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Draghi's QE Compromise

23 December 2014

Robert Kuenzel
, 
Grant Lewis
  • All signs point towards the ECB adopting sovereign QE in the New Year.
  • But given Draghi’s desire to appease the German-led opposition, the design of the policy seems bound to be second-best.

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Jump-starting Germany: A menu for Merkel

13 November 2014

Robert Kuenzel
, 
Chris Scicluna
  • German policymakers need to act to jump-start the stalled economy.
  • But complacency, compromise and the near-religious obsession with the balanced budget suggest the German economy will remain sluggish.
  • That’s bad for Germany. And terrible for the euro area. 

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Draghi's ECB: Bottom of the table

17 September 2014

Robert Kuenzel
, 
Grant Lewis

The ECB now aims to return its balance sheet back to 2012 levels. But meeting that ambition, in the near term at least, is going to be extremely difficult. And, even if it can, both the nature and size of the balance sheet increase it implies is puny relative to what the world’s other major central banks have undertaken. 

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ECB Preview: Will Draghi rise to the occasion?

03 September 2014

Robert Kuenzel
, 
Chris Scicluna

For Draghi not to prove a big disappointment tomorrow, he needs at least to maintain the language he used at Jackson Hole as well as provide strong hints of further action to come. Failure to do either would be bad news for euro area government bonds and good news for the euro. And it would also signal that his attempt in Jackson Hole to bounce the Governing Council into QE had failed, for now at least, leading to a general downgrading of the probability of QE that has been priced in post-Jackson Hole.

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UK Bank Rate: Slackers hold the key

13 August 2014

Grant Lewis
, 
Emily Nicol

The performance of the UK labour market over the past year or so has confounded all expectations. And today’s data showed a further drop in the unemployment rate, to just 6.4% in the three months to June. But the MPC also today revised down its estimate of the equilibrium unemployment rate and its forecast of wage growth. As such, Mark Carney was able to stick to his mantra that increases in Bank Rate, when they come, will be very gradual, and that the eventual resting point for Bank Rate will be significantly below what had been usual in the pre-crisis period.

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