Category Archives:

monetary policy

Here are some of the scariest charts in finance to celebrate Halloween

Investment markets have been remarkably resilient over the course of 2017. Sure, the geopolitical environment has thrown up a few frightening days which saw markets sell-off but on the whole volatility has been muted and most asset classes have generated solid total returns. That said, any horror movie fan will tell you that the scariest part of a horror film happens when things are relatively …

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European Central Banks: it’s not just the ECB meeting on Thursday

While the market gears up for the much anticipated European Central Bank meeting on Thursday, there are two other European central banks due to meet earlier in the day; Sweden and Norway.

I was in Washington a couple of weeks ago for the World Bank and IMF conferences, which was a great opportunity to hear from policy makers and economists. It served as a timely reminder that the European centr…

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Is it time for the Bank of England to target nominal GDP?

In December 2012, the then Governor of the Bank of Canada, Mark Carney, gave a speech entitled “Guidance” to the CFA Society of Toronto. Less than two weeks earlier, the UK Chancellor of the Exchequer, George Osborne, had announced that Carney would be the 120th Governor of the Bank of England (BoE). As this was Carney’s first public engagement since the announcement, traders and market economi…

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UK CPI continues to overshoot the target

CPI now 2.9% up from 2.6% last month, above expectations and overshooting the Bank of England forecast

UK CPI is now within a hair’s breadth of requiring a letter to the Chancellor. RPI increased to 3.9% from 3.6%, which was also above expectations. The increased fuel prices were expected this month, but August is also a high inflation month given transport price hikes that take place as people head away for their holidays, and as clothing and footwear prices are hiked with the new season’s coll…

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Financial conditions suggest the case for more hawkish Fed than inflation dynamics would suggest

Guest contributor – Jean-Paul Jaegers, CFA, CQF (Senior Investment Strategist, Prudential Portfolio Management Group)

A lot has been written on the recent softness in US inflation data, as headline inflation pulled back, with a similar trend in core inflation. Admittedly, a number of unusual factors have partly been a driver behind this, although more importantly there is quite some persistence…

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Is it time for the Bank of England to sell corporate bonds back to the market?

On August 4th last year, the Bank of England announced a series of easing measures in response to the Brexit referendum results. They were very concerned regarding a potential slowdown and collapse in both the economy and corporate confidence and so implemented a variety of measures; reducing interest rates, increasing liquidity lines for banks, and reintroducing their gilt and corporate bond p…

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Five years on from “whatever it takes”

Today marks five years on from Mario Draghi’s now famous ‘whatever it takes’ remarks, widely credited with sparking a reversal in the Eurozone’s fortunes.

Below are five charts offering some insights into the European Central Bank’s successes and failures in the ensuing period, as well as some of the challenges that remain.

  1. Funding costs in the periphery

Five years ago, funding costs for the …

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The Israeli Shekel: Flying under the radar

Though the recent US Treasury report did not name any country as a currency manipulator (see more details on this in Mario’s blog), the monitoring list centres on larger economies that meet the following criteria:

  1. The country has a significant bilateral trade surplus with the United States defined as more than USD 20 billion.
  2. The country has a current account surplus of at least 3% of GDP and …

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Canada’s increasingly divergent rate path

Yields on Canadian sovereign bonds have been dragged higher in recent months, with the yield on the 10-year bond recently reaching 2 year highs. This sell-off appears to reflect the US reflation narrative, rather than the economic fundamentals of the Canadian economy.

The market currently thinks the Bank of Canada will remain on hold throughout 2017, pricing in only one rate hike – a 20 basis …

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Mortgages and monetary policy in the US and UK

The cost of new mortgage borrowing and payments on outstanding household debt can have a large impact on the rate of growth of an economy. For this reason, central bankers are interested in the transmission mechanism of monetary policy. It has been shown that interest rates can have a stronger influence on an economy where there are a high proportion of variable rather than fixed-rate mortgages…

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