Many astute market observers maintain the central banks are never going to be able to stop printing money and stimulating.
The Fed finished its wind-down of QE in September, but quickly shifted back to a dovish stance in January.
The ECB ended its bond buying program in December, but today assured markets more stimulus is on the way.
Those market observers predicting never ending stimulus are looking more and more correct.
The BOJ, BOE, and Fed all meet this week. Expect more of the same.
Paul Gordon and Piotr Skolimowski report for Bloomberg:
European Central Bank policy makers anticipate using an interest-rate cut as their first stimulus move if they need to act again to boost inflation, according to three euro-zone central bank officials.
Lowering borrowing costs further below zero would be the most likely initial step rather than resuming asset purchases, said the officials, whose alarm at the descent of market inflation expectations to a record low is nudging them all toward favoring action. They didn’t want to be identified, citing the confidentiality of such discussions. An ECB spokesman declined to comment.
ECB President Mario Draghi appeared to set a low bar for action on Tuesday when he said additional stimulus will be needed “in the absence of any improvement” to the outlook for growth and inflation. He specifically cited rate reductions as an option, sending the euro lower and prompting money markets to price in a 10 basis-point cut by December.
Investors subsequently brought forward their expectations to September after Bloomberg’s report. Commerzbank AG now predicts such a policy step in July, while JPMorgan Chase & Co. said it now expects a rate cut in September.
“Draghi is going to finish his tenure with a cut,” said Claus Vistesen, chief euro-zone economist at Pantheon Macroeconomics. “The door is now open and I don’t see how they can not walk through it.”
Read more here.
Jeremy Jones, CFA
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