Saxo Bank vurderer, at centralbankerne på deres møder i december vil stimulere økonomien endnu engang. Den amerikanske centralbank vil formentlig gøre det lidt mere forsigt end ECB, mens ECB måske vil gøre brug af sin bazooka med lån til den ikke-finansielle sektor.
What is left in the central bank toolbox ?
Summary: All the investors are eyeing at the upcoming central bank meetings in December hoping for a new stimulus to speed up economic recovery in 2021. This week, we discuss what is left in the central bank tool kit to support activity in the wake of the second lockdown and focus on the new cooperation between central bank and government that is emerging all around the world, but more noticeably in the United States with the Biden-Harris administration.
In December, once again, we will see global investors paying a great deal of attention to the decisions from the central banks, especially the European Central Bank and the Federal Reserve that are due to meet on 10 December and 16 December, respectively.
Prior to that, the economic diary next week includes a bunch of data for the month of November, notably worldwide PMI surveys and U.S. nonfarm payrolls. Consensus expects a slowdown in job creation in the United States in November due to the re-imposition of restrictions to fight against the coronavirus, thereby adding further pressure on U.S. policymakers to find an agreement for a new stimulus package.
The spotlight will be Fed Chair Powell’s testimony before the Senate banking committee on 1 December to discuss CARES ACT with Treasury Secretary Mnuchin.
Monetary policy: more is always better
In the coming weeks, investors will pay particular attention to central bank decisions. The latest ECB and Fed minutes released this week provide us useful insights on which monetary policy options might be favored in the near future.
The Fed minutes confirmed that some soft stimulus might be announced in December, with the most likely option consisting in pursuing QE but longer than initially anticipated. A debate among most FOMC members has also emerged regarding more explicit qualitative guidance on conditions under which tapering could happen. We don’t anticipate in the near term any final decision on that matter.
Expectations are high that the ECB will resort to a new monetary bazooka in December. The ECB minutes have been seen unanimously by market participants as very dovish. Members of the Governing Council repeated once again that PEPP and TLTRO are the most effective tools at the moment, which corroborates our call for an extension of PEPP and the introduction of more favorable conditions to TLTRO.
ECB’s chief economist P. Lane’s speech this week is another confirmation that TLTRO, which has substantially supported the granting of loans to the non-financial private sector, will be at the core of the next ECB stimulus package.
