Nothing is expected from the Fed in March

The Fed hasn’t changed its monetary policy stance. It’s main interest rate remains between 0.25% and 0.5%. The US central bank is still considering that its monetary strategy is accommodative.
What is important now is the follow up of the December Fed’s decision to hike its interest rate. It was expected that it will not change its rates at the January meeting, the question was for March. A press conference is scheduled and could give to the Fed the opportunity of an announcement.
What type of signals the Fed could give to investors was the unknown of the January press release. Continue reading

A more accommodative ECB? My macroeconomic column

Point #1The global economic momentum remains weak
World trade was up by only 2% when November 2015 is compared to November 2014. This growth rate is still below the average seen before 2008 (blue band on the graph).  The explanation framework based on the absence of growth drivers seems always the good one. No impulse from the US or China and the incapacity for the world economy to converge to a higher growth trajectory. Continue reading

The demand for credit is stronger in the Euro Area

The ECB survey shows, at the end of 2015, a new improvement on credit conditions for companies.
The first point to mention is that credit standards are still accommodative at the turn of the year. Banks are not tightening their behaviour on the credit market. Credit standards are almost at their lowest. That’s what the graph below shows. It’s not the situation encountered in 2009 and 2012. Continue reading

The importance of oil – My weekly Column

First graphA lower oil price will drive inflation rates down
With Iran back on the oil market, the price dropped below 30 dollars for a barrel. This could have an important impact on the inflation rate and therefore on monetary policy strategies in Europe and in the US.
The graph shows, for the Euro Area, the energy contribution to the inflation rate. It also shows the one year change of oil price (Brent) in euro. The two curves have consistent profiles.
With an oil price at 50 and the EURUSD exchange rate at 1.07 (red line), the oil price change is consistent with an energy contribution that could be close to 0 on average in 2016. It was a good hypothesis to put the price at 50. In that case, the headline inflation rate was able to converge to the core inflation rate. It was a comfortable situation for central bankers.
If on average, the oil price is 35 USD and 1.07 (green line), the contribution could be close to -0.6%. In that case, the inflation rate would be circa 0%. With 30 USD and 1.07 it would be probably negative.
These simple calculus show that the oil price trajectory will be important in 2016 (close to 30 or below?) and that there is no guarantee that inflation rates could converge to 2% in a finite time. Continue reading