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The fashion for negative rates

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  • The Fed statement was not exactly a stunning example of clear prose, but Fed Chair Yellen rather bluntly told the world that interest rate hikes are coming after the first quarter of next year. Market expectations for the Fed are too late and too conservative. Markets need to listen to economists more.
  • Russia's government continued to seek to support the rouble in the foreign exchange markets. The question is whether the hearts and minds of domestic investors can be won by the authorities - a challenge given the legacy of hyperinflation within a generation.
  • The Swiss National Bank announced negative interest rates on sight deposits and pledged unlimited intervention to keep the Swiss franc under control if necessary. There are some echoes of an earlier Swiss negative rate episode in 1979, similar prompted by oil turbulence and capital flight.
  • UK retail sales should show a strong consumer in November. Markets expect the German ifo index to improve somewhat. The UK Philly Fed survey of regional business sentiment is forecast to gain to 30.0. Away from the market noise, the economic data is doing OK.

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