Central banks in June : Several decisions but no big surprises

Higher u.s. rates expected in June, then status quo until the end of the end of the year

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· The ECB will delete the character ultra-dovish in its policy, but it will leave its plan of quantitative easing (QE) unchanged
· Meetings scheduled in June will not initiate a cycle of hardening coordinated

Paris, June 6, 2017 – Anna Stupnytska, Economist World at Fidelity International, gives his predictions for the meetings of the european and american central banks in the month of June. According to her, the month of June will be important for monetary policy because the federal Reserve and the ECB are going to raise the veil on their strategy to reduce the character accommodating of their own policies. Despite the many comments on the stiffening potential of monetary policies, central banks could adopt a posture more accommodating than expected, which would demonstrate the difficulties inherent in this exercise, eight years after the financial crisis.

Federal reserve : an increase in opportunistic rates
According to Anna Stupnytska, the raising of the Fed funds rate in June will be the last of the year 2017. The favourable financial conditions have
reassured by the Fed this year, but the economy has not evolved in the desired direction. The weakness of consumption, is increasingly obvious and is explained by several factors, including the negative growth of wages in real terms, the reduced capacity of individuals to become the owners and the tightening of credit conditions. After weighing on growth for many quarters, the investments have eventually come around, but they make up for still not a consumption in berne.
At the same time, the inflation outlook remains subdued and a rise in the price of raw materials seems, for the moment, excluded. Underlying inflation should increase slightly in the coming months, but this should not bother the Fed. The building tensions on the labour market could eventually exert pressure on wage growth, but the slope is relatively flat Phillips curve at this point in the cycle do not indicate that an acceleration very progressive.
It is very difficult to identify a catalyst which could lead to an acceleration of u.s. growth relative to its current level. Given the uncertainties surrounding the political program of D. Trump, the implementation of the tax reform and infrastructure spending is far less likely. Anyway, it was obvious, according to Anna Stupnytska that the budget measures D. Trump would not have a positive impact on growth this year. Their impact could be felt in 2018, but if this causes an acceleration of inflation, the Fed could not afford to be too accommodative, and this could put an early end to the phase of the current expansion.

ECB : caution is the order of
“The economy of the euro area is experiencing its strongest period of growth since the crisis of the sovereign debt crisis, and the character synchronized recovery is a good indicator of its viability. In this context, the ECB should be able to begin to reduce the extremely accommodative in its policy. But given the dependence of the rebound of the economy to monetary policy and the peak probably reached by the global business cycle, the ECB should not rush.
The extremely accommodating monetary policy was to decrease at the meeting of the ECB in June, probably via a shift in forward guidance, a scenario that came through in the recent statements of the members of the board of governors. Additional information on this taper should be provided at the end of the year. But this process will surely be slower than anticipated by the consensus, and will remain, dependent of the strength of the euro. Market participants will seek to learn more about the progress of the taper, and increases in the deposit rate , but according to Anna Stupnytska, the ECB is not yet ready to make this decision. To do this, it will have to wait for 2018.


About Fidelity International
Fidelity International is a leading provider of investment strategies and retirement solutions at the global level. As an independent company, Fidelity aims to provide its clients with a management expertise of the most cutting edge associated with technological means, and services of the first plan, in order to help them achieve their financial goals. Created in 1969, the company operates 294 billion dollars and has one of the largest global networks of research with more than 400 investment professionals located in key financial centres around the world (31.03.2017).

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