Anglo-Saxon central banks

Posted by: Paul Donovan

30 Jan 2020
  • The US Federal Reserve basically did nothing on policy. There was a technical change for the interest rate on reserves which is of no real interest to financial markets. Former New York Fed President Dudley explained why putting liquidity into the repo market does not flow into equities (what happens in bank reserves, stays in bank reserves).
  • The Bank of England is next. The bank will consider a wide range of policy data points, not one-off items. It may also consider that there will soon be a budget, with more fiscal stimulus. This is Governor Carney's last meeting. That is not especially relevant. The bank's monetary policy committee takes delight in outvoting governors.
  • US fourth-quarter GDP is due. This is the first of many guesses at growth in the US economy, and it is the least well informed guess of the lot. Markets will still treat it as if it were meaningful information. The economy should be a bit below trend – the consumer helps, investment does not.
  • German December consumer price inflation should creep towards 2%. Countries like the Netherlands already have inflation heading towards 3%. With the ECB reviewing policy, there are almost no expectations of a shift in the near term.

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