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Business, Paul Donovan, Published on 27/10/2014
» Central bank policy is already being tightened. The problem is that in the world after quantitative policy, central bank policy can no longer be represented by a simple interest rate line on a chart. Policy has become more complex, and that complexity is something that markets seem to overlook. Central bank policy now rests on three pillars, and tightening in any of these three policy areas will restrict economic activity.
Business, Paul Donovan, Published on 18/06/2014
» We live in stirring times. Mario Draghi, president of the European Central Bank (ECB), has crossed the monetary policy Rubicon and cut one of the euro zone’s key interest rates into negative territory. This is dramatic stuff, as even the most economically oblivious are likely to recognise that negative interest rates are a radical policy. At the same time, the US Federal Reserve is gracefully gliding out of its quantitative policy position, and by October that money-printing process is likely to be effectively at an end. The question from most investors is therefore “what next for US monetary policy?” The answer is likely to be an increase in US interest rates, and those increases may start earlier and take place faster than many investors currently assume. The Bank of England has been even more explicit in signalling a desire to tighten interest rates sooner than financial investors had expected.
News, Paul Donovan, Published on 25/07/2012
» Politics is playing a dominant role in financial markets today _ and generally speaking, investors do not like it.