Monetary policy

The financial and economic crisis has shown that central banks need leeway for ad hoc interventions in the monetary and credit cycle. A clear separation between financial and monetary policy would be a first step towards long-term stability.

Chinese economic reforms continue, but the authorities are going about it carefully. After all, they don’t want to risk missing their growth targets. Oil-price declines and the US growth recovery are providing some welcome wind in China’s wings.

For once the ECB surprised markets on the upside at its 22 January meeting. Despite numerous press leaks, the measures announced widely exceeded the expectations of market participants … and of governments. This new monetary reality should provide support for European equity markets in the coming months.

According to Philippe Ithurbide, Global Head of Research, Strategy and Analysis at Amundi, it will act through a number of channels among which interest rate, liquidity, wealth effect and forex channels, whose effects has already partly been felt in anticipation, to which should now be added confidence channels due to the program’s credibility with its potential open ended feature.

According to Jean François Robin, Analyst at Natixis, Considering that a EUR 500bn asset purchase programme was anticipated, one can expect a bull flattening and convergence trades (search for liquidity plus pooling, albeit partial) to predominate, while euro looks set to extend its decline whereas risky assets, especially equities, should benefit, probably even gold in the short term...