Central Bank watch: ECB, FED and CAD

Analysts at ANZ offered a breakdown of the various Central Banks from overnight.

Key Quotes:

"The Fed: “Most participants judged that if economic information came in about in line with their expectations, it would soon be appropriate for the Committee to take another step in removing some policy accommodation. A number of participants pointed out that clarification of prospective fiscal and other policy changes would remove one source of uncertainty for the economic outlook.” “Soon” points to June, though the picture is caveated by “it would be prudent” to wait for evidence that a recent slowdown in economic activity had been transitory.

Senior ECB officials continued to counter growing market expectations that there may be a meaningful shift in ECB forward guidance with both Draghi and Constancio reinforcing the view that the ECB will fully implement its QE programme (EUR60bn per month until year end). Draghi also noted that underlying inflation remains subdued despite the increasingly solid recovery in activity. His comment that QE may have more side-effects than negative interest rates would seem to imply that he is not an advocate of changing the outlined sequencing (i.e. rates will rise sometime after QE ends subject to inflation recovering).

The Bank of Canada maintained its benchmark interest rate at 0.5%, noting that monetary policy “stimulus is appropriate at present.” Canada’s adjustment to the oil price decline is “largely complete”. Markets took the slight shift in language as a move to a less dovish tone and the balance of risks shifting towards hikes as opposed to cuts."

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