BARCLAYS | The minority conservative government led by Prime Minister Pedro Passos Coelho was ousted present week after the parliament rejected his government’s programme by a vote of 123 to 107. Political uncertainty is likely to continue to weigh on Portugal’s funding costs, despite the very accommodative monetary policy of the ECB.
The markets sway to the rhythm of the central banks, but it’s not clear that monetary policy alone can solve the serious economic problems affecting most of the planet. Perhaps it would be a good thing to take heed of Summers idea that it is preferable to back productive investment and not the creation of bubbles supported by low interest rates.
On face value, the ruthless tools used by central bankers to inject piles of money into the economy point to a brand new way of conducting monetary policy. Never before, except for in wartime, did they dare to trigger such massive asset-buying programmes. And never before did they so blatantly disregard the future risks a huge liquidity glut might fuel.
LONDON | BNP Paribas | Even after a very dovish FOMC meeting…the USD reaction has been muted. BUT the USD has strengthened against the EM currencies…
The FED not only held unchanged its rates in its last FOMC meeting last week. It plunged investors into utter disarray by delivering an extremely dovish message on future action. The prospect of a hike this year loses steam while bewildered markets pull back to the waiting game.
By Fernando Barciela | Board member at Ferrovial, amongst other Spanish listed companies, Juan Arena was President of Bankinter from 2002 to 2007. “The crisis comes when assets prices drop. Then we have to choose between debt haircuts or raising asset prices via inflation and money printing,” he says.
Barclays | We expect the Fed to remain on hold at its September meeting, deferring rate hikes while it assesses renewed risks to the outlook.
South Korean economist Ha-Joon Chang argues that although orthodox thinking is to cut debt, the most effective way for countries to grow is to boost their income. As for the recovery, this expert in emerging markets notes that the world economy is not really picking up in the way that it usually does after a big downturn. This is the first part of our conversation.
The Fed’s wavering over addressing the matter of its announced rate hike has badly affected the markets, increasing their volatility. It should act now, curbing any further speculation, and disregard recent calls from the IMF and the World Bank to further delay this move.
UBS | Monetary policy remains stimulative globally, and labor markets are tightening. Yet, global inflation is low.