Fra Commerzbank:
Fed The Fed still sees weak US economic growth in the first quarter as temporary. This is the message from recent comments by Fed officials such as Dennis Lockhart, president of the Atlanta Fed. His opinion is particularly insightful in our view as his generally centrist positions are a good reflection of the mood prevailing in the Fed.
In this respect, he differs from colourful figures such as Narayana Kocherlakota (dove) or Jeffrey Lacker (hawk), who mainly only represent outsider views. While Lockhart described the first quarter as “disappointing”, he also said he was “not overly concerned”. A number of temporary factors had dampened the economy. The underlying fundamental trends were strong enough for a “bounce-back” in the second quarter, followed by resumed growth of 2.5 – 3%.
Lockhart called market expectations of a rate hike in September “reasonable”. The next economic data will therefore be decisive for Fed policy. Should the expected upward turn not materialize, the central bank would wait beyond September. Lockhart has said in this context that he would rather take the risk of acting too late than too early.
ECB ECB Council members Constancio, Jazbec and Hansson confirmed that it is too early to discuss tapering the ECB’s quantitative easing programme (QE). According to Constancio, QE will not be halted prematurely, even if the economy in the euro zone is picking up more rapidly than expected. “The programme is working well. Why should we think of discontinuing it when inflation is negative and inflation expectations are nowhere near our medium-term goal of close to 2%? We only started it a few months ago. It would be very strange if we were already talking about stopping.” Constancio argued that making investors take more risks “is partly what we want to achieve through our programme. …The only danger is that the “search for yield” might get out of hand. We need to keep a close eye on that. It is the job of macroprudential policy, not of monetary policy, to avoid the build-up of bubbles”. . ECB’s Hansson said that the issue of haircuts applied to Greek bonds presented as collateral in the central bank’s emergency lending program for Greek banks “deserved attention”. Reportedly, the ECB Council agreed to give Greece more time to bridge the gap in its bailout talks before deciding whether to raise the haircuts. The central bank will wait for the outcome of next week’s meeting of the region’s finance ministers before reassessing the situation.
