Monetary Policy

  • The RBA eases and there is less talk of a Grexit.

    Another Central Bank Eases and Grexit Talk Subsides

    The Reserve Bank of Australia joined the chorus of central banks to ease policy.  The 25 bp rate cut was not a major surprise but it did catch many a bit off-guard as recent data and the pace of the Australian dollar's decline had prompted many to push out the expectation to next month. 

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  • What are the long term implications of negative interest rates?

    Testing Central Bank Balance Sheet Limits

    When the Swiss National Bank lifted its cap on the franc, many thought they understood the message.  It had reached the end of its rope.  Some suggested the ownership structure of the SNB (owned by the Swiss cantons and individuals vs the stock exchange) opposed a further expansion of its balance sheet (~80% of GDP) vs ~20-25% in the UK and US by comparison. 

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  • Quantitative easing has had mixed results and reviews.

    Quantitative Easing - What you should know about it!

    On 22nd January 2015, European Central Bank announced its plan to revive Eurozone’s stagnant economy agreeing to pump in €60 billion ($69 billion) per month thus grabbing headlines. Quantitative Easing (QE) is not an unfamiliar policy in the financial world.  When short-term interest rates are closest to zero and the central bank can no longer ease policy by simply adjusting the price of its reserves, then it aims to adjust the quantity of reserves.

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  • Don't expect fireworks from this Federal Reserve meeting.

    A "Routine" U.S. FOMC Meeting if That's Possible

    The Federal Reserve’s two-day meeting concludes Wednesday.  To the extent the FOMC meeting is ever routine, this should be it.  Its forward guidance evolved at the end of last year.  The “considerable time” between the end of the asset purchase program, which it never called quantitative easing, and the first hike, is now called “patience”.  

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  • 1.1 Trillion is a lot of euros.

    Will ECB Asset Purchases Work Like in the U.S. and U.K.?

    By allowing the European Central Bank (ECB) to start buying debt issued by its member states, the Eurozone is copying a strategy now associated with the earlier return to growth in the US and UK.

    Quantitative easing (QE) may not have worked in the way its architects hoped; reviving private investment by reducing borrowing costs and raising asset values. But QE has set up conditions for such revival by helping governments and households finance their debt at low cost, so that spending picks up and gives an incentive to invest.

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  • ECB plan details are known today, but the effects will take a while to be known.

    The Benefits of Lower Interest Rates Over a Currency War

    Today is all about the ECB.  The press claims to have access to people or documents that have the ECB buying 50 bln euros of bonds a month.  The duration of the program is not clear. There was a conflict in the media.  Some claimed that the program would last a year.  Others claimed it would last until the end of 2016.   

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  • The ECB meeting is the main event for this week.

    Waiting for the ECB

    The European Central Bank meets tomorrow, and that is the main event of the week.  The price action today is dominated by other central banks.  The market is still struggling to find a new balance after the Swiss National Bank's surprising move last week.  

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  • Was the SNB forced into floating the franc?

    Did the Swiss National Bank have a Choice?

    Currency wars have been predicted for years. Outright monetary battles were last seen during the Great Depression of the 1930s, when governments competed to devalue their currencies to gain market advantage. But since the return to floating exchange rates in the 1970s, the risk of renewed competitive manipulation has hovered over the monetary system like a dark cloud.

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  • The BOJ, BOC and ECB all meet this week.

    Central Bank Meetings Dominate This Week's Economic Events

    This will be an eventful week.  There are three major central bank meetings:  BOJ, BOC and ECB.  The ECB is widely expected to announce a wider bond-buying program that will include sovereign bonds.  January 25 Greece holds national elections in which Syriza is maintaining a small lead.  

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