One central banker says something interesting

Posted by: Paul Donovan

12 Feb 2020
  • Fed Chair Powell (a lawyer, not an economist) testified yesterday. There was little of market relevance. The questions on climate change were interesting, as a sign of policymakers' focus. Powell suggested that the Fed does not currently see the coronavirus as a serious threat to the US economy.
  • ECB President Lagarde (a lawyer, not an economist) testified yesterday. There was little of market relevance. There was some defensive commentary around the ECB's policy of taxing savers and some financial institutions via negative interest rates. Lagarde did acknowledge that the damage of negative rates could increase over time, which is a statement of the obvious.
  • Sweden's Riksbank, which already ended the distortion of negative rates, decides policy today. Markets expect no change. The Reserve Bank of New Zealand governor did do something to interest markets, signalling no need to cut rates further this year.
  • The data calendar is very quiet (Eurozone industrial production for December is too late to be exciting). The US Democratic Party primary in New Hampshire saw two candidates withdraw from the race (there are still plenty left to choose from). Sanders and Buttigieg lead the poll. Markets are unlikely to focus until the 3 March "Super Tuesday" results.

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