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Tag Archives: Central Banks

Central Banks on a Preset Course Reduces Significance of High-Frequency Data

Arguably the most important data next week is the flash PMI. It is not available for all countries, but for those generally large G10 economies, the preliminary estimate is often sufficiently close to the final reading to steal its thunder. Moreover, and this applies to high-frequency data more broadly, given the overshoot of inflation in most counties, with some exceptions, notably in Asia, central banks appear to be on set courses.  The near-term data are...

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SNB’s Zurbruegg: It is not roll of monetary policy to cure risks to financial system

Vulnerabilities have increased and Swiss real estate market Swiss apartments overvalued by 10% to 35% SNB continues to monitor developments in real estate market It is not roll of monetary policy to curb risk to financial system The  USDCHF  is trading back below its 100 hour moving average at 0.93129 and its 200 hour moving average at 0.93304. However at the low today, the pair did find support against what has been a swing area between 0.9293 and 0.92964. The...

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SNB introduces possibility of repo rate transactions being indexed to policy rate

The Swiss central bank says it is to enhance flexibility in steering money market interest rates This will be added to the SNB’s monetary policy repertoire moving forward but not before some test operations are conducted. For the time being, the central bank implements monetary policy by setting the SNB policy rate so this just adds to the tools they can play around with. However, I still see the key policy rate as being the main weapon in the armory. The full...

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Ukraine and the Next Wave of Inflation, Part II, Can Russia Enact a Gold Standard?

Can Russia Enact a Gold Standard? In Part I we discussed how the fallout from the Russian invasion of Ukraine will lead to inflation, but not in the way most people think.  In Part II we discuss the possibility of Russia repudiating the dollar and going on a gold standard. Can they do it? How would the world react? Why not enact a Bitcoin Standard instead? The Russian central bank reportedly has over 2,000 tonnes of gold. We have seen three arguments repeated many...

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SNB says remains prepared to intervene in FX market if necessary

Franc is currently sought after as a refuge currency Franc appreciation also reflects inflation differential between Switzerland and other countries The franc continues to be highly valued SNB looks at overall currency situation Individual currency pairs do not play a special role Some verbal intervention there by the SNB but in typical cases for the franc, actions speak louder than words. That said, this could be a precursor before the “invisible hand” steps in. So,...

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SNB Jordan: Strong Swiss Franc limits Swiss inflation

SNBs Jordan Strong CHF limits swiss inflation See no sign swiss wage price cycle Inflation stubbornly above 2% would lead to policy tightening Difficult to say whether global rates have turned, much still depend on economic development CHF has remained stable in real terms Asked about real estate prices, Jordan says monetary policy aims primarily at price stability The SNB is not investing in crypto currencies The USDCHF has moved to new session lows (higher CHF)...

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SNB says successfully tested use of digital currency to settle transactions with top investment banks

The latest trial could see the introduction of central bank digital currency move a step closer in Switzerland. The SNB says that they integrated the digital currencies into payment systems and used them in simulated transactions involving UBS, Credit Suisse, Goldman Sachs, and Citigroup. The test showed it was possible to instantaneously execute payments, ranging from CHF 100,000 to CHF 5 million, elimination counter-party risk. I still think it will be a while...

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Testing The Supply Chain Inflation Hypothesis The Real Money Way

Basic intuition says this is a no-brainer. Producer prices rise, businesses then pass along these higher input costs to their customers in the form of consumer price “inflation” so as to preserve profits. This is the supply chain hypothesis. Statistically, we’d therefore expect the PPI to lead the CPI. And this was expected for much of Economics’ history, taken for granted as one of those self-evident truths (kind of like the Inflation Fairy). After the dreadful...

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Why Governments Hate Gold

Do governments hate gold? The answer: Yes — Governments hate gold because they cannot print it, and it is difficult for them to control. Because they cannot print it or easily control it, gold has little use to them during the never-ending schemes to tax and then redistribute wealth. India is a recent example of a government trying to control gold imports through increased taxation on imports and imposing rules, such as that importers had to re-export 20% of imports...

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Why Do Central Banks Want Higher Inflation?

Why do Central Banks want higher inflation? The debt ceiling debate in U.S. Congress and related political nonsense brings even more to light the exponential growth in US federal government debt. US government debt has doubled in the 10 years since the last major debacle Congress created over raising the debt ceiling back 2011. The debate and Congress’s unwillingness to increase the limit back in August 2011 resulted in declining equity markets. It also resulted in...

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