The US FOMC minutes were out yesterday, and the ECB minutes overnight and the Fed minutes were interpreted as more dovish than expected, with “some” participants expressing concern about inflation not persisting, notes the research team at ANZ.
“The market appeared to discount the “some” qualifier, with US yields and the USD coming under pressure, though a December hike remains a done deal as far as market pricing is concerned. The ECB minutes overnight showed the majority on the governing council believe it is appropriate to proceed very gradually with forward guidance in relation to QE, but that opposition is rising to extending the program: “Some concerns were also expressed that the open-ended nature of the asset purchase programme might generate expectations of further extensions,” while others felt “an end date was… well justified in anticipation of further progress towards a sustained adjustment in the path of inflation on the basis of the better than expected growth momentum, diminishing risks and continued favourable financing conditions”. Europe is enjoying its strongest growth since 2011, and US growth is accelerating. But the missing ingredient remains inflation.”
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