(blog originally posted on www.bruegel.org)
Euro area consumer price inflation, as measured by the HICP, continues to undershoot the ECB’s target of “close to, but below 2%”, currently at -0.1% in March. While it is still too early to tell if the ECB QE programme launched on March 9 will manage to bring back inflation towards the target in the medium term, a look at market- and survey-based inf… Read the article
Richard Koo popped by our office a few weeks ago to discuss his most recent book The Escape from Balance Sheet recession and the QE Trap. You can see the interview here. We asked who was the Japanese prime minister in 1997 who oversaw arguably Japan’s biggest policy error post the collapse of Japan’s debt fuelled bubble, and the answer was Ryutaro Hashimoto.
It is perhaps a little harsh to im… Read the article
For years the Western world mocked Japan’s attempts to recover from its spectacular debt-fuelled boom and bust, blaming the Bank of Japan for doing far too little and far too late, and lamenting Japanese fiscal stimulus as extreme recklessness, where the only achievement has been to propel Japan’s debt levels into the stratosphere.
Now, seven years after much of the developed world’s own debt … Read the article
As we started 2014 the US Treasury market was expecting 10 year yields to be at 4.13% in a decade’s time. This 10 year 10 year forward yield, derived from the yield curve, is a good measure of where the bond market believes yields get to if you “look through the cycle”, and disregard short term economic trends and noise. I wrote about it here and suggested that we were approaching the top of th… Read the article
This time last year many thought that duration management was going to be the key to success in 2014. Yields were expected to rise as the Fed weaned the market off QE and began to normalise rates. As a result, only the very brave would have been positioned long duration heading into 2014. To be positioned as such would presumably have taken some explaining, particularly when set against what se… Read the article
It has been a while since we talked about QE, but we covered this substantially in the past (see for example ‘Sub Zero?’, ‘QE – quite extraordinary‘ and ‘Quantitative easing – walking on custard‘). It now appears, at least for the time being, to be a part of monetary history in the UK, and more recently the US. However, it is being reapplied in Japan and about to do a grand tour of Europe. Our… Read the article
With the European Central Bank (ECB) purchasing €1.7bn of covered bonds last week, the Eurozone’s “QE-lite” programme has well and truly begun. Although the focus to date has been on covered and asset backed bonds, an article from Reuters last week spurred the market, due to a rumour that the ECB would soon be considering an extension to include secondary market corporate bond purchases. Althou… Read the article
The ECB is finally joining the Quantitative Easing (QE) party. Un-sterilised asset purchases have been a major policy tool in most of the developed world over the past few years but next month (as the Fed ends theirs, incidentally) the ECB will make its first foray into QE proper by embarking on an asset backed security (ABS) purchase programme.
Through this programme, focused on “simple, trans… Read the article
Richard recently wrote about the exceptional times in bond markets. Despite bond yields at multi-century lows and central banks across the developed world undertaking massive balance sheet expansions the global recovery remains uneven.
Whilst the macro data in the US and UK continues to point to a decent if unspectacular recovery, the same cannot be said for the Eurozone. Indeed finding data to… Read the article
Many of us have become accustomed to a world of ultra-low interest rates and quantitative easing (QE). Taking into account inflation, real short-term interest rates are negative in most of the developed world. Of course, these historically low interest rates were a central bank response –co-ordinated on some occasions – to the Great Financial Crisis of 2008. Whilst we are still waiting for the … Read the article