The Federal Reserve unveils a hypothetical scenario for this year's bank stress test.
Lagarde: Weak economic activity in the eurozone is widespread in all sectors.
Bailey: UK inflation is expected to fall to target in the spring.
The Central Bank of Russia announced that it would maintain its benchmark interest rate at 16%.
Zimbabwe will establish a currency board.
[Global Central Bank Dynamics].
The U.S. Federal Reserve recently released a hypothetical adverse scenario for bank stress testing this year. This is the first annual test since the collapse of several regional banks in the United States in March 2023. According to the Fed's release, this year's core test will look at banks rising by 6 percent in the unemployment rateWhether there is sufficient funds to lend to households and businesses at a peak of 5 percentage points to 10 percent。This year's test will cover 32 banks, some of which have as little as $100 billion in assets.
A look at last week's speeches by the Federal Reserve
Fed Governor Bowman said the Fed still faces many risks in the fight against inflation; It's too early for when and how much the Fed will cut rates; does not think it is appropriate to cut rates "in the near future"; The current federal policy rate is in an "appropriate position".
Federal Reserve Governor Barr said that the Fed's balance sheet reduction is running smoothly; The FOMC needs to see more good inflation data before cutting rates; CPI data suggests that the U.S. road to the 2% inflation target is likely to be bumpy; Full support for the normalization of the FOMC's monetary policy.
Goolsbee said inflation could be a little higher, but it was still possible to reach 2%; It does not support waiting for inflation to reach 2% before cutting interest rates; The Fed's inflation target is based on the PCE, not the CPI.
Daly said the Fed's three rate hikes this year are reasonable benchmarks. Policymakers need to be aware of two risks when setting monetary policy, namely slow progress in reducing inflation and a sudden deterioration in the labor market.
Bostic said that given the current economic situation, the Fed does not need to rush to cut interest rates; The strong economy supports the Fed's cautious adjustment of monetary policy and will continue to work to bring inflation down to 2%. Bostic expects the Fed to cut interest rates twice in 2024.
The Council of the European Union has adopted a resolution requiring financial institutions holding more than €1 million in assets of Russian** banks to separately account for the balance of funds arising from EU sanctions, as well as for the corresponding income.
A list of last week's speeches by the ECB**
ECB President Christine Lagarde said weak economic activity is widespread in all sectors, from construction and manufacturing to services. The ECB will continue to take a data-driven approach. The ECB needs more data to show that inflation will reach 2%.
ECB Vice President Guindos said some forward-looking survey indicators point to a pickup in economic growth in the future. The impact of rate hikes has not yet been fully felt; ** must be considered in conjunction with upcoming data.
ECB Chief Economist Lien said that the trend is good in the right direction in reducing inflation; The next step is to cut interest rates, but the timing depends on the data; There are risks associated with cutting rates too early or too late.
ECB Executive Board member Schnabel said that the continued low productivity growth, and even negative growth recently, increases the risk that companies will pass on higher wage costs to consumers, which could delay the return of inflation to the 2% target.
ECB Governing Council member Nagel said history has shown that easing monetary policy too early is worse than easing monetary policy too late.
ECB Governing Council member Hernandez de Cos said that the bank** shows that inflation will continue to fall, and the inflation rate will remain around 2% in 2025 and 2026, and core inflation is expected to continue to decline. As for the exact timing of the rate cut, it still needs some time to consider.
ECB Governing Council member Scicluna said it was open to a rate cut in March as inflation subsides; The European economy is facing a soft outlook.
Bank of Japan Governor Kazuo Ueda said that the Bank of Japan will carefully study various data and information in the hope of confirming whether there is a virtuous cycle of wage and price strengthening.
Bank of England Governor Bailey said that inflation is expected to fall to target in the spring; The question now is how long the policy will remain restrictive；The inflation situation in the spring will not determine the monetary policy stance; Inflation must be sustained to return to 2%.
The Central Bank of Russia announced on the 16th that it would keep the benchmark interest rate unchanged at the current level of 16%.
Riksbank Governor Tedten said that inflation has come down and stabilized, so interest rates should have peaked. The Riksbank is likely to cut interest rates in the first half of the year. However, there is a risk that inflation could rise again. Therefore, any rate cut must be done cautiously.
Zimbabwe announced that it would establish a currency board by pegging the exchange rate to hard assets such as **
The Bangko Sentral ng Pilipinas (BSP) maintained its policy rate at 650% unchanged, in line with market expectations. The Bangko Sentral ng Pilipinas (BSP) said the inflation path remains unchanged and a slight uptick is likely in the second quarter.
[Market Watch].
CICC research report believes that the Fed will basically not cut interest rates in March, and the May rate cut is not a "certainty", if the U.S. economy and inflation remain resilient, the Fed may be more cautious on the road to interest rate cuts. From the perspective of the general direction, it is still believed that US inflation will slow down this year. However, in terms of pace, there is a lot of uncertainty, because the recent Red Sea navigation safety problems have increased the risk of ** chain, coupled with the resilience of aggregate demand in the US economy and the still solid labor market, which may increase the stickiness of inflation. If supply is less stable and demand is resilient, then the Fed's easy rate cut could lead to further strengthening in demand and increasing the risk of "secondary inflation".
Bank of America said it was difficult to draw strong conclusions about the direction of the economy from January's volatile data, and investors should remain on the sidelines. The Fed is still expected to start cutting rates in June, although it prefers to delay them.
The new bond king" Gundlach believes that the market has overestimated the Fed's interest rate cut in 2024 a lot; The Fed prefers to take a slightly more conservative approach in the current economic situation; If the Fed cuts rates, it should be 50 basis points; It looks unlikely that rate cuts will start in May, and if possible, in June.
Ronald Man, a strategist at Bank of America, said the ECB's move to absorb trillions of euros of excess liquidity has pushed up borrowing costs in the region's funding markets. As the ECB makes further progress in reversing years of accommodative monetary policy, both secured and unsecured interest rates for banks in the region are likely to continue to rise. "The change in the repo rate undoubtedly reflects an increase in the demand for financing," he said, referring to the 11 trillion euros in Europe (11.).$8 trillion) market, which is important for the day-to-day liquidity of banks and other borrowers**. As the ECB shrinks its balance sheet, banks will compete more fiercely for reserves. ”
Analysts said that despite the ongoing focus on the Bank of Japan's policy normalization, the rebalancing of Fed expectations over the past few weeks has pushed USDJPY above 150. This is quite conclusive evidence that US interest rates are much more important to the pair than any small movement in Japanese policy rates or yields. And with the USD/JPY exchange rate back above 150, the question of whether to worry about intervention will arise. However, in the near future, this threat does not look particularly serious. After all, there are good reasons for USDJPY's ** and, more importantly, market conditions don't look chaotic. However, the pair may have the ability to move to around 155 for a fairly short period of time, and then one needs to worry about the actions of the Ministry of Finance or the Bank of Japan.
[Focus of the week].
Tuesday. 08:30 The Reserve Bank of Australia (RBA) released the minutes of its February monetary policy meeting.
Wednesday. 15:20 Bank Indonesia announces interest rate decision.
21:00 2024 FOMC voting committee member Atlanta Fed President Bostic speaks at an event.
22:00 Bank of England Monetary Policy Committee member Dingra speaks.
Thursday. 03:00 The Federal Reserve releases the minutes of its monetary policy meeting.
14:30 Bank of England Monetary Policy Member Greene speaks.
19:00 The Central Bank of Turkey announces its interest rate decision.
20:30 ECB releases the minutes of its January monetary policy meeting.
23:00 Fed Governor Jefferson speaks.
Friday. 02:00 Fed Governor Bowman speaks.
03:00 2026 FOMC Voting Committee, Philadelphia Fed President Harker speaks.
06:00 Fed Governor Tim Cook speaks.
06:00 2026 FOMC member and Minneapolis Fed President Kashkari speaks.
08:35 Fed Governor Waller speaks.
15:30 Bank of England Monetary Policy Member Greene speaks.
17:20 ECB Executive Board member Schnabel speaks.
18:00 ECB Governing Council member Nagel speaks.
Editor: Ma Mengwei.
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