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central banks and supranationals

which-corp-bonds-ecb

Which corporate bonds will the ECB buy?

Bond markets have reacted strongly to the 10th March announcement by the European Central Bank (ECB) of its new corporate sector purchase programme (CSPP). Credit spreads of euro-denominated investment grade (IG) corporate bonds have tightened by around 20 bps on average. Still, a lot of the CSPP’s particulars are anybody’s guess at this point. The publication of the account of the last monetar…

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Knowing your nordics

Knowing your Nordics: An overview of central bank policy and the negative rate environment

There has been a barrage of G7 central bank coverage in March, culminating in much talk, but resulting in – on the whole – little new action. The Bank of Japan remained on hold (after adopting a surprise negative rate policy at the end of January), the Federal Open Market Committee (FOMC) delivered a “dovish hold” (keeping interest rates unchanged while lowering their longer term rate guidance)…

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Inflation expectations

Has the ECB reached the limits of monetary policy?

The simple answer is a no. Eric Lonergan in a guest blog has already (see here) debunked the idea that central banks are at the zero bound. And since then the market has become increasingly confident that the ECB will cut its deposit rate further into negative territory at tomorrow’s meeting. And it has reason to do so. Inflation and growth will be lower than the Bank had forecast a mere three …

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16.02.10-CC-blog-1

How long until China reaches the floor of the recommended reserve adequacy range?

Much has been discussed on the topic of the optimal level of foreign exchange reserves. One of the common methodologies is the IMF’s ARA (Assessing Reserve Adequacy) metric, which essentially provides a range based on a country’s trade, broad monetary aggregates and external liabilities. How much weight should be given to each factor varies according to the economic structure of each country, i…

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16.01.14-ME-blog

A look at the Swiss economy a year after the currency peg break

A year ago today the Swiss National Bank (SNB) unexpectedly discontinued its CHF peg against the euro, causing huge moves in the FX markets. On the anniversary of the peg removal I thought it would be interesting to see how the Swiss economy has developed over the past twelve months.

Swiss economy robust, but not immune during 2015

The Swiss economy actually proved to be quite resilient in 2015…

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Three reasons why the UK will not raise rates anytime soon

With the Fed recently raising its interest rates via a unanimous vote, I’ve been wondering whether the UK will shortly follow suit. The market seems to think not, pricing in the first UK rate rise in Q1 of 2017, compared to two further US rate hikes in 2016. At face value this huge divergence feels strange; both countries are targeting (and undershooting) a 2% inflation rate, both have similar …

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Japan trip report – a video from Tokyo. Inflation, Abenomics and cute robots

We did a research trip to Tokyo last month. The main discovery by my colleagues Anjulie Rusius and Anthony Doyle was that I am “annoyingly good at karaoke”. I have to put my hands up to that one. Sadly for you my singing didn’t make it into the official trip report video. Instead we discuss why, counter to popular myth, Japanese policymakers might not want either a) a much weaker yen or b) any …

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2015-09 blog RW

We are there – nothing to fear

The Bank of England’s Monetary Policy Committee (MPC) are due to meet on Thursday and most economists expect a dovish set of minutes to accompany the announcement of no change in the BoE base rate. Additionally, the minutes will likely emphasise the risks of a persistent undershoot in UK inflation given the continued fall in commodity prices and waning global demand. Despite these risks, the MP…

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BoE September Easing

Contrary to popular opinion, the Bank of England’s next move will be a monetary easing

On the 7th of September £38bn worth of UK gilts (4.75% 2015) will mature. The Bank of England (BoE) own just under half the issue, having purchased the bonds through its £375bn quantitative easing (QE) programme. At this point in time, the BoE have indicated that they are committed to keeping the size of the QE program at £375bn. As a result of the 2015 bonds maturing, the bank will therefore h…

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Robotisation rates are correlated with demographics

“We need to hike…so that we have room to cut if we need to”. Eh? And some robot stuff too.

I keep hearing the argument that the Fed needs to hike, so that if the US economy slows down again it will have room to cut rates once more.  In other words it needs to get away from the zero bound so that the traditional monetary policy tool of rate cutting comes back into play in the future.  In less cerebral moments I may have made this argument myself, but I’m struggling to remember why it …

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