With the Fed contemplating whether to hike again next month and start “normalizing ” its balance sheet before the end of 2017, the two other major central banks are facing far bigger problems.
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Two months after the BOJ quietly started tapering its QE program, when it also hinted it may purchase 18% less bonds than planned…
… Governor Haruhiko Kuroda admitted last week that the Bank of Japan’s bond holdings are currently growing at an annualized pace of only ¥60 trillion ($527 billion), 25% below the bottom-end of its policy range, and confirming that without making any formal announcement, the BOJ has quietly followed the ECB in aggressively tapering its bond buying program.
In the latest confirmation that the Brexit “doom and gloom” scenarios proposed by experts are unlikely to materialize, moments ago in the latest monthly report from the German Bundesbank, even if they did provide a great excuse for the BOE to resume QE and to buy corporate bonds at the same time, the central bank said that the German economy should expand during summer in line with strong underlying economic trend, while saying that the consequences from Brexit will be limited, at least in the short term.
Some of the highlights via BBG:
Despite weak orders in 2Q, sentiment in German industry has noticeably improved
Brexit impact on expectations by German companies has been mild so far; supports view that economic consequences in Germany will be limited, at least in short term
Positive company expectations for export activities support solid export growth in 3Q; manufacturing will contribute more strongly to economic growth
Bundesbank sees higher investment in equipment and machinery due to above-average capacity utilization
Construction investment also to pick up in 3Q
Private consumption could drive domestic growth on favorable outlook for wages and jobs, and on oil prices
The full report can be read here and is reproduced below.
The former head of the Bundesbank has cast doubt on the future viability of the euro if countries do not follow Germany in imposing structural reforms to boost their longer-term growth rates.
Calling the probable introduction of quantitative easing by the European Central Bank on Thursday as “only part of the fix”, Axel Weber, now the chairman of UBS, said that there were legitimate questions hanging over the viability of the single currency
If countries do not reform, he said, “I think there will always be questions about viability of the project and Europe has not done enough to dispel these concerns”.
Mr Weber was speaking at the World Economic Forum in Davos and gave a traditionally German account of the problems in the eurozone and put the responsibilities on failure of governments to reform rather than inadequate action from the central bank.
He said he expected a “sizeable programme” of QE, adding, “but the real issue is the ECB has continuously bought time for European policymakers to fix the issue”.
Saying the policies of structural reform, particularly in the periphery of the eurozone – Italy, Greece, Spain, Ireland and Portugal – were inadequate, Mr Weber, who was the president of the Bundesbank until 2011, said, “now Europe’s not back, the problems are back”.
Germany shipped more of its overseas gold reserves back to Fft last year according to the Bundesbank’s latest report published a short while ago
The Bundesbank successfully continued and further stepped up its transfers of gold last year. In 2014, 120 tonnes of gold were transferred to Frankfurt am Main from storage locations abroad: 35 tonnes from Paris and 85 tonnes from New York. “Implementation of our new gold storage plan is proceeding smoothly. Operations are running very much according to schedule,” said Carl-Ludwig Thiele, Member of the Executive Board of the Deutsche Bundesbank.
The Bundesbank took advantage of the transfer from New York to have roughly 50 tonnes of gold melted down and recast according to the London Good Delivery standard, today’s internationally recognised standard. “We also called on the expertise of the Bank for International Settlements for the spot checks that had to be carried out. As expected, there were no irregularities,” said Mr Thiele.
According to its new gold storage plan, unveiled in January 2013, the Bundesbank will be storing half of Germany’s gold reserves in its own vaults from 2020 onwards. This necessitates a phased transfer to Frankfurt am Main of 300 tonnes of gold from New York and all 374 tonnes of gold from Paris.
Since the transfers began in 2013, the Bank has relocated a total of 157 tonnes of gold to Frankfurt am Main – 67 tonnes from Paris and 90 tonnes from New York. This is equivalent to roughly 23% of the total quantity to be transferred. The following table gives an overview of the gold that has been transferred to date
Germany’s Bundesbank raised its forecast for growth of the euro zone’s largest economy this year and next on Friday, highlighting the increasing divergence between the currency block’s member countries.
The bank said it expects Germany to grow 0.5 percent this year and 1.7 percent next year compared with June-forecasts of 0.3 percent and 1.5 percent respectively.
The bi-annual projections also forecast growth of 2.0 percent in 2015.
Germany has been a major driver of the euro zone recovery, which has lost some of its momentum recently with major economies like France and Italy loosing steam.
The Bundesbank said the improvement was driven mainly by demand at home rather then from abroad, benefiting from low-interest rates and growing incomes.
“The German economy is in good shape: the unemployment rate is low, employment is rising, and wage growth is returning to normal,” Bundesbank President Jens Weidmann said.
Germany’s top court may have approved the creation of the euro-zone’s anti-crisis firewall Wednesday but the threat that Germany may yet tear it down hasn’t gone away for good.
The Karlsruhe-based constitutional court Wednesday reserved judgment on the European Central Bank’s plan to buy unlimited amounts of government bonds, which the ECB intends to use to buttress future rescue acts by the European Stability Mechanism.
The court is widely expected to confirm the main parts of its judgment on the ESM in a final ruling in December but may rule that the ECB’s latest plans go against the constitution and E.U. law.
Critics, led by Jens Weidmann, the head of Germany’s central bank, argue that the ECB is acting beyond its mandate to keep prices stable by effectively printing money to finance government deficits. By contrast, ECB President Mario Draghi argued last week that the plan is “strictly within our mandate,” aimed solely at ensuring a level of interest rates that is appropriate for a region sliding into recession.
If Germany’s top court were to side with the critics in its final ruling, then the case may end up at the European Court of Justice, the ultimate arbiter of disputes over the division of competences between the E.U. and its member states. That could again unsettle markets and deal a fresh blow to Chancellor Angela Merkel’s center-right government, only months before it has to face a general election.
Technically, the Constitutional Court in Karlsruhe has no competence to rule on the ECB’s policy. But the ECB depends on the national central banks of the euro zone to actually carry out its policy and the Deutsche Bundesbank is bound by the German constitution. Read More