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Strategies & Market Trends : Dino's Bar & Grill -- Ignore unavailable to you. Want to Upgrade?

To: Goose94 who wrote (11433)	1/23/2015 9:02:53 AM
From: Goose94	Read Replies (1) \| Respond to of 203432

Global Central Banks Still Have The Pedal To the Metal The world remains awash in easy money. Global central banks continue to dish up more bond buying programs and lower interest rates in attempts to stimulate economic growth and to encourage inflation. In this environment, gold continues to do well, as the yellow metal punched back above the $1,300 per ounce level this week for the first time since mid August. This week, the European Central Bank (ECB) confirmed what everyone has been waiting for —that they will begin a large asset purchase program in March in an attempt to stave off a deflationary spiral. Also this week, the Bank of Canada unexpectedly cut interest rates there from 1% to 0.75% amid concerns that declining oil prices will weigh on the economy there. Even Denmark is getting in on the rate cutting action. Denmark slashed its main interest rate twice this week, tugging its deposit rate down to minus 0.35%. And, the Bank of England (BoE) may have switched from the hiking category to the "on hold" category for 2015. Along with the U.S. Federal Reserve, analysts were expecting the BOE to raise interest rates this year. However, that may be changing. "The Bank of England minutes struck a dovish tone. We have already pushed back when the BoE will begin normalizing rates, and odds are rising it won’t occur until late this year or early next," wrote economists at Moody's Analytics in a research note to clients. The Bank of Japan (BoJ) wrapped up its latest monetary policy meeting January 21 and left its quantitative easing program intact, which includes asset purchases aimed at increasing the monetary base at an annual pace of about 80 trillion yen, which is 16% of their GDP. What other central banks could dish up some surprises? "The next surprise move could come from the Reserve Bank of Australia, as commodity prices hurt growth and undermine inflation expectations," according to Moody's Analytics. Overall, disinflation remains a key theme and concern across the global economy and is a driver for central bank action. "Disinflation is intensifying across a good portion of the global economy. U.S. consumer prices fell 0.4% in December, leaving them up less than 1% on a year-ago basis. The German CPI posted a larger decline, falling 0.5% in December, leaving it up 0.2% on a year-ago basis. Euro zone CPI posted its first year-over-year decline in five years," wrote economists at Moody's Analytics. In the U.S. it is not only oil prices that are falling. The December CPI report revealed declines in used car vehicle prices (down 1.2%), apparel prices (down 1.2%) and airline fares (down 5%). Meanwhile, U.S. policy rates remain historically accommodative and at a record low zero to 0.25%. The U.S. Federal Reserve has widely broadcast its intentions to start hiking interest rates mid-year. Yet, the number and the pace of rate hikes could be slower than previously expected due to the soft inflation outlook. Don't forget, the U.S. central bank has its hands tied by a dual mandate to encourage full employment and stable prices. February Comex gold futures have climbed over 10% since the start of 2015. "Not surprisingly, gold has done quite well in this environment: with real interest rates firmly in negative territory in much of the world – including the U.S., this shiny brick that pays no interest appears to be a formidable competitor," wrote Axel Merk, president of Merk Investments in a research note to clients. Bottom line? The global economy still sees many challenges, and central banks are still driving the easy monetary policy train with no significant signs that the exit is near.