Is now the right time to tax banks further?
- Hitherto the movements of equity markets have been met with suitable distain by economist – they are not reflecting economic realities. However if banks find themselves targeted then there is a risk that the credit cycle may be impacted.
- One interesting question is what this may mean for the policy debate. Negative rates are a de facto tax on the banking system. Mr Draghi's desire to ease Euro area policy further may have to be shaped by the implications of this taxation in more volatile times.
- Economic reality continues to defy the financial markets for now. UK retail sales from the BRC showed very strong growth, focused on big ticket items. German industrial production numbers lie ahead.
- The US NFIB small business sentiment survey is due. While the survey can be criticised, the details do give a relative sense of where things are going. The 'availability of credit' signals may be worthy of attention.