UK, EU Central Banks Follow the Federal Reserve

Yesterday, both the European Central Bank (ECB) and the Bank of the UK cut their benchmark interest rates to record lows. This is especially incredible in the case of the UK, whose Central Bank over 300 years old! You can see from the following chart that both Central Banks have more than made up for their respectively slow starts in easing monetary policy by effecting several dramatic rate cuts, following the example of the Federal Reserve. The baseline UK rate now stands at .5%, only slightly higher than the Federal Funds rate, and slightly lower than the 1.5% ECB rate.

UK, EU Central Banks Follow the Federal Reserve

Yesterday, both the European Central Bank (ECB) and the Bank of the UK cut their benchmark interest rates to record lows. This is especially incredible in the case of the UK, whose Central Bank over 300 years old! You can see from the following chart that both Central Banks have more than made up for their respectively slow starts in easing monetary policy by effecting several dramatic rate cuts, following the example of the Federal Reserve. The baseline UK rate now stands at .5%, only slightly higher than the Federal Funds rate, and slightly lower than the 1.5% ECB rate.

UK, EU Central Banks Follow the Federal Reserve

Yesterday, both the European Central Bank (ECB) and the Bank of the UK cut their benchmark interest rates to record lows. This is especially incredible in the case of the UK, whose Central Bank over 300 years old! You can see from the following chart that both Central Banks have more than made up for their respectively slow starts in easing monetary policy by effecting several dramatic rate cuts, following the example of the Federal Reserve. The baseline UK rate now stands at .5%, only slightly higher than the Federal Funds rate, and slightly lower than the 1.5% ECB rate.

Will Mexican Peso Crisis of 1994 repeat itself?

Having risen to a six-year high against the Dollar in late 2008, the Mexican Peso seemed to have firmly distanced itself from the devastating financial and economic crisis suffered in the early 1990′s. However, all of the factors that were blamed for the earlier crisis have since re-emerged, leading some analysts to question whether a repeat is possible. According to a report published by the Atlanta Fed shortly after the 1994 crisis:

China Looking to Buy Oil & Diversify from US Treasuries

US Treasury yields have been held low across the short-term and long-term due in part to a lack of appealing investment opportunities in a deflationary period, while the Federal Reserve announced in January the possibility of buying long-term US government Treasury bonds to help hold down long-term interest rates (and thus mortgage rates), hoping for a slow controlled decent in housing prices.

China Looking to Buy Oil & Diversify from US Treasuries

US Treasury yields have been held low across the short-term and long-term due in part to a lack of appealing investment opportunities in a deflationary period, while the Federal Reserve announced in January the possibility of buying long-term US government Treasury bonds to help hold down long-term interest rates (and thus mortgage rates), hoping for a slow controlled decent in housing prices.

Fundamentals Catch up with Yen

In hindsight, it is now clear that the Japanese Yen’s dramatic rise in 2008 was mostly due to financial, rather than economic factors. In other words, a decline in risk aversion led to the unwinding of the Yen carry trade and a subsequent inflow of capital into Japan. Unfortunately, the recession and inflated currency have since taken their toll on the Japanese economy, resulting in an annualized 13% contraction in GDP for the latest quarter. The balance of trade has also shifted, to such an extent that Japan actually recorded a trade deficit in the most recent month. Having concluded, for the moment at least, that forex intervention is no longer necessary, the Central Bank has announced plans to deploy some of its $1 Trillion+ forex reserve hoard to help ailing companies. Barron’s reports:

A reversal of the yen, from strength to weakness, will have “major global implications…” Perhaps beleaguered Japanese authorities already have begun reacting to the “carnage” the yen’s rise has wrought.

Read More: An Odd Decouple