Brazil May Want to Rethink Using IMF Forecasts
Brazilian central bank President Tombini said it would take into account the IMF’s revised forecasts for a deeper recession when it meets this week to decide on policy. Sorry, but we don’t buy it. IMF forecasts should not affect a...
Looking to the Great White North for a Rate Cut
Speculation is mounting that the Bank of Canada will be the first major central bank to cut rates this year. It meets on January 20. The combination of the drop in oil prices (40% since mid-October) and the erosion of...
Was it or Was it Not a Currency War?
Former Fed Chair Bernanke has penned a blog post that seeks to refute claims that the US monetary policy was the start of a currency war. Brazil’s finance minister first levied this claim in 2010 as the Federal Reserve, under...
An Unusual Policy Move by Sweden’s Riksbank
Many countries may look with envy upon Sweden. Growth last year was probably around 3%, with household consumption rising a little more than 2%. Its current account surplus is 7.5% of GDP. Exports were up by 4.3%. Its budget deficit...
How Long Can Interest Rates Stay Low?
When a central bank lifts interest rate targets by 0.5% it expects households and firms to respond. In a crisis, the official target may fall by 3% in order to shock the economy into a positive response. These movements of...
Ask the Experts about the U.S. Fed Rate Hike Decision
Three, two, one, liftoff! Alex Nikolsko-Rzhevskyy, Lehigh University It finally happened: the nine-year-long spell of near-zero interest rates came to a logical end. The Fed raised its funds rate target in the first step toward normalizing US monetary policy. Was...
Japan’s Central Bank Tweaks its Monetary Policy
The Bank of Japan was the fourth major central bank to meet this week. Sweden and Norway kept policy unchanged. The Fed hiked. There was no expectation that the BOJ would do anything. Governor Kuroda surprised the market with largely...
The Sky Did Not Fall
Asia extended the US dollar's post-Fed gains while Europe has seemed content to consolidate the move, perhaps waiting for US leadership. Asia extended the US dollar's post-Fed gains while Europe has seemed content to consolidate the move, perhaps waiting for...
A Dovish Interest Rate Hike?
For the first time in 9 years, the Federal Reserve has raised interest rates in a move that could make many loans more expensive for companies and Americans. Speaking today in Washington D.C., Federal Reserve Janet Yellen discussed the Federal...
The Greenspan Conundrum
There are many investors and observers who do not think the Fed ought to raise interest rates today. The Fed's targeted inflation measure, the core PCE deflator, stood at 1.3%, well below the 2% target. They see the fresh sell-off...
Fed Day: Not Tight, Just Less Easy
The much-awaited Fed meeting is here. A 25 bp increase in the Fed funds range to 25-50 bp is widely expected. The near certainty of this contrasts to the high uncertainty of the immediate impact stocks, bonds, and the dollar. ...
Consequences of Setting Such a Low Interest Rate Bar
With the US Federal Reserve seemingly set on raising interest rates, it is time to take stock of what low rates have done for the world. In addition, what the prospects are when this era of low interest rates ends....
The Fed Meets, but So Do Other Central Banks
The euro made marginal news highs near $1.1060 while sterling and the yen have been confined to yesterday's ranges. European equities are bouncing off ten-week lows. The dollar-bloc is firm; the upbeat RBA meetings provided only a short-lived fillip higher. ...
From the Mind of Mersch
Investors, fellow central bankers, and the media continue to try to make sense of last week's ECB surprise. We had argued that given the market positioning, especially the dramatic accumulation of speculative short euro positions since the middle of October...
Do Diverging Monetary Policies Matter?
The prospect that the central banks of the US and the Eurozone will soon make opposing moves on policy rates has allowed financial markets once again to demonstrate their neuroses. Some market participants are expecting exchange rate turmoil – but...