Hopes for a weaker euro looking more like fantasy

December 9, 2013

Hopes that the soaring euro will eventually fall and help the economy with a much-needed export boost for struggling euro zone nations are looking more and more like fantasy.

Auto-pilot QE and the Federal Reserve’s taper dilemma

November 26, 2013

 It wasn’t supposed to be this way.

When the U.S. Federal Reserve launched its third round of quantitative easing, or QE3, it was hailed as an “open-ended” policy that would last as long as needed. Most important for investors, the pace of the bond buying – which started at a somewhat arbitrary $85 billion per month – would be “data dependent.” Especially throughout the spring, officials stressed they were serious about adjusting the dial on QE3 depending on changes in the labor market and broader economy. But as the unemployment rate dropped to 7.3 percent last month from 8.1 percent when the program was launched in September, 2012, the bond-buying has effectively been on auto-pilot for 14 straight months.

Another backhand volley from forward guidance

November 8, 2013

Forward guidance is quickly proving to be rather backward.

While it’s a favourite game of every punter who’s not paid to make predictions to trash the track record of those who are, just about everyone who follows the European Central Bank was stunned by the timing of its decision to cut rates on Thursday.

ECB rate cut takes markets by surprise – time to crack Draghi’s code

By Eva Taylor
November 7, 2013


After today’s surprise ECB move it is safe to forget the code words former ECB President Jean-Claude Trichet never grew tired of using – monitoring closely, monitoring very closely, strong vigilance, rate hike. (No real code language ever emerged for rate cuts, probably because there were only a few and that was towards the end of Trichet’s term.)

Romer, taking aim at Fed, advocates ‘regime change’ and a shift to nominal GDP

October 28, 2013

By Alister Bull

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Christina Romer, former chair of the White House Council of Economic Advisers and a strong advocate for Janet Yellen to take over from Ben Bernanke as the next chair of the Federal Reserve, slammed the Fed in a lecture last week that accused the U.S. central bank of being too meek and of fighting the wrong battle by being fixated on asset bubbles.

How to play down a housing boom like it’s 1999

October 16, 2013

Here’s some of the top reasons from a 1999 Reuters poll on why a housing bubble wouldn’t form, which are re-appearing 14 years later.

Time for Fed to rethink its forward guidance?

October 8, 2013

Federal Reserve officials have largely acknowledged by now that leading markets to believe the central bank would reduce its bond buying stimulus in September and then failing to do so was a communications blunder.

Fed doves strike back

October 4, 2013


Now that Washington’s circus-like government shutdown has put a damper on hopes for stronger U.S. economic growth going into next year, dovish Federal Reserve officials again appear to have the upper hand in the way of policy commentary.

A market-dependent Fed?

September 18, 2013

It’s hard to shake the feeling that the Federal Reserve is about to begin pulling back on stimulus not just on the back of better economic data, but also because financial markets have already priced it in. The band-aid ripping debate over an eventual tapering of bond purchases that started in May was so painful, Fed officials simply don’t want to go through it again.

Note to markets: it’s been September all along for the Fed taper

September 17, 2013

Now that the outcome of one of the most anticipated Federal Reserve monetary policy meetings in history is just hours away, most investors and traders have settled on the view that the central bank will announce a plan to trim the pace of its $85 billion in monthly purchases of government and mortgage-backed securities on Wednesday. We just don’t know which, if any, of the two asset classes it will focus on, and by how much it will taper what it buys each month.