Monetary Policy

Is the ECB too close to the private sector?

Is the ECB too close to the private sector?

7 mins. to read

Yesterday the FT uncovered a series of meetings between ECB policymakers and the private sector that occurred just before the governing council meetings from which important, market-moving, interest rate decisions resulted. Central banks were made independent from the government to avoid an evident conflict of interests that allowed us to achieve more stable, lower inflation…

Time to Rethink Macro Policy

Time to Rethink Macro Policy

6 mins. to read

“So just as I want pilots on the planes that I fly, when it comes to monetary policy, I want to think that there is someone with sound judgement at the controls.” – Martin Feldstein The time when physical money will be made illegal is not that far away, as central banks have now exhausted…

Income Redistribution: A Side Effect of Monetary Policy

Income Redistribution: A Side Effect of Monetary Policy

8 mins. to read

The other day I came across a very interesting and challenging research paper about the degree of investor sophistication and its implications on capital income inequality. While the paper attempts to explain the role of information and knowledge on investment attitudes and ultimately on capital income for varying levels of household income, it has quite…

Warning Bells Are Ringing

Warning Bells Are Ringing

6 mins. to read

If you believe the last summer was tough to invest in the equities market, then just wait for the rest of the year and you’ll see how bad things can get! I don’t want to be the “Dr Gloom” of Master Investor, but I’m increasingly worried about the proportions the current distortions are taking, as…

The Battle Between CPI and PCE

The Battle Between CPI and PCE

6 mins. to read

Central banks have been so fixated on fighting inflation that they have killed it completely. Now they have the reverse problem and need to find ways of generating it again. But, at a time when interest rates are already near zero, central banks need to jump into the unknown world of unconventional measures where quantitative…

Bill Gross Vs the FED

Bill Gross Vs the FED

7 mins. to read

Bill Gross from Janus Capital (ex:PIMCO) has heavily criticised central banks for failing to foresee the consequences of conducting a zero interest rate policy (ZIRP) for too long. They’re destroying “the savings function of capitalism, which is a necessary and in fact a synchronous component of investment”, as “accustomed to Taylor Rules and Phillips Curves,…

FED’s Next Move… Negative Rates?

FED’s Next Move… Negative Rates?

7 mins. to read

Is there anybody who still believes the FED will hike rates this year…? The next? With the latest developments in mind, I dare to say the FED may be closer to another round of QE or even to setting negative rates than to a rate hike. Yesterday’s FOMC meeting and policy announcement not only kept…

BoE Concerned with China

BoE Concerned with China

5 mins. to read

The last time the BoE moved its key interest rate was in March 2009, when the financial crisis was at its peak and the British economy was thirsty for liquidity. Six and a half years later, the financial crisis is over but the BoE is still afraid of touching its near-zero rate. The last MPC…

Draghi still has ammunition in his bazooka

Draghi still has ammunition in his bazooka

7 mins. to read

Earlier in the year the ECB announced its own asset purchase programme to reflate the Eurozone economy. Investors received the news with exuberance and drove equity prices to historical highs. But so much has changed since that moment, such that what looked like the best plan in years is now seen as mere routine, embraced…

Central Banks Have Lost the Inflation Link

Central Banks Have Lost the Inflation Link

7 mins. to read

For the last three decades, central banks have been concentrating their efforts on fighting two gaps – the output gap and the inflation gap – being mandated to throw everything they can at the economy in order to correct any major aberrations. While managing the first gap is the primary goal of government, managing the…

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