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central banks

The Fed balance sheet and repo facility cannot explain the stock market’s movement in isolation

World economy 16th February 2020

Repo Facility: QE Or Not? It Does Not Matter

Unigestión | Whether it is called QE or not, buying bills (swapping reserves for short-term bonds), injecting liquidity into the market place and growing the balance sheet affects risky assets. Market conditioning (the Pavlovian effect) since the GFC is that stock markets cannot go down when the Fed is growing the balance sheet. Additionally, the Fed’s extremely aggressive response to the repo blowout in September is another signal to markets that it has a very low tolerance for market fluctuations.

Which central bank blinks and cut rates first?

World economy 13th February 2020

Which Central Bank Blinks And Cuts Rates First?

TwentyFour Asset Management’s CEO Mark Holman thinks central banks will move on rates any time soon, but where the first move comes from might be harder to call. They are sure it will not be the UK, thank goodness and also sure it won’t be the ECB. It won’t be the US in the near future either.

Don't fear the Libra - worry about retail central bank digital currency instead

World economy 2nd February 2020

Don’t Fear The Libra – Worry About Retail Central Bank Digital Currency Instead

A retail central bank digital currency (“CBDC”) could be a major concern for European commercial banks. Recent central bank commentary suggests to Bank of America Global Researh that the likelihood of a CBDC being launched is increasing. This year, the ECB has published a position paper on a retail digital currency, and the BIS has announced a group of six central banks will study the topic. Analysts at BofA have three key concerns about this.

Quantitative easing now looks permanent – and has turned central banks into pseudo governments

World economy 26th January 2020

Quantitative Easing Now Looks Permanent–And Has Turned Central Banks Into Pseudo Governments

via The Conversation | After a pause of a few months, the world’s leading central banks are “printing” money again to try to bolster their economies. Commonly known as quantitative easing or QE, the European Central Bank (ECB) resumed its programme just before the turn of the year. The backdrop is lukewarm growth, a looming recession in Germany, and persistent fears of Japanese-style deflation.

Mario Draghi ECB presiden 012

Markets 1st October 2019

Musical Chairs at the ECB

Joachim Fels (PIMCO) | By cutting the deposit rate to -50 basis points, extending forward guidance, introducing a two-tiered system for excess reserves that mitigates the adverse impact of negative rates on bank profitability, and resuming open-ended net asset purchases of EUR 20 billion per month, the European Central Bank (ECB) recently provided clarity about its prospective monetary policy stance for the foreseeable future and thus well beyond the change in leadership from Mario Draghi to Christine Lagarde that takes place at the end of October.

NYSE bull

Markets 24th September 2019

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.

Central banks' QE was a powerful driver of the economy and markets

Markets 20th September 2019

Central banks do what they can

DWS | “First, do no harm.” That command may, or may not have been part of the Hippocratic Oath among medical practitioners since ancient times. Central bankers, however, appear increasingly keen to follow that maxim on both sides of the Atlantic. On Wednesday, the U.S. Federal Reserve (Fed) once again lowered key rates by “only” 25 basis points to a target corridor of 1.75%-2.00%. And once again, its reasons included subdued inflation as well as risks resulting from weaker global growth and various trade conflicts, justifying another insurance cut. In that sense at least, President Trump has seems to have influenced central-bank policy.

draghi black

In Europe 13th September 2019

Draghi leaves an outstanding heritage

J. P. Marín-Arrese | Against all odds, Draghi has secured consensus over his stimuli package by a cunny trade-off between the subdued intensity of individual measures in exchange of ample coverage. His brilliant brinkmanship as Chair of the ECB facilitates the task of his successor as Ms Lagarde can wait-and-see comfortably cushioned by a strong and comprehensive arsenal relieving her of the need to change course for many months to come.

wound QE

World economy 4th September 2019

The unintended consequences of saving the world from the financial crisis

Niel Dwane (Allianz GI) | The response of central banks to the financial crisis 10 years ago may have saved the world from a devastating depression, but it also created a host of unforeseen effects – from more indebtedness to more economic inequality. Looking back at what we got right – and what went wrong – what lessons can we take away for the future?