- Divergence Theme Questioned
- What to Expect from the Central Banks in 2017
- The ECB is Clearly NOT Hawkish
- Bank of England On Hold Until November
- Trump’s Proposal “Print the Money” Echoes Franklin and Lincoln
- Japan's Helicopter Money Play
- Brexit and the Derivatives Meltdown
- Central Banks Gaming
- Is that Buzzing Sound Helicopter Money?
- Is the Influence of the Central Banks Fading?
- Reinventing Banking
- Negative Interest, the War on Cash, and the $10 Trillion Bail-in
- The Future of Central Bank Monetary Policy
- Jeremy Corbyn’s Controversial Quantitative Easing Proposal
- Central Bank Season Heats Up
- Reserve Bank of New Zealand Rate Decision
- What has the ECB been Buying
- Four Central Banks Meet but FOMC is the Key
- Federal Overnight Reserve Repurchase Repo and Fed Funds Implications for 2015
- BoJ and ECB expected QE policies
- Unfitting Policies Will Not Save the Euro-area or Japan in 2015
- Can the $40 Drop In the Price of Oil Bankrupt the Biggest Banks?
- New G20 Banking Rules
- Central Banks Are Playing the Stock Markets
- A Public Bank Option for Scotland
- Preparing To Asset-strip Local Government The Fed’s Bizarre New Rules
- The Fed could Keep Rates at Zero through 2015
- Are Public Banks Unconstitutional? No. Are Private Banks? Maybe.
- New Challenges for an Old FED
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Central Banks Gaming
What is the Next Shoe to Drop?
29 Apr 2016
One can appreciate the frustration in Tokyo. The Bank of Japan surprised the world by adopting negative rates in January and the yen rallied. It now disappointed many by not easing, and the yen rallied. The BOJ next meetings in mid-June and like this week, the outcome of its meeting will be announced the day after the FOMC meeting. There is some idea that BOJ may be waiting for Abe's new fiscal package and the G7 meeting Japan hosts next month.
The latest FOMC's statement did not convince investors that a June hike was more likely, though a majority of economists surveyed see the second hike delivered then. Sequentially, many see the failure of the Fed to include a risk assessment as indicative of the high hurdle for a June move.
While the Fed needs to see evidence that the US economy is recovering from the six-month slowdown, which we think will in fact materialize, we are concerned that the global climate will look different when the Fed meets in mid-June. We are not convinced that emerging market equities can hold their 25% four-month rally. The same is true for commodities. Then, of course, there is the UK referendum, the Spanish election, and likely tensions with Greece. It is possible that the impeachment process in Brazil drags into June as well.
Some suggest a Fed move at the July FOMC meeting. The potential for June turmoil, at least from Europe, may have subsided, and the Fed would have more evidence of the economic performance in Q2. On one hand, the fact that there is no press conference in July would argue against a move. On the other hand, raising rates without a scheduled press conference would free the Fed from the gaming in the market. We still would prefer a press conference after every meeting to get around that gaming, which is a common practice among many major central banks.