The Fed’s Options

RGE’s Kevin Harris has a nice preview of the July FOMC meeting: in brief, FOMC members are locked and loaded, ready for a September hike, though they will refrain from committing to a move and do their best not to cause an overreaction across the yield curve, where too few hikes are priced in relative to the […]

The Evolution of the ECB’s Thinking on Negative Deposit Rates

The OECD has been telling the ECB to cut rates since November last year; today, after nearly half a year, the tortise-like ECB acted, cutting two rates that don’t really matter much. The ECB opened up two more doors today, though it hasn’t walked through them: first on securitization of SME loans into ABS, and second, to lower […]

Krugman vs. Druckenmiller: A Blow by Blow Analysis

Paul Krugman (PK) recently accused Stan Druckenmiller (SD) of insensitivity to the working class because of the hedge fund superhero’s worries (as reported by Business Insider, from an interview with Bloomberg) that QE and an explicit policy of holding rates down for very long might [lead to bubbles]. Of course SD is NOT against recovery, per […]

Why Did Brazil Underperform its Peers in 2012? Policy.

The end of Q4 brought forward interesting dynamics in the LatAm region: Namely, a sharp deceleration in inflation in every inflation-targeting economy, with the exception of Brazil (although we expected inflation to soothe by year-end in Mexico, Chile and Peru, the deceleration was much stronger than anticipated, and downward revisions to our inflation forecasts could […]

What to Watch for 2013: MENA Edition

2012 has been quite another rollercoaster year for the Middle East, including rocky transitions, flareups and protracted conflict. Meanwhile the region finally started benefitting from the lagged effect of higher oil prices. 2013 will no doubt bring more of the same, particularly as populations and leaders struggle to begin responding to economic grievances. Clockwise from […]

QE3 Will Work if it Shifts Expectations That the Fed Will Tolerate More Inflation

Beyond the straightforward mechanics of QE3 (i.e., the Treasury and MBS purchases), the Fed’s impact on expectations is key. The guidance indicated that support would remain in place until the economy is well in their clear. By aggressively pushing on bond yields, and more importantly, promising to maintain that effort, Bernanke and Co. definitely had […]

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