Bank of Japan runs out of road

21 September, 2016

The Bank of Japan delivered a whole heap of nothing at its policy meeting today, although some adjustments were made to its policy framework. If you take the time to read through these measures, then the impression is of a central bank that has largely lost the monetary plot and is undertaking an ever more complicated and convoluted approach to monetary policy. The new regime is called “Quantitative and qualitative easing (QQE) with yield curve control” but there is also “QQE with a negative interest rate”. It’s like watching a film where the plot gets ever more complicated until you don’t have a clue what is going on or who is involved with what. It would be far easier if the BoJ held its hands up and admitted that monetary policy measures had reached the end of the road, but somehow the government may not like that. USDJPY popped higher as a result of the lack of robust policy action, whilst stocks were also higher. This reaction could struggle to be sustained, as in the aftermath the market could well conclude that these measures amount to nothing.

As if this wasn’t enough excitement for one day, the long-awaited Fed decision arrives later. As we know, the market is pricing in a limited chance of a hike in rates, only around 20%. This does not preclude a change in rates, but generally the Fed likes to lead markets by the hand and such an unexpected change in rates would not be taken well by market and stock especially. On the unchanged scenario, it’s all about the tone of the statement. If largely unchanged, emphasising the data dependency of the next move, then the dollar is likely to soften modestly. If the Fed decides on a more hawkish stance (less likely in my view), then the dollar will rally, especially against the lower yielding currencies (such as the Swiss franc and euro).


Source link  
Oil Gains and GBP Stumbles

On Tuesday, the American Petroleum Institute said crude stocks in the United States fell by 7.4 million barrels last week. That is almost twice...

Geo-Politics will be the focus of the week

This week will be dominated by Geo-Politics as the US Tax Bill needs to be reconciled between the Senate and House, whilst UK Prime Minister...

Positive Economic Data for Euro and UK

Data released on Thursday from Markit Economics showed eurozone’s thriving economy powered ahead in November, with new manufacturing orders...


UK Growth Forecast Lowered

UK Chancellor Phillip Hammond delivered an Autumn Budget that appeared to be somewhat neutral in its content. More sobering was the updated forecast...

Eurozone economy is robust but...

Speaking at the Frankfurt European Banking Congress, ECB President Mario Draghi, commented that although the eurozone economy was robust...

Trump: Jobs, jobs, jobs!

Data released on Friday showed US job growth accelerated in October after hurricane-related disruptions in the prior month, but a sharp retreat in average earnings and an increase...


UK Interest Rates in Focus

The Bank of England is widely expected to raise UK interest rates for the first time in 10 years today. An expected 0.25% rise, to 0.5%, will push...

Strong US Q3 GDP Boosts USD

The US Commerce Department released Q3 GDP data on Friday, showing the US economy expanded at an annual pace of 3%. With the back-to-back...

So, Who Will Be the Next Fed Chair?

The markets are turning their attention to who will become the next Chairperson of the Federal Reserve. President Trump recently commented that...

  


Share: