MM #120 – Bold BOJ vs. Fearful Fed

It was a big week for central banks, with implications going well beyond the short-term market reactions. We start with the immediate takeaways and continue to the long-term consequences.

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  1. FED – what happened and what’s next: No change in rates, but we had three dissenters and a massive hint for December. Where will markets go now? Will we get a hike in December?
  2. FED – long term fears and worries: The puzzling lack of productivity is worrisome, lowering all long-term forecasts. Where is the US economy going in the long-term? Can the central bank do all the heavy lifting?
  3. BOJ – nothing on the headline: The BOJ did trigger some action in the yen, which moved higher on the lack of immediate action. There were also some contradicting messages.
  4. BOJ – doing whatever it takes: By targeting long-term 10-year interest rates, the BOJ took a very bold step. It could change the course of the economy, well, for the long-term. ‘
  5. Preview: The only notable event apart from the Fed is the BOJ decision, which happens on the same day. A higher yen seems like a reasonable scenario.

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