Friday August 25, 2017 - 16:47:00 GMT
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Central Bank Policies Inadequate. Time For New Methodologies
John M. Bland, MBA
Pushing On A String Traders spent the better part of last week waiting for the Kansas City Fed Central Banker Symposium in Jackson Hole Wyo. This has become a major event annually with key central bankers from all over the world in attendance. In past years, some figures have made news in their keynote addresses, but such was not to be the case this year. Both ECB President Draghi and Fed Chair Yellen were slated to make high profile speeches, but not much was expected in terms of news. Both (and many others) are having trouble combatting low levels of inflation in their areas of jurisdiction. The Fed consistently has undershot its inflation target and forecasts for many years now. The problem would appear to be structural, not cyclical and major central banks have not acquired the required tools, nor the knowledge, needed to correct this problem.
One possibility might be that inflation simply is not being measured correctly. If you ask the average citizen of most major developed economies, you will be told by most that they feel that their cost of living has been rising significantly. Are the Fed inflation metrics realistic? I have heard even from top Fed officials that perhaps new models based on what is ACTUALLY happening in the real world might be required. New models perhaps might inspire new tools. The old tools obviously have not been working and might be obsolete as the global economy appears to be in a period of major structural changes. I wish we would have heard more (or anything) from the central bankers on this topic from Jackson Hole.
EUR Surprise Comment I was surprised to hear the ECB’s Hansson late Wednesday in a Bloomberg interview dismiss the recent EUR rise as not being a problem. That certainly is not conventional wisdom. Most feel that the significant EURUSD rise over the past several months would be a major issue for some areas of the Eurozone. In fact, a currency appreciation can amount to a policy tightening. I am not sure this is ECB policy. As for the U.S. 10-yr note, it continues to hold roughly unchanged from a week ago. This is an extremely low level with the economy this far into an economic recovery. Ten year yields partially reflect a risk-off posture due to the recent softness in stocks.
Amazing Trader EVENT RISK Calendar:
Mon 28 Aug
All Day GB- Holiday
Tue 29 Aug
14:00 US- CB Consumer Conf
Wed 30 Aug
12:15 US- ADP Jobs
12:30 US- GDP
14:30 US- EIA Crude
Thu 31 Aug
06:00 DE- Retail Sales
07:55 DE- Employment
09:00 EZ- flash HICP
12:30 US- Core PCE Deflator
Fri 1 Sep
All Day final PMIs
12:30 US- Employment
14:00 US- final Univ of Mich
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
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