Posts Tagged: central banks


The strengthening dollar and the sudden departure of Bill Gross from Pimco caught the market’s attention this week.

Next week, focus shifts back to the economy and monetary policy. Here’s a look at what the calendar holds.

Jobs report

All eyes are on the monthly non-farm payrolls report due next Friday. The US economy is expected to have added 210,000 jobs in September, while the unemployment rate is projected to remain unchanged at 6.1 per cent.

Other key economic reports set for release next week include personal income and spending, consumer confidence and the ISM manufacturing survey.


The European Central Bank’s latest monetary policy decision on Thursday will be closely scrutinised by markets, as will a press conference from president Mario Draghi immediately after. >> Read More


The U.S. can live with a stronger dollar but wants Japan and the European Union to do more to rev up their economies.

     That was one takeaway from the weekend gathering here of finance ministers and central bank chiefs from the Group of 20 nations.

     “There was hardly any talk about currency policy,” said a Japanese government source.

     The joint communique issued at the close of the two-day meeting only affirmed existing “exchange rate commitments.” In April of last year, by contrast, the group had explicitly pledged to “refrain from competitive devaluation” amid criticism from some members, including South Korea, that the Bank of Japan’s monetary easing was driving down the yen.

     With the Federal Reserve winding down quantitative easing, the dollar’s recent stand-alone rise amid major currencies is a homegrown phenomenon. There was little mention of that here. >> Read More


The European Central Bank will have to extend its bond-buying programme to include eurozone government bonds – most likely by the start of next year -Barclays analysts argue.

Speculation that the ECB will follow other major central banks in starting a full “quantitative easing” programme has been stewing for some time, but was brought to a boil by the disappointing demand for its latest round of cheap bank loans this week.

ECB president Mario Draghi has said he wants to boost the central bank’s balance sheet by €1tn up to its 2012 size, but to do so he will have to buy government bonds, Barclays argued in a report today. The reasons are as follows.

First, increasing the ECB’s balance sheet by up to €1tn to its 2012 size is unlikely to be achieved via TLTROs, ABS and covered bond purchases alone…

Second, we believe that the risk of too long a period of low inflation is higher than the ECB’s inflation projections imply, while the growth outlook has significantly deteriorated and remains subject mainly to downside risks, especially for France and Italy.

However, the bank’s analysts admit that their prediction for QE in the first quarter of 2015 is a “close call”, especially given intense German opposition.

The charts below illustrate Barclays’ reasoning. The first one shows how eurozone inflation is expected to remain well below the ECB’s target for an extended time. The second shows how the size of its balance sheet relative to the common currency area’s economy has dropped significantly since the crisis.

The third illustrates how it is hard to lift the ECB’s balance sheet by €1tn without buying government bonds, given the paucity of alternatives.

>> Read More

6 Major Sources Of Global Uncertainty

19 September 2014 - 10:15 am

This has been an unusual year for the global economy, characterized by a series of unanticipated economic, geopolitical, and market shifts – and the final quarter is likely to be no different. How these shifts ultimately play out will have a major impact on the effectiveness of government policies – and much more. So why have financial markets been behaving as if they were in a world of their own?

Apparently unfazed by disappointing growth in both advanced and emerging economies, or by surging geopolitical tensions in Eastern Europe and the Middle East, equity markets have set record after record this year. This impressive rally has ignored a host of historical relationships, including the long-established correlation between the performance of stocks and government bonds. In fact, correlations among a number of different financial-asset classes have behaved in an atypical and, at times, unstable manner.

Meanwhile, on the policy front, advanced-country monetary-policy cohesion is giving way to a multi-track system, with the European Central Bank stepping harder on the stimulus accelerator, while the US Federal Reserve eases off. These factors are sending the global economy into the final quarter of the year encumbered by profound uncertainty in several areas. >> Read More


Mario Draghi’s latest attempt to stave off economic stagnation in the eurozone had a faltering start on Thursday when demand for the European Central Bank’s first offer of cheap four-year loans fell far short of expectations.

The low take-up of the loans piles pressure on the ECB to consider more radical measures such as quantitative easing, though the idea continues to face resistance in Germany, Europe’s largest economy.

Europe’s banks borrowed €82.6bn through the first of the ECB’s Targeted Longer-Term Refinancing Operations, or TLTROs, out of a possible €400bn, much less than analysts had forecast.

That dealt a blow to Mr Draghi’s ambitions to expand the ECB’s balance sheet by up to €1tn, in order to boost lending to smaller businesses in the region and counter low inflation.

Inflation, at 0.4 per cent, remains well below the ECB’s target of just under 2 per cent. Meanwhile, investors continue to doubt policy makers’ ability to keep prices on track, with an important measure of longer-term inflation expectations falling on Thursday. >> Read More

It’s TLTRO time !

18 September 2014 - 14:22 pm

Just cos we got nothing else going on today the ECB decided to launch its first instalment of the TLTRO’s ( Targeted Long-Term Refinancing Operations) announced at the June meeting amongst a package of measures that the Draghster says will boost its balance sheet to as much as EUR 3 trillion from EUR 2 trillion

Due at 09.15 GMT  Draghi said the policy will

support bank lending to households and non-financial corporations.

  •  Banks that increase their lending will be rewarded with cheap long-term funding.

In othe words the ECB will provide cheap financing to banks who agree to pass on cheap borrowing to the non-corporate financial sector and households (but not mortgage lending).

Today’s take-up is expected to be low though with many analysts looking at EUR 100-150 bln so its effectiveness will be questionable

Full timetable is >> Read More


It has been a while since the PBOC engaged in some “targeted” QE. So clearly following the biggest drop in the Shanghai Composite in 6 months after some abysmal Chinese economic and flow data in the past several days, it’s time for some more. From Bloomberg:


The topic of China’s inevitable financial crisis, and the open question of how it will subsequently bail out its banks is quite pertinent in a world in which Moral Hazard is the only play left. Conveniently, in his latest letter to clients, 13D’s Kiril Sokoloff has this to say: >> Read More


An ally of Chancellor Angela Merkel criticised the European Central Bank and its president Mario Draghi in a rare public attack, telling Bild newspaper the ECB’s new schemes to bolster lending and buy asset-backed securities would scare Germans.

“It’s only going to frighten a lot of people when ECB chief Mario Draghi opens up the central bank’s money tap and at the same time buys junk paper,” Christian Social Union chairman and Bavaria state premier Horst Seehofer said in an interview with Germany’s top-selling newspaper, to be published on Monday.

Political leaders in Germany almost never publicly question or criticise the independent Bundesbank, Germany’s central bank, or the European Central Bank, although government officials have expressed doubts about the ECB’s moves privately.

The ECB cut interest rates to near zero on Thursday and pledged to buy asset-backed securities in addition to its plan to offer new four-year loans to stabilise inflation expectations and pump money into the flagging euro zone economy. >> Read More


The International Monetary Fund has joined in the applause for the European Central Bank.

In a highly unusual move, Christine Lagarde, the IMF’s managing director, said that she “strongly welcomes” the fresh stimulus measures undertaken by the European Central Bank.

Earlier on Thursday, the ECB surprised investors by cutting interest rates and announcing it will begin buying bonds backed by corporate loans next month.

The danger of deflation, or a sustained fall in prices, in the eurozone was something that the IMF first warned about in January.

In late morning trading in New York, the euro was down almost two cents against the dollar at $1.2965, while yields on the debt of some of the eurozone’s hardest hit economies, including Spain and Italy and would involve buying government debt, were down as much as ten basis points. >> Read More

ECB Press Conference – Live Feed

04 September 2014 - 18:10 pm

European Central Bank president Mario Draghi has confirmed the central bank will start buying a broad portfolio of repackaged bundles of loans known as asset backed securities, in its latest move to try and counter the threat of economic stagnation across the eurozone.

The announcement of the ABS programme at Thursday’s press conference had been widely expected after Mr Draghi openly acknowledged in late August that markets had started to doubt the ECB’s ability to return inflation back to its 2 per cent target.

Mr Draghi said the bank would buy “simple and transparent” ABS backed by loans to the private sector, as well as announcing a covered bond buying programme.

The two programmes will be launched in October, with details released after the ECB’s meeting next month.

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Technically Yours,
Team ASR,
Baroda, India.