British economic growth slowed to 0.4 percent at the start of the year, a preliminary release showed as expected on Wednesday, but the real picture may well be better.
U.S. first quarter economic growth, if there is any, is set to be disappointing once again, with private forecasters providing the most pessimistic first-take view for the start to the year since the recovery from financial crisis began.
Gordon Brown has added one more to the already lengthy list of Brexit scenarios: an independent Scotland that could be forced to join the euro zone.
The “Panama Papers” revelations continue to seep into domestic politics in various countries. Seeking to take back the initiative after being on the defensive over his late father’s financial activities, British PM David Cameron will today announce legislation making companies criminally liable if employees aid tax evasion. Some commentators suspect pro-Brexit backers and media are playing the whole business up to damage Cameron and his standing as the main face of the “remain” camp. Elsewhere, after the departure of the Icelandic prime minister, Maltese premier Joseph Muscat is feeling the heat after the leaked papers showed two of his political allies had offshore accounts. Several thousand people took to the streets in Malta’s capital on Sunday to demand his resignation. Muscat says he is looking into the allegations before he takes any further steps.
It’s no secret that Wolfgang Schaeuble has a dim view of how the ECB has conducted monetary policy. For years he has been sending out warnings about Mario Draghi’s cocktail of low interest rates, bond purchases and generous liquidity for banks. Euro zone inflation may be in negative territory, but for Schaeuble, the ECB’s extraordinary measures are unjustified. He has said repeatedly that they risk creating new financial bubbles. Still, until the past few days, Schaeuble’s criticisms were mostly polite and indirect. Now, suddenly, the gloves appear to be off.
All the talk and the drama on trading floors may be how much the Federal Reserve has bowed to the will of financial markets in its surprisingly more cautious tone on interest rates.
It had all been going to plan until 2:56 pm Frankfurt time. The euro had dipped as ECB President Mario Draghi announced new rate cuts to record lows, promised more bond-buying stimulus and offered to pay banks to borrow cash for lending into the real economy. The big bazooka was firing once again and this time it was hitting the target. Then, in a comment which he perhaps thought would show his confidence that everything was under control, Draghi said he doubted any more rate cuts would be needed. Although many in the market might have come to a similar conclusion themselves, the effect was devastating, sending the euro higher and so effectively wiping out much of the stimulus effect he had achieved only minutes earlier. The response of the market is not wholly logical and is probably best understood in terms of a cheap Hollywood romance: “I knew it had to end sometime, Mario — but I can’t bear to hear you say it.” Whatever. Draghi’s reputation as a verbal enchanter is compromised for a second time, the full impact of this last batch of stimulus has been squandered and the secret is out that central bankers are running out of ammunition. Over to the Fed, Bank of Japan and Bank of England next week.