Central Banks

With the hoped for Fed plan to hike interest rates two more times this year and a building swell of discussion on when to start allowing balance sheet shrinkage, I’m beginning to sense a pattern on what the preferred timing might just be with this all. Bill Dudley on Friday said “If we start to normalize the balance sheet, that’s a substitute for short term hikes…and …

[Read more...] about Balance Sheet Shrinkage, Boom and Bust

Sorry to continue to harp on this but Mark Carney and the BoE have a problem on their hands. I’ll call it the Arthur Burns/G. William Miller problem, the two Fed Chairman in the 1970’s who focused more on employment than the flaring inflation, //www.federalreservehistory.org/Media/Image/EventDetailMain/38-1. Rule #1, a steady currency and thus stable prices is …

[Read more...] about Mark Carney, Arthur Burns and G. William Miller

This story is not really saying anything about the timing of when the ECB will raise its deposit rate from -.40% but it does confirm the story last week that it is being discussed and the ECB will take a different tact than the Fed. This is because much of the corporate financing in Europe takes place via the banks as opposed to the much wider reach of the US capital …

[Read more...] about ECB’s Nowotny’s Hint

After hiking rates, the markets are excited (bonds, stocks, gold and everyone short the dollar) because the Fed didn’t change their dot plot and thus remain on pace with 3 hikes this year in total. Even though the dot plot is not relevant because so much can change, the Fed reminded us all of the gradual nature of their expected behavior on this rate hike cycle. …

[Read more...] about The FOMC speaks

The euro is rallying to the highs of the day at $1.065 on the Bloomberg story that: “ECB policy makers considered the question of whether interest rates could rise before their bond buying program comes to an end, according to people familiar with the matter.” This was followed though with: “The council didn’t discuss any specific scenario or timeline and hasn’t …

[Read more...] about ECB Interest Rate Discussion

Janet Yellen is basically on board with a March hike by saying “At our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the fed funds rate would likely be appropriate.” She is also is defending the turf of the FOMC by saying “I …

[Read more...] about Yellen on the March

I’ve continued to call out Mark Carney for the inflation problem he has on his hands and which he further facilitated with his panic easing after Brexit. For a 2nd straight month retail sales ex fuel were very disappointing. They fell .2% m/o/m in January vs the estimate of up .7%. Also, December sales were revised to a 2.2% m/o/m decline from -2% and vs the initial …

[Read more...] about The Times They Are a Changin’

Janet Yellen is NOT committing herself to a March rate hike but she’s doing what I thought she should do and that is put March on the table (try to get rate hike odds nearer to 50%) vs a market that essentially took it off (with odds at 30%). She talked about the continued progress made on the employment front and the inflation stats moving to their target …

[Read more...] about March Hike is on the Table

The FOMC statement was about as boring as can be thus giving us nothing much new. But it does reaffirm a still very dovish committee that seems to want to wait to see what fiscal policy changes DJT will bring us. They seem to have not taken any messages from the robust market responses to the election that have taken stocks, interest rates, inflation expectations and …

[Read more...] about Again, its like the election and markets’ response never happened.