Memento: How QE will work
The Corner | March 5, 2015 | Whatever it takes, don’t miss the mechanics of the European Central Bank’s next purchase programme starting on Monday.
monetary policy
Janet Yellen may soon run out of patience
MADRID | February 26, 2015 | By JP Marín Arrese | The FED is back in business after years of loose monetary policy aimed at redressing an ailing economy. With the business climate markedly improving, the time is ripe to raise rates. Yet, Janet Yellen has repeatedly warned against a swift hike, instead emphasising the need for patience until the upward trend is solidly anchored. In her testimony before the Senate Committee, she noted that policy would only cover the next two FOMC meetings, sparking speculation that the move could well start in June.
The Federal Reserve was all set for mid-2015. Is that still true?
SAO PAULO | By Marcus Nunes via Historinhas | On December 2 2014, Stanley Fisher gave an interview (video) to Jon Hilsenrath of the WSJ. It was notable because Fischer had mostly been quiet, except for a couple of Lectures (not speeches) – here, here – given in international forums. Six or seven weeks later, is that interview still pertinent? At that point oil prices stood at close to USD 70 and now they stand below 50. Mostly as a reflection of low global AD (here).The global scenario is changing quickly, and not for the better. So maybe Fischer is not so sure anymore. [Image:WSJ]
US economy: Playing the “let’s pretend things are great” game
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!
What if QE operates on the supply side and keeps prices low?
WASHINGTON | By Pablo Pardo | Do you want a Who’s Who of the Republican talking heads? If so, go to this list. Those are the luminaries that asked the Federal Reserve not to go ahead with the Quantitative Easing in 2010, for fear of inflation and currency debasement. Four year later, inflation is nowhere to be seen, and, according to the IMF, the US dollar has strengthened its role in the monetary system.
Fed’s baby steps towards tightening
MADRID | The Corner | Janet Yellen spoke about patience in judging when to raise rates on Wednesday, which means no hikes for at least two meetings. The change in guidance was played down by the FOMC statement. BNP Paribas analysts thinks the US central bank wants to prepare markets for hikes but at the same time reassure them. They call for the first hike in September.
Welcome to the New Normal in China
BEIJING | By Xiu Gao via Caixin | The annual Central Economic Work Conference report sketches a framework for looser monetary policies and adjustments to slower economic growth in China.
The Fed’s motto: Mistakes should be repeated!
SAO PAULO | By Marcus Nunes via Historinhas | Fed officials have great difficulty in thinking outside the box, ceaselessly repeating themselves. If they stopped to think for a moment they would see what´s very different now from what presented itself ten years ago. And the significant difference is not in the rate of inflation or the rate of unemployment, but in the level trend and growth rate of nominal spending
Next TLTRO may reach €160 billion
MADRID | The Corner | All markets eyes are set on the ECB’s second offer of cheap four-year loans (TLTRO), which will take place next Thursday and are aimed to revive the eurozone’s battered economy and try to boost lending to SMEs. As a matter of fact, this second round will be important as any decision about launching a QE program will be influenced by how the banks respond to Thursday’s liquidity open bar.
Draghi fails to deliver
MADRID | By JP Marín Arrese | Markets took Mario Draghi´s encouraging promises at face value a couple of weeks ago. However yesterday’s ECB Council meeting failed to endorse any move to bolster the QE strategy. Super-Mario was only able to renew the central bank´s firm commitment to act should economic prospects markedly deteriorate. Investors felt utterly upset and reacted accordingly.