Published on July 31, 2017 by William De Vijlder.
Policy normalisation makes communication particularly important, even more so when monetary policy has been very easy for a very long time and when different tools have been used to that end (policy rate at the zero lower bound or lower, quantitative easing, forward guidance).
Published on July 26, 2017 by William De Vijlder.
The importance of structural policy is unquestionable. This was clearly explained by Mario Draghi at the ECB Conference in Sintra. However, their impact not only depends on the timing but also on the types of measures, the credibility and the interaction with other policy measures.
Published on July 25, 2017 by William De Vijlder.
Mario Draghi’s speech on 26 July 2012 was instrumental in calming down markets. The dominating concern today is how to bring monetary policy normalisation without creating market disruption.
Published on July 3, 2017 by William De Vijlder.
Monetary policy normalisation is a balancing act: tighten too early could trigger a recession, hike too late could mean an inflation overshoot and a need to raise rates more aggressively. The reaction of financial markets adds to the complexity of the balancing act. Different factors have made the job of central banks more difficult in recent years.
Published on June 27, 2017 by William De Vijlder.
Replace ‘blue sky’ with ‘robust growth’ and ‘umbrellas’ with ‘economic policy instruments’ and you have a description of the global economic environment: robust growth but, if a downturn would come, very little manoeuvring room for fiscal and monetary policies to stimulate growth. All the more reason to keep a watchful eye on the horizon, and to prepare for clouds to appear.
Published on April 10, 2017 by William De Vijlder.
“After a long straight, the driver downshifts and brakes slightly before going into a curve. When the curve proves to be tighter than expected, and with the car still cruising at high speeds, the driver hits the brakes harder. The wheels lock and the car skids out of control.” This metaphor seems to fit the challenges currently facing the US Federal Reserve
Published on February 3, 2017 by William De Vijlder.
Fiscal stimulus to an American economy at full employment is likely to trigger a tightening of financial and monetary conditions which in turn could affect growth prospects and investors’ appetite for risk. The route therefore looks well defined. It reflects a monetary policy which will gradually become more restrictive and will end up holding down growth.
Published on December 1, 2016 by William De Vijlder.
A festive spirit has swept Wall Street as investors anticipate tax cuts for both households and companies, and to a lesser extent, greater spending, notably on infrastructure. In contrast, the bond market has slumped.
Published on September 27, 2016 by William De Vijlder.
Central bank credibility is a necessary condition for monetary policy to be successful in achieving its objectives. It refers to the authority (independence) of the central bank to act when circumstances require and to its willingness and ability to take the appropriate measures.
Published on March 4, 2016 by William De Vijlder.
In the Eurozone, China and the UK, purchasing manager indexes for the manufacturing sector declined in February. In the United States, in contrast, the manufacturing ISM rose but still held below 50, the level separating industrial expansion from contraction.
