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USA: The ‘Mid-cycle’ adjustment in key interest rates is done & Euro Area: Germany...

04 Nov

Martin Ertl

US: The ‘Mid-cycle’ interest rate adjustment is done.The Fed concludes its adjustment in the key interest rate as the economy continues a solid expansion but some weak spots occur.In Q3 2019 the US economy continued its expansion. Real gross domestic product (GDP) rose by 1.9 % (q/q, annualized rate) after 2.5 % during H1 2019. The expenditure components reveal that growth remains driven by personal consumption expenditure (2.9 %), while the second consecutive decline in fixed investment (-1.3 %) indicates weakening business dynamism. Investment in structures and equipment fell by 15.3 % and 3.8 % whereas residential investment rose by 5.1 %. In addition, net exports again deducted from GDP growth as imports growth outpaced exports (1.2 % and 0.7 %). Finally, government consumption contributes ...     » Weiterlesen


 

Quarterly Macroeconomic Outlook: Lower growth ahead (Martin Ertl)

16 Okt

Martin Ertl

Global economic prospects further weakened as trade disputes remain unsolved. Deceleration has become increasingly synchronized.Conflicting business cycle signals raise the uncertainty about the short-term Euro Area outlook. Sentiment and growth have been slowing, yet labor markets appear robust.Austria’s economy is cooling. While household consumption and construction provide support, manufacturing industries herald a slowdown.Central- and Eastern Europe continues to outpace growth in the Euro Area. It is unlikely that the region can fully decouple from the Euro Area business cycle, yet substantial improvements in labor markets have made CEE more resilient.Leading central banks (ECB & Fed) have added monetary policy stimulus. Without a major reversal in monetary policy, the current low-yield env...     » Weiterlesen


 

Macroeconomic effects of unconventional monetary policy & the ECB’s new stimulus p...

16 Sep

Martin Ertl

New monetary stimulus package lowers the deposit facility rate to -0.5 % and restarts QE at a monthly pace of 20 billion Euro (open ended).Previous unconventional monetary policy has led to a rise in inflation by 0.6 %-age points. The European Central Bank provides additional monetary stimulus by lowering the interest rates further into negative territory and restarting net asset purchases (QE). The cut of the interest rate on the deposit facility by 10 basis points (bp), to -0.5 %, was widely expected. Part of the banks’ excess liquidity holdings will be exempt from negative deposit rates, introducing a two-tier system. The exempt tier, which is initially set at 6 times an institution’s minimum reserve requirements, is remunerated at an annual rate of 0 %. QE will start in November at a monthl...     » Weiterlesen


 

New ECB QE and its effects on interest rates (Martin Ertl)

09 Sep

Martin Ertl

The ECB is expected to introduce new unconventional monetary policy measures.First, we calculate the free-float of German government bonds, which has become very low.In addition, we make use of recent evidence about QE effects on term premia to sketch monetary policy options.Large scale asset purchases (LSAP), or “quantitative easing” (QE), are intended to decrease long-term yields and ease financing conditions thereby stimulating aggregate demand and bring inflation back in line with the central bank’s price stability objective. The ECB launched the asset purchase programme (APP) in January 2015, which initially pledged the purchase of 60 billion EUR of securities each month. The asset purchases ended in December 2018 when the portfolio had reached around 2.6 trillion EUR.In the wake of ...     » Weiterlesen


 

Challenges for Monetary Policy: News from the Jackson Hole Economic Symposium (Mar...

05 Sep

Martin Ertl

Trade policy uncertainty is the Fed’s main concern and cannot be easily incorporated into its monetary policy framework.Further clarification of central bank communication can shield from the perception that monetary policy decisions might be politically motivated, Orphanides suggests.Jordà and Taylor argue that central banks cannot escape adopting a global perspective in setting monetary policy.An international perspective is also emphasized by Kalemli-Özcan who focuses on international spillovers of US monetary policy stressing the importance of changes in risk perception.Krishanumurthy and Lustig emphasize the continued importance of the US dollar exchange rate in the global credit cycle, driven by the convenience yield of US Treasuries.The Fed is fighting symptoms of a problem it cann...     » Weiterlesen


Martin Ertl

Chief Economist, UNIQA Capital Markets GmbH

>> http://uniqagroup.com/gruppe/