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Deflation defeated (it's like it was never a threat)

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  • There were some dovish ECB comments over the weekend, with Coeure saying that Euro rates would stay very low for ages and ages, and he did not care what other central banks did with their rates.
  • Noyer declared rates would stay low in spite of the apparent defeat of the deflation threat. It is a modern day economic miracle - deflation was potent enough to cause negative rates, and now it has gone. It is almost as if the threat never existed at all.
  • This week sees the release of the minutes of the last US Federal Reserve meeting (Wednesday); an important event as three new members joined the last meeting, and there is the potential for more divergence of views as the end of quantitative policy approaches.
  • Australian construction sentiment improved for the first time this year, supporting (marginally) the idea of the RBA on hold. Industrial production data are due from Germany and Spain - but as a relatively strong and a recovering economy respectively, these are probably not concerns for investors

Listen to the audio version of this briefing.