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5 Jul 2013
Flash: Central banks embark on unconventional policy – Deutsche Bank
FXstreet.com (New York) - The BoE and the ECB made a great effort yesterday to stress that they are nowhere near as hawkish as the Fed - at least on a relative basis, points out Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank.
However, before investors get excited it's worth noting that the Fed are still injecting $85bn a month of liquidity into markets whereas the BoE and ECB are currently on hold with regards unconventional policy. “In fact the ECB balance sheet has been slowly shrinking this year.” they add.
Nevertheless that the ECB broke with 14 years of protocol to give any guidance on future rate policy is a notable step. The BoE by issuing a statement suggesting that the recent rise in yields was not consistent with the weak recovery and low inflation was also significant. They also hinted in their statement that they may be more specific on their commitments to keep rates low for longer at their August meeting.
However, before investors get excited it's worth noting that the Fed are still injecting $85bn a month of liquidity into markets whereas the BoE and ECB are currently on hold with regards unconventional policy. “In fact the ECB balance sheet has been slowly shrinking this year.” they add.
Nevertheless that the ECB broke with 14 years of protocol to give any guidance on future rate policy is a notable step. The BoE by issuing a statement suggesting that the recent rise in yields was not consistent with the weak recovery and low inflation was also significant. They also hinted in their statement that they may be more specific on their commitments to keep rates low for longer at their August meeting.