Follow Paul Donovan

Divergent growth, divergent policy

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Japan's economy experienced its second consecutive quarter of negative economic growth, leading to the use of the word "recession" in the media. The divergent growth experience of the world's major economies explains why quantitative policy is divergent, and why monetary policy will diverge.
  • China received IMF support for including its currency in the SDR basket. This does not make it a reserve currency. The UBS Reserve Management Seminar survey indicated 70% of central banks already own or intend to own RMB, and the remaining 30% are under no obligation to hold RMB.
  • Euro area inflation figures are due, and expected to show an unchanged yoy headline rate. Disinflation (i.e. falling inflation rates but not necessarily falling price levels) is coming to a conclusion with the end of the oil price base effects. With oil a neutral impact, core inflation may be looked to as the more important number.
  • The Bundesbank publishes its monthly report today, which may attract some attention. Draghi of the ECB speaks again. The US offers up the Empire State survey of manufacturing sentiment.