binance left Coinmarketcap net_left adver left

Like Tortoise vs Hare, ECB may 'normalize' before Fed :Mike Dolan

Wednesday, January 12, 2022
Column-Like Tortoise vs Hare, ECB may 'normalize' before Fed :Mike Dolan © Reuters. FILE PHOTO: The logo of the European Central Bank (ECB) is pictured outside its headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach

By Mike Dolan

LONDON (Reuters) - If the world's big central banks are convinced the economic emergency is over and policy should start to return to pre-pandemic settings, the ECB is likely to beat the Fed to it.

Facing the highest inflation rates in decades, caused mainly by the distortions and bottlenecks related to rapidly reopening economies after serial COVID-19 lockdowns, central banks fear those rates will be slower to subside than first thought.

The Omicron wave around year-end again muddied the economic picture and could prolong supply chain and labour market distortions that keep inflation rates higher for longer, as well as raising the risk of them becoming embedded in household, worker and company expectations.

If in doubt, the message seems to be, stop adding stimulus, return to square one and assess the lay of the land.

U.S. Federal Reserve officials have entered 2022 with all guns blazing. Most now insist they will not only stop buying new bonds by March, but the first of at least three interest rate rises this year will come at that point and unwinding of the Fed's bloated balance sheet commence shortly after.

Fed chair Jerome Powell spoke on Tuesday of 'normalizing', policy while being 'humble and nimble'.

While the picture for the European Central Bank is different, it faces a similar inflation and communications headache and the message from its top officials is one of both caution over inflation risks and a restatement of its central price stability mandate.

ECB Chief Economist Philip Lane said this week he still sees inflation back below the 2% target next year and in 2024, while its President Christine Lagarde spoke on Tuesday of an "unwavering" commitment to stable prices and new Bundesbank boss Joachim Nagel said he sees a "danger" inflation stays high.

For many in the markets, faced with a more modest economic rebound, higher jobless levels, lingering credit problems and ageing demographics that threatened deflation for a decade, the ECB will be deeply dovish for far longer than the Fed.

An almost 10% swoon in the euro/dollar currency rate in the second half of last year illustrates some of that.

ECB policy rates and long-term benchmark sovereign bond yields were negative pre-pandemic and remain so. And the size of its accumulated balance sheet is both higher than the Fed's in nominal terms as well as being, at more than 65%, almost twice the share of gross domestic product than Washington's.

But as UniCredit economist Marco Valli points out, much of the ECB's stance was in place before the pandemic.

"When the different starting points of monetary policy are taken into account, the ECB's stance looks less dovish than generally thought," he wrote.

'HUMBLE AND NIMBLE'

Valli reckons that based on its Dec. 16 decisions - which aims to wind down emergency pandemic bond buying stimulus by March, end new special lending facilities by June and taper long-standing asset purchases to pre-COVID levels by the fourth quarter, the ECB would be back to pre-pandemic settings by October, a year ahead of the Fed on existing plans.

Of course, the Fed cut its policy interest rate by more than 150 basis points and revamped its net bond buying from scratch when COVID hit. The ECB by contrast relied mostly on the PEPP bond purchase programme as its key support flooring long-term interest rates. Its repo rate was already at 0% since 2016 and its deposit rate had already been cut to the current -0.5% in 2019.

But Valli says it is still worth noting that the ECB will be back to pre-COVID levels long before the Fed despite fewer labor market distortions feeding wages, less exchange rate weakness on import prices and less concern over equity valuations.

Either the Fed has been too slow to normalize - and judging by its frantic speechifying this year, some Fed officials appear to think that - or the ECB is being too cautious.

"The former appears more likely," Valli concluded.

Market pricing for a small 10bp rise in ECB deposit rates by year-end still seems excessive to most economists.

Deutsche Bank (DE:DBKGn)'s 'House View' published on Tuesday says this 'liftoff' is unlikely until 2023, but it sees net asset purchases dropping by about 70% this year.

On the flip side, even if the Fed were to hike rates four times this year, as market pricing now suggests, it would still leave them well below pre-pandemic levels.

A rapid wind down of the Fed's balance sheet this year might even up the relative stances somewhat as shrinking the ECB's appears a much longer way off. But the Fed's Powell said on Tuesday no decision on that had been taken yet.

So while the ECB may seem more of a tortoise to the hare-like Fed, it may also find it wins the race. Whether that's a good result for the euro zone economy is less clear.

The author is editor-at-large for finance and markets at Reuters News. Any views expressed here are his own

(by Mike Dolan, Twitter (NYSE:TWTR): @reutersMikeD; Editing by Alexander Smith)

Leave your comment
ig right nyse right Neteller adver right
APPROVED BROKERS
rakuten_main right top net_home_top ig_main right top Binance _ main right top fbs_main right top tifia_main right top
27-01-2022 04:13:17 (UTC+7)

EUR/USD

1.1199

-0.0039 (-0.34%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (5)

EUR/USD

1.1199

-0.0039 (-0.34%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (5)

GBP/USD

1.3424

-0.0037 (-0.28%)

Summary

Sell

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (2)

Sell (6)

USD/JPY

115.00

+0.37 (+0.32%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (0)

AUD/USD

0.7087

-0.0027 (-0.38%)

Summary

Sell

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (1)

Sell (7)

USD/CAD

1.2680

+0.0015 (+0.12%)

Summary

Buy

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (6)

Sell (1)

EUR/JPY

128.79

-0.03 (-0.02%)

Summary

↑ Buy

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (7)

Sell (2)

EUR/CHF

1.0381

-0.0001 (-0.01%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (1)

Gold Futures

1,813.85

-15.85 (-0.87%)

Summary

↑ Buy

Moving Avg:

Buy (11)

Sell (1)

Indicators:

Buy (9)

Sell (1)

Silver Futures

23.293

-0.514 (-2.16%)

Summary

Neutral

Moving Avg:

Buy (7)

Sell (5)

Indicators:

Buy (2)

Sell (6)

Copper Futures

4.4682

-0.0468 (-1.04%)

Summary

↑ Sell

Moving Avg:

Buy (4)

Sell (8)

Indicators:

Buy (0)

Sell (6)

Crude Oil WTI Futures

87.03

-0.32 (-0.37%)

Summary

↑ Sell

Moving Avg:

Buy (2)

Sell (10)

Indicators:

Buy (0)

Sell (8)

Brent Oil Futures

88.38

-0.36 (-0.41%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (8)

Natural Gas Futures

4.096

+0.060 (+1.49%)

Summary

↑ Buy

Moving Avg:

Buy (11)

Sell (1)

Indicators:

Buy (8)

Sell (0)

US Coffee C Futures

238.13

+0.23 (+0.10%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (8)

Euro Stoxx 50

4,131.35

-33.25 (-0.80%)

Summary

Sell

Moving Avg:

Buy (4)

Sell (8)

Indicators:

Buy (1)

Sell (5)

S&P 500

4,349.93

-6.52 (-0.15%)

Summary

↑ Buy

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (11)

Sell (0)

DAX

15,327.34

-132.05 (-0.85%)

Summary

↑ Buy

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (6)

Sell (1)

FTSE 100

7,478.04

+8.26 (+0.11%)

Summary

↑ Sell

Moving Avg:

Buy (5)

Sell (7)

Indicators:

Buy (1)

Sell (6)

Hang Seng

23,807.00

-482.90 (-1.99%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (6)

Sell (1)

US Small Cap 2000

1,971.72

-32.32 (-1.61%)

Summary

Neutral

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (5)

Sell (4)

IBEX 35

8,631.28

+11.08 (+0.13%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (5)

Sell (3)

BASF SE NA O.N.

68.070

+0.760 (+1.13%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (9)

Sell (1)

Bayer AG NA

52.08

+0.53 (+1.03%)

Summary

Buy

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (5)

Sell (4)

Allianz SE VNA O.N.

225.85

+1.05 (+0.47%)

Summary

Buy

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (5)

Sell (3)

Adidas AG

241.68

-1.52 (-0.62%)

Summary

↑ Sell

Moving Avg:

Buy (1)

Sell (11)

Indicators:

Buy (2)

Sell (7)

Deutsche Lufthansa AG

7.024

-0.043 (-0.61%)

Summary

Neutral

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (3)

Sell (4)

Siemens AG Class N

138.88

-2.36 (-1.67%)

Summary

↑ Sell

Moving Avg:

Buy (4)

Sell (8)

Indicators:

Buy (1)

Sell (9)

Deutsche Bank AG

11.920

+0.500 (+4.38%)

Summary

Neutral

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (1)

Sell (5)

 EUR/USD1.1199↑ Sell
 GBP/USD1.3424Sell
 USD/JPY115.00↑ Buy
 AUD/USD0.7087Sell
 USD/CAD1.2680Buy
 EUR/JPY128.79↑ Buy
 EUR/CHF1.0381↑ Buy
 Gold1,813.85↑ Buy
 Silver23.293Neutral
 Copper4.4682↑ Sell
 Crude Oil WTI87.03↑ Sell
 Brent Oil88.38↑ Sell
 Natural Gas4.096↑ Buy
 US Coffee C238.13↑ Sell
 Euro Stoxx 504,131.35Sell
 S&P 5004,349.93↑ Buy
 DAX15,327.34↑ Buy
 FTSE 1007,478.04↑ Sell
 Hang Seng23,807.00↑ Buy
 Small Cap 20001,971.72Neutral
 IBEX 358,631.28↑ Buy
 BASF68.070↑ Buy
 Bayer52.08Buy
 Allianz225.85Buy
 Adidas241.68↑ Sell
 Lufthansa7.024Neutral
 Siemens AG138.88↑ Sell
 Deutsche Bank AG11.920Neutral
Mua/Bán 1 chỉ SJC
# So hôm qua # Chênh TG
SJC Eximbank6,195/ 6,235
(5/ -5) # 1,255
SJC HCM6,190/ 6,250
(10/ 5) # 1,270
SJC Hanoi6,190/ 6,252
(10/ 5) # 1,272
SJC Danang6,190/ 6,252
(10/ 5) # 1,272
SJC Nhatrang6,190/ 6,252
(10/ 5) # 1,272
SJC Cantho6,190/ 6,252
(10/ 5) # 1,272
Cập nhật 27-01-2022 04:13:19
Xem lịch sử giá vàng SJC: nhấn đây!
ↀ Giá vàng thế giới
$1,814.89-7.26-0.40%
Live 24 hour Gold Chart
ʘ Giá bán lẻ xăng dầu
Sản phẩmVùng 1Vùng 2
RON 95-IV2486025350
RON 95-II,III
E5 RON 92-II2359024060
DO 0.05S1890019270
DO 0,001S-V1925019630
Dầu hỏa1779018140
ↂ Giá dầu thô thế giới
WTI$86.47+0.410.47%
Brent$88.30+0.240.27%
$ Tỷ giá Vietcombank
Ngoại tệMua vàoBán ra
USD22.470,0022.780,00
EUR24.775,4326.164,36
GBP29.663,4530.930,27
JPY191,46202,68
KRW16,2819,84
Cập nhật lúc 16:04:52 27/01/2022
Xem bảng tỷ giá hối đoái
binance main right Fxpro Main Right aetos main right adver main right