Leading central banks mould investor sentiment

2015 ◽  
Keyword(s):  
Central Bank ◽  
Federal Reserve ◽  
Developing Economies ◽  
Investor Sentiment ◽  
Oil Prices ◽  
Central Banks ◽  
Euro Crisis ◽  
Content Type ◽  
The Us ◽  
Country Specific

Significance In the worst start to a year for US equities since 2008, the benchmark S&P 500 index fell 0.7% during the week ending January 10. December's employment report showed US non-farm payrolls rising by a robust 252,000, but average hourly earnings declined, accentuating deflationary fears. The dollar continued to strengthen against the euro on concerns about a possible euro crisis over Greece and the introduction of sovereign QE by the ECB. With the US Federal Reserve preparing to raise rates, investor sentiment remains fragile. Impacts The tug-of-war between central bank largesse and country-specific, geopolitical and economic risks will become more intense. Markets will focus on renewed fears of 'Grexit' and on concerns about German opposition to an ECB sovereign QE programme. The relentless oil prices slide, exacerbated by the dollar's strength, will put further strain on EM assets. The ruble is likely to weaken further, increasing the scope for contagion to other developing economies.

CNB will keep raising rates to quell Czech inflation

2018 ◽  
Keyword(s):  
Federal Reserve ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Oil Prices ◽  
Content Type ◽  
Inflation Rates ◽  
The Us ◽  
National Bank ◽  
Repo Rate ◽  
Turkish Lira

Subject Central Europe’s monetary hawks and doves. Significance The Czech National Bank (CNB) has raised its benchmark two-week repo rate five times since February. That is more times than the US Federal Reserve (Fed) and has brought Czech rates above Poland’s. The CNB is likely to remain Central Europe’s most hawkish central bank in 2019, despite increasing pressure on its regional peers, the National Bank of Hungary (MNB) in particular, to begin tightening policy as inflation rates pick up. Impacts Investor sentiment towards emerging markets is improving, with developing economy stocks rising more than 2% in November. Emerging market currencies, including the ailing Turkish lira, are rising against the dollar. Weakening demand and mounting concerns about oversupply will affect oil prices, which have been falling sharply since early October. Bond traders are becoming increasingly sceptical that the Fed will hike rates three times in 2019.

ECB's QE will buoy EM bond markets

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Developing Economies ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Central Banks ◽  
Capital Inflows ◽  
Bond Markets ◽  
Quantitative Easing ◽  
Content Type ◽  
Large Current

Subject Opposite forces are shaping investor sentiment towards EM assets. Significance Investor sentiment towards emerging market (EM) assets is being shaped by the conflicting forces of a strong dollar and the launch of a sovereign quantitative easing (QE) programme by the ECB. While the latter is likely to encourage investment into higher-yielding assets, such as EM debt, the former will keep the currencies of developing economies under strain, particularly those most sensitive to a rise in US interest rates due to heavier reliance on capital inflows to finance large current account deficits, such as Turkey and South Africa. Impacts EM bonds will benefit from ECB-related inflows, while the strength of the dollar will keep local currencies under strain. Higher-yielding EMs will benefit the most from the ECB's bond-buying scheme since they provide the greatest scope for 'carry trades'. The collapse in oil prices is forcing EM central banks to turn increasingly dovish, putting further strain on local currencies.

Ultra-loose monetary policy will soon run its course

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Markets ◽  
Interest Rates ◽  
Mutual Funds ◽  
Investor Sentiment ◽  
Central Banks ◽  
Target Range ◽  
Content Type ◽  
Equity Mutual Funds

Significance Expectations that the Fed will refrain from hiking its benchmark rates from its target range of 0.25-0.5% and that the Japanese central bank will provide further stimulus are suppressing volatility in financial markets and fuelling demand for risk assets. However, evidence that "overburdened" monetary policy is losing its efficacy triggered a sell-off in bonds and equities on September 9, increasing the scope for sharper price falls as investors worry that central banks have run out of ammunition. Impacts Services expanded in August at their slowest pace since 2010, making it less likely that the Fed will raise interest rates this month. EM bond and equity mutual funds have enjoyed a surge in inflows since the Brexit vote as yield-hungry investors pour money into risk assets Oil, a key determinant of investor sentiment, will stay below 50 dollars/barrel unless major producers agree measures to stabilise prices.

Hungary’s rising prices may shift monetary policy

2019 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Euro Area ◽  
Federal Reserve ◽  
Content Type ◽  
Core Inflation ◽  
The Us ◽  
Manufacturing Sectors ◽  
National Bank

Significance The sharp slide in the forint is fuelling inflationary pressures, testing the resolve of the National Bank (MNB -- the central bank) to continue providing stimulus to the economy. Despite a surge in core inflation in Hungary to 3.8%, the MNB is using this year’s dovish U-turns by the ECB and the US Federal Reserve (Fed) as cover to keep monetary policy ultra-loose. Impacts The dollar index is strengthening despite the dovish U-turn by the Fed and is putting an end to the sharp rally in EM currencies in January. Inflationary pressures will be muted across the euro-area, with core inflation falling to 0.8% in March, less than half the ECB’s target. PMIs show Czech and Polish manufacturing sectors continuing to contract and Hungarian growth at its weakest level since 2016.

Emerging Europe markets will be strong in 2016

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Developing Economies ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Commodity Prices ◽  
Oil Prices ◽  
Content Type ◽  
Central Eastern Europe ◽  
Equity Funds

Subject The prospects for Emerging Europe assets. Significance Despite record levels of outflows from emerging market (EM) bond and equity funds in 2015, the financial markets of Central-Eastern Europe (CEE) have remained remarkably resilient. They are likely to continue to outperform those of Latin America and Emerging Asia next year, because of a combination of relatively strong fundamentals and liquidity support from the ECB. Impacts Investor sentiment towards developing economies is now shaped almost entirely by dramatic declines in commodity prices. US monetary policy will now prove secondary to the plunge in oil prices. Growth in the CEE region picked up significantly this year and is still expected to remain relatively robust in 2016.

US housing sector could boost GDP growth

2015 ◽  
Keyword(s):  
Federal Reserve ◽  
Oil Prices ◽  
Housing Sector ◽  
2008 Financial Crisis ◽  
Content Type ◽  
The Us ◽  
Home Sales ◽  
The 2008 Financial Crisis ◽  
Missing In Action ◽  
The Impact

Subject The impact of the housing sector on US growth. Significance After being 'missing in action' for about eight years, the US housing sector is finally showing signs that it may be poised for acceleration. New home sales for May showed their strongest pace of sales since February 2008, while housing permit data revealed a near eight-year high in new authorisations. This indicates that the overall economy will benefit as the glut in pre-recession housing works through the system and the population returns to earlier trends. Impacts Higher savings from low oil prices could be spent in the housing market, as they have not translated to a significant consumption boost. A new housing bubble is not likely, as credit conditions remain tighter than before the 2008 financial crisis. If housing contributes to stronger GDP recovery, the Federal Reserve could accelerate the pace of rate hikes.

Normalisation threatens Emerging Europe’s bond markets

2017 ◽  
Keyword(s):  
Interest Rates ◽  
Federal Reserve ◽  
Emerging Market ◽  
Central Banks ◽  
Capital Inflows ◽  
Bond Markets ◽  
Content Type ◽  
The Us ◽  
Asset Purchases ◽  
Investment Grade

Subject The risks to Emerging Europe’s bond markets from the removal of monetary stimulus. Significance The IMF has warned that the withdrawal of monetary stimulus by the US Federal Reserve (Fed) is likely to reduce capital inflows into emerging market (EM) economies. Emerging Europe is particularly vulnerable, thanks to the additional risks posed by the reduction of asset purchases by the ECB. Corporate bonds are most at risk because of the rapid compression in spreads on sub-investment grade debt, at their lowest levels since the financial crisis. Impacts Hawkish signals from central banks and US tax cuts are taking the benchmark ten-year US Treasury yield to its highest level since mid-March. However, dollar weakness will ease some of the strain on EM currencies and local bonds. With low core euro-area inflation reducing pressure to end QE, the ECB is unlikely to raise interest rates before 2019.

scholarly journals Central Banking in Rawls’s Property-Owning Democracy

2018 ◽  
Vol 47 (5) ◽  
pp. 674-698 ◽  
Author(s):  
Jens van ’t Klooster
Keyword(s):  
Central Bank ◽  
Federal Reserve ◽  
Central Banks ◽  
Central Banking ◽  
Difference Principle ◽  
Justice As Fairness ◽  
The Us ◽  
Democratic Control ◽  
The Difference ◽  
The Government

The dramatic events of the crisis have reignited debates on the independence of central banks and the scope of their mandates. In this article, I contribute to the normative understanding of these developments by discussing John Rawls’s position in debates of the 1950s and 1960s on the independence of the US Federal Reserve. Rawls’s account of the central bank in his property-owning democracy, Democratic Central Banking (DCB), assigns authority over monetary policy directly to the government and prioritizes low unemployment over price stability. I contrast DCB with Central Bank Independence (CBI), which requires that the central bank is independent of the government and pursues low inflation. I evaluate DCB by asking whether justice as fairness requires democratic control of the central bank and argue that it does not. Instead, so I argue, the choice between DCB and CBI should be justified in terms of the difference principle. By reflecting on central banking in a property-owning democracy, I cast new light on the Rawlsian realistic utopia of a just capitalist society, while also investigating democratic objections to today’s independent central banks.

Attention will turn to policy scope to fight recession

2019 ◽  
Keyword(s):  
Federal Reserve ◽  
Equity Markets ◽  
Central Banks ◽  
Equity Market ◽  
Bond Markets ◽  
Content Type ◽  
China Trade ◽  
The Us ◽  
Equity Funds ◽  
Global Equity Markets

Significance The dovish U-turns by the US Federal Reserve (Fed) and the ECB, which were withdrawing monetary stimulus as recently as end-2018, are accentuating concerns that the leading central banks lack the firepower to fight the next recession. Creating confusion, global equity markets are surging but bond markets are growing more pessimistic. Impacts The Chinese equity market is surging as investors anticipate some form of US-China trade deal, but any boost is likely to be temporary. US equities have rebounded this year, but the outflows from US equity funds that began in October will continue and may rise amid anxiety. Chinese growth was slowing even before the tariffs and worries are rising that this, more than trade, will increasingly hit world growth.

Central Europe's slow rate rises will aim at growth

2021 ◽  
Keyword(s):  
Interest Rates ◽  
Federal Reserve ◽  
Slow Rate ◽  
Emerging Market ◽  
Central Banks ◽  
Content Type ◽  
The Us ◽  
Equity Funds ◽  
Us Dollar ◽  
The Eu

Significance The MNB’s first rate rise in a decade responds to headline inflation rising to the highest rate in the EU. The US Federal Reserve (Fed) decision to bring forward raising interest rates to 2023 is putting emerging market (EM) assets under increasing strain and heaping pressure on Central Europe’s central banks to begin tightening. Impacts Capital markets’ ‘hunt for yield’ will bolster EM bond and equity funds despite concerns about the Fed’s withdrawal of stimulus. The vast majority of investors are behaving as if the current surge in inflation will prove transitory. A sharp deterioration in sentiment may follow if price pressures last longer than expected. Brent crude’s rise to its highest level since October 2018, despite the recent rally in the US dollar, will fuel inflationary pressures.

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