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Globally enters the “policy to loose economy ratio” model
Zhang Yu in Yi Yu Qi Wen
The main points
I. Monetary policy: normalization or tightness → marginal relaxation
At the beginning of 2019, as the global economic growth slowed down, global central bank policies became marginal.
1. Rate hike: either suspend or delay or maintain low interest rates
Federal Reserve - pause or raise interest rates during the year. The US bond yield curve rose in reverse pressure in 2019, meaning that the Fed raised interest rates or suspended during the year. The Fed’s rate hike window is gradually closed. From five dimensions (lower economic growth, moderate inflationary pressure, volatility in the labor market, near the bottom of the neutral interest rate, and the market expectation rate hike is 0), the Fed’s March increase The probability of interest is almost 0, and June is an important observation point.
ECB - suspension of interest rate hike during the year. Taking into account the risk of economic recession and fiscal expansion pressure, the European Central Bank delayed the interest rate prospects for the first rate hike at the March meeting until the end of this year.
Bank of Japan - will not raise interest rates in the short term. The Bank of Japan Governor’s speech at the beginning of March expressed continued support for the easing policy and believed that it was difficult to achieve the 2% price target by 2020.
2. Reduce the table: or end or hedge or expand the purchase plan
Federal Reserve - End of the year.when?The March meeting may announce a detailed plan.What is the current status?At present, the size of the Fed's balance sheet is about 4.03 trillion US dollars, which is 0.53 trillion US dollars lower than the peak before the contract.How to end the contraction?Significantly increase the size of the balance sheet (according to Powell's statement, the target size of the balance sheet is 16%-17% of GDP, currently 19.5%, 6% before the crisis), reduce MBS or repurchase US debt.What is the impact? Improving the global liquidity environment, lowering the yield of US long-end government bonds, and the US bond yield curve are further flattened.
ECB - launching the third round of targeted long-term refinancing.What is TLTRO?Directed Long-Term Refinancing (TLTRO) provides credit institutions with up to four years of financing, and the funds that banks can borrow are linked to their loans to non-financial businesses and households (except for home purchase loans). Previously, Ouyang launched TLTRO I and TLTRO II in 2014 and 2016 respectively.Why start the third round of TLTRO?First, the early TLTRO will expire, and some banks with poor liquidity, insufficient cash and high reliance on TLTRO are facing increasing risks. Second, hedge QE ends its impact on liquidity, preventing the deterioration of the financing environment of the euro zone banks and stimulating economic growth.What is the impact?Reduce the financing costs of businesses and households and offset the impact of negative interest rates on banks. It is conducive to the improvement of market risk appetite and reduces the market's concerns about the slowdown of economic growth and the monetary policy of the European Central Bank.
Bank of Japan - raised asset purchases in March. According to the political purchase plan announced by the Bank of Japan, the maximum amount of government bond purchases will increase from 600 billion yuan per month to 650 billion yuan per month in March, and the number of corporate bond purchases will rise from about 500 billion yen per month. The month is about 750 billion yen.
Second, economic growth: strong and weak deviation → ratio mode
Entering 2019, the economic growth of major economies has entered a downward trend, entering the “difference” mode.
1. Economic growth: slowdown in growth
US - economic growth rate enters the turning point. Affected by the closure of the US government, the US economic data for the first quarter is expected to weaken significantly. Looking forward to 2019, the US economic growth has entered a turning point.
Europe - facing stall risk. The recent economic downturn is expected to weaken. Looking forward to 2019, the contribution of trade to the economy will further decline, domestic demand will weaken, and the overall economy will slow down.
Japan - Consumption tax hike will curb economic growth. There is a weakening trend in consumption and production. Looking forward to 2019, Japan’s economic growth will face a slowdown, mainly due to the slowdown in domestic demand.
2. Inflation: not the main threat at present
US inflationary pressures eased, Europe and Japan maintain low volatility
3. Labor market: good
The US labor market has fluctuated; the European and Japanese labor markets are strong.
US, European and Japanese monetary policy exceeded expectations, capital market volatility, geopolitical crisis
Editor in charge: Robot RF13015
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