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8 Apr 2013
Forex Flash: Policy frameworks melting into air - BAML
FXstreet.com (Barcelona) - The Bank of America Merrill Lynch Global Economics Team believe that policy frameworks are melting into air.
Starting with the BoJ, they note that the bank broke with a pattern of reactive policymaking, adding to the list of unprecedented monetary policy moves seen across the world. They feel that the benefits of global policy easing outweigh the costs at this stage, and they expect further follow-through from the Fed and the BoJ well into 2014. Looking to the US, they note that many analysts argue that the recession of 2008-9 distorted seasonal adjustment factors, creating “hot” winters and “cool” summers. However, they believe this "echo effect" is small and fading. They write, “If the economy slows this spring-as we expect-blame politicians, not technocrats.” Moving to the Eurozone, the note that the ECB's Mario Draghi signaled the ECB could change its rate stance over the next month(s), and is mulling over credit support, but within its mandate, which seems to exclude asset purchases. In Japan, they comment that at the 3-4 April meeting, the first under the new Governor, the BOJ adopted "quantitative and qualitative monetary easing" under which its balance sheet is set to roughly double by year-end 2014.
Starting with the BoJ, they note that the bank broke with a pattern of reactive policymaking, adding to the list of unprecedented monetary policy moves seen across the world. They feel that the benefits of global policy easing outweigh the costs at this stage, and they expect further follow-through from the Fed and the BoJ well into 2014. Looking to the US, they note that many analysts argue that the recession of 2008-9 distorted seasonal adjustment factors, creating “hot” winters and “cool” summers. However, they believe this "echo effect" is small and fading. They write, “If the economy slows this spring-as we expect-blame politicians, not technocrats.” Moving to the Eurozone, the note that the ECB's Mario Draghi signaled the ECB could change its rate stance over the next month(s), and is mulling over credit support, but within its mandate, which seems to exclude asset purchases. In Japan, they comment that at the 3-4 April meeting, the first under the new Governor, the BOJ adopted "quantitative and qualitative monetary easing" under which its balance sheet is set to roughly double by year-end 2014.