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Central bank comment, in the year of tightening

| Posted by: Paul Donovan | Tags: Paul Donovan

  • This is the year of simultaneous central bank policy tightening. Already, quantitative policy is being tightened (in the sense that liquidity demand is growing faster than liquidity supply). The US Federal Reserve and the Bank of England are both expected to raise rates further this year.
  • Today is a day of central bank speeches. ECB President Draghi is leading the list, but Draghi's views may not be aligned with everyone else at the ECB. Dovishness from Draghi may need to be discounted somewhat. Bank of England and Fed speakers are also on the schedule.
  • China's President Xi has cleared the way to continue in office indefinitely, having term limits on the presidency removed. Investors had probably assumed that Xi would continue to wield power, so this is not immediately significant. In the longer term, innovation in any economy requires the ability to challenge the status quo.
  • German Chancellor Merkel is also untroubled by term limits. The CDU party congress votes today on the grand coalition deal. The CDU is not expected to present an obstacle – there is more uncertainty about the outcome of the SPD vote, announced on 4 March.