Policymakers at the European Central Bank, led by its president Christine Lagarde, have agreed hike their three key interest rates by 50 basis points. This is the first policy rate tightening since 2011. The last time they did this it was followed by the start of the euro crisis. Ultimately, that crisis could only be solved by the then-president Mario Draghi’s commitment to do “whatever it takes” (WIT) to save the euro area. The limits of that commitment were never tested to the full, but his presidency did see a pivot towards ultra-loose monetary policy. Ms Lagarde’s commitment to WIT

Stock markets continue their ascent, with the month-long rise helping to erase the dramatic losses incurred earlier this year. But with economic data still dire, and more to come as a slew of first quarter GDP data is released later this week, much of this will be as a consequence of the extraordinary measures taken by central banks around the world. Even so, jitters remain, as evidenced by last week’s collapse in oil prices, with the US WTI benchmark reaching deeply negative territory for the first time in history. While the severity of the price drop was largely motived by

Fathom calculates, and publishes on Datastream, the optimal interest rate, as implied by John Taylor’s 1993 policy rate rule,[1] for a range of advanced economies. On the one hand, these Taylor rule-implied rates fell across several developed markets in 2019 Q1, including in the US and Japan for the first time since 2015 and 2016, respectively. This mirrors a more dovish stance taken by central banks in the US, Japan and Europe over the past few months, amid concerns about slowing global growth. The falls in implied rates were partly driven by swings in the oil price, which affects headline

At long last inflation is beginning to rise in the advanced economies and it is now above target in the US (2.9%), euro area (2.1%) and UK (2.4%). Looking forward, Fathom expects these headline rates to remain relatively close to target but for varying reasons. In both the US and euro area, the output gap should exert greater upward pressure on prices next year and broadly offset a diminished contribution from energy prices. By contrast, UK inflation is likely to weaken slightly from here and slip below 2.0% by the end of this year as the effects of sterling’s post-Brexit

The Italian equivalent of the English idiom, “to kill two birds with one stone”, involves catching multiple pigeons with one bean, apparently. Whatever the precise translation, Mario Draghi has certainly achieved more than one positive outcome while presiding over the ECB’s QE programme. While the primary rationale for large-scale asset purchases was to return inflation closer to target, the ECB’s QE programme also conveniently compressed sovereign debt spreads between core and periphery states, creating breathing space for countries with excessive debt levels. However, the QE programme is now nearing its conclusion and the end to net purchases will bring upward

One of the chief strengths of crypto-currencies is becoming their weakness. Freedom from regulation was the big draw of bitcoin, ether and their proliferating kind. But the exchanges set up to trade them often lack basic controls over identity, fraud, technology and even volume, a Reuters investigation shows. Without fixes, that will consign digital currencies to the financial fringe. These bourses can be prone to hacking. Kraken suffered a denial-of-service interruption in May, for instance, during a 70 percent drop in the price of the ether currency – and such reactions can be exacerbated by a lack of circuit breakers

The global economy is gathering steam. With one or two notable exceptions (the UK and, to a lesser extent, Japan), both the developed world and the developing world are enjoying above-trend growth — in some cases, a long way above trend. And the upswing has legs: in the US and the EA it is likely to run for another year or two at least, and in China perhaps for a bit longer. Other emerging economies will follow suit. Fathom’s Q3 global short-term forecast underlines this message. In our central forecast, global growth is up in the mid-3% range, with the

It’s all too easy to covet other people’s problems. European Central Bank President Mario Draghi has too little inflation and is grappling with a rising euro that makes imports cheaper. His Bank of England counterpart Mark Carney has too much inflation yet sterling’s weakness is boosting import prices. The good news is that the same fix can alleviate both problems. A trade-weighted measure of the euro’s value has risen nearly 6 percent in the past five months, helped by brighter euro zone economic prospects and the weakening of some other major currencies. One of them is sterling, whose trade-weighted index

Britain’s increasingly fractious relationship with Brussels is showing up in a predictable place. The European Union could restrict euro clearing in London, the Financial Times reported on Monday. It’s a timely reminder of the risks to the United Kingdom of breezily accepting a so-called hard Brexit. Britain and the EU have for years bickered about control of clearing houses – the financial utilities that stand between counterparties on derivatives trades and provide protection in the event that a trader goes bust. Of the $762 billion of euro-denominated derivatives cleared daily, three-quarters currently occurs in London, according to Bank for International

Please note this article was written prior to the US-led airstrikes against Syria.  It has been a strong start to the year for developing market equities. Robust capital inflows in the first quarter helped propel the MSCI EM index higher by 11+% – approximately double the return seen in developed markets over the same time frame [1]. It is not just the numbers that makes this an impressive performance. It has occurred at a time when the Fed upped the pace of monetary policy accommodation withdrawal from one 25bp hike per year to one 25bp hike per quarter [2]. As demonstrated

It is premature to conclude that the Bank of Japan will increase its ten-year government bond yield target in line with rising US Treasury yields. Fiscal dominance, meaning the extent to which fiscal deficits constrain monetary policy, is weighing on the central bank’s independence. With a long road to recovery ahead, even greater collaboration between the government and central bank cannot and should not be ruled out. We look for a widening divergence between Japanese and US government bond yields, all the way down the curve. Refresh the chart in your browser | Edit chart in Datastream Benefiting from global