed 260 per cent of GDP in Japan by the end of the year, and reach around 140 per cent in the USA and around 100 per cent in the eurozone. Concerns about the high level of debt being unsustainable in the long run are at least theoretically unjustifiable as long as interest rates and government bond yields remain close to zero. This is because zero interest rates allow practically any deficit or mountain of debt to be easily funded.

ECB details 1

European Banks Strategy: The monetary policy cacophony

BOfAML | It is difficult for forward guidance to be credible when the institution is discussing whether any of its tools or targets are likely to be around in a few months. Embarking on a wide ranging discussion about monetary policy targets, communication and tools, with 25 relevant ECB board members, guarantees a cacophony. Volatility lies ahead for sure, we think.


10 Themes for the Next 10 Years

BofAML | We enter the next decade with interest rates at 5,000-year lows, the largest asset bubble in history, a planet that is heating up, and a deflationary profile of debt, disruption and demographics. We will end it with nearly 1bn people added to the world, a rapidly ageing population, up to 800mn people facing the threat of job automation and the environment on the brink of catastrophic change. At the same time, 3bn more people will be connected online and global data knowledge will be 32x greater than today. The social, political and economic responses to these challenges, all heading to a boiling point this decade, will overhaul traditional paradigms.

global growth

What recession?

Jessie J. (Unigestion) | Growth drivers have stabilised considerably since June, following the end of the slowdown that started in January 2018. The “mid-cycle” pause called by Fed Chair Jerome Powell has led to a one-of-a-kind situation: world growth remains decent while monetary policy has become once again incrementally more accommodative.

European equities

The S&P 500 has gained 233% since 2010, as opposed to 92% for the MSCI Europe

Igor de Maack (Natixis) | Years of negative rates may well be coming to an end, with a reversal of investor sentiment for bonds over the last few weeks. In fact, the French 10-year rate is now verging on 0%. However, these years will leave their mark in terms of the extravagance of the monetary policies implemented for the purposes of “Saving Private Capitalism”, lost on the battlefield of excessive debt and driven into the trenches of complex finance.

Jerome Powell

The Fed is once again data-dependent

Christian Scherrmann (DWS) |  As has been widely anticipated, the Fed is again lowering key rates by 25 basis points – the third step in the current cycle. Judging from the obligatory statement, it seems quite plausible the Fed might be done with cutting for a while. From now on, its main focus seems to be on monitoring the U.S. economy, rather than, say, on pondering whether the current interest rate level appears appropriate, given the current situation. In short, the Fed is once again data-dependent.

NYSE bull

Carry Me Home

Chris Iggo (AXA IM) | The market is trading like it believes the mid-cycle correction story rather than the impending recession narrative. Equity and credit markets are doing “ok” and rates have bottomed for now.