Investors React to Meddling Central Banks
The Bank of Japan defied expectations and its economic assessment to leave policy unchanged. The inaction spurred a 3% rally in the yen and an even larger slump in stocks. The financial sector took its the hardest and dropped almost...
Fed Appears to Know the Score
The FOMC delivered a statement largely as expected. It upgraded its assessment of the global economy by dropping the reference to risks. It downgraded its assessment of the domestic economy by acknowledging that growth has slowed. The FOMC delivered a...
Kuroda Chrome: Japan’s Monetary Tools
Under Kuroda's leadership, the BOJ has surprised the market a number of times, most recently with the move to negative rates at the end of January. Under Kuroda's leadership, the BOJ has surprised the market a number of times, most...
To Each Their Own (Monetary Policy)
The gains the US dollar registered in the second half are being pared, but it is sterling's strength that stands out. It is difficult to attribute it to Obama's push against Brexit, but there does appear to have been a...
This FOMC Meeting Overshadowed by June
We expect the FOMC statement this week to recognize the improvement in the global conditions that have been an increasing worry for officials over Q1. At the same, time the soft patch of the US economy is undeniable. We suspect...
All About the ECB
The ECB meeting is the session's highlight. In recognition of the risk that ECB President Draghi expresses displeasure with the premature tightening of financial conditions through the exchange rate channel is encouraged a modest bout of euro selling. The single...
Unconventional Monetary Policy and Unintended Consequences
On August 2015, the People’s Bank of China devalued the yuan with the aim of appreciating the currency against the US dollar. On October 2015, the European Central Bank signaled the intention to pump more liquidity into the Eurozone economy....
Dovish or Maybe Just Less Hawkish
A few short hours stand in the way of the long holiday weekend for many. The capital markets are retracing the recent moves. This means equities and commodities are lower. It means bonds are firmer and the dollar stronger. The...
Is the ECB Buying Assets or Time?
The euro rallied shortly after the ECB announced numerous monetary measures that in their totality were more than expected. Many saw this as proof that monetary policy had lost its effectiveness, and central banks have lost credibility. The euro rallied...
Reconciling the Fed’s Large Change in Forward Guidance
If there was one word Yellen emphasized yesterday it was caution. The dot plot reflected that as well. Can one ask if the Fed is being too cautious? Yellen acknowledged that the Fed's assessment of the US economy had not...
Monetary Policy’s Strange New World
There’s an old adage in economics that the best way to cure deflation is to drop money from helicopters. Clearly, this phrase isn’t older than mid-20th century, because before that time we didn’t have helicopters… we also didn’t have manipulative...
A Rate Hike Today would be an FOMC Surprise
Since the Federal Reserve hiked rates in December, both the European Central Bank and the Bank of Japan have eased policy further. The idea that because they cut rates means that the Fed cannot raise rates is a not a...
The FOMC Meets and the ECB Moves Linger
The market's focus has shifted to the two-day FOMC meeting that begins today. The Federal Reserve should be pleased with recent developments. Labor market slack continues to be absorbed. Core inflation measures continue to edge higher. The market's focus has...
Interest Rate Policy vs. Monetary Policy
The market reaction to Draghi's indication, once again, that interest rate policy has run its course, will be debated for some time. Draghi delivered the goods that many investors said was lacking last December. The ECB policy was more than...
Understanding the Point of the ECB’s Actions
The euro is paring the recovery that began in the middle of the ECB's press conference yesterday. The market reaction was one intuitively expected to broad easing of interest rates and credit conditions. The market reversed, and violently so, only...