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Monetary policy spin

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  • US Fed Chair Yellen is scheduled to testify to Congress on Tuesday and Wednesday. With the end of quantitative policy effectively confirmed for October, the interest will be on how long the interval will be before the Fed raises rates.
  • The Bundesbank's Weidmann  was sounding more than normally Weidmann-like over the weekend. Monetary policy is wrong for Germany (too loose), it should be tightened as soon as possible, and (horror) may be being used for fiscal purposes.
  • Weidmann's comments are significant because there is a risk that German sentiment sours further towards the ECB. The move to negative rates at a time when German inflation perceptions are likely to rise is not helpful.
  • ECB president Draghi speaks in the wake of bond spread widening from non- core European markets (the exception being France). Portugal's Prime Minister has been trying to downplay the risks to the "tranquillity" of the financial system.

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