Daily Insight
Group Economics Macro & Financial Markets Research
30 March 2016
A cautious Yellen focuses on risks Maritza Cabezas Senior Economist
Fed Chair Yellen delivers a considerably dovish speech on the global economy and outlook…
Tel: +31 20 343 5618
…while recommending a cautious approach to further rate hikes
maritza.cabezas@nl.abnamro.com
We expect rates to remain on hold in the coming months, reflecting our view of modest US economic growth. Moreover early rate hikes could unsettle markets
Aline Schuiling Senior Economist
Bank lending in the eurozone continues to rise
Tel: +31 20 343 5606 aline.schuiling@nl.abnamro.com
Chair Yellen delivers a dovish speech on the global economy and outlook… On Tuesday, Fed Yellen in a speech at the Economic Club of New York, showed her concerns about global developments and the ongoing risks, as well as the implications they could have for US economic activity. She mentioned that there was a lot of uncertainty regarding how smooth China’s transition will be. She also pointed to the risks of oil prices falling again and the impact for the global economy. …and described the US economy as ‘somewhat mixed’… As for the US economy, she expressed uncertainty regarding the inflation outlook, particularly given the recent financial market turbulence and the chance of a further slowing of the global economy. Such developments, in her view, could delay the return of inflation to the 2% target. Moreover, she signaled that a strong job market contrasted with manufacturing and net exports which continued to be hard hit. …recommending a cautious approach to rate hikes Given the risks to the outlook, Chair Yellen considered it appropriate for the Committee to proceed cautiously in adjusting policy. She mentioned that this caution was warranted because the federal funds rate was so low. We expect rates to remain on hold in the coming months. This reflects our view of modest economic growth in the US. In addition, early rate hikes could unsettle markets. Fed San Francisco President Williams more positive about the US economy… On Tuesday, the President of the Federal Reserve Bank of San Francisco, Williams, held a speech today in Singapore on the US economy, global growth and international risks in
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Daily Insight – A cautious Yellen focuses on risks- 30 March 2016
perspective. He is a non-voting member and is normally considered a dove. However, in the past few weeks, his remarks have been a bit hawkish. He is one of the Fed officials, that said some days ago, that rate hikes could be considered as soon as April. In his latest speech, he maintained a positive view on the US economy, expecting growth to be a bit above 2% this year and the unemployment rate to fall to roughly 4.5% by the end of the year. On top of this he mentioned that inflation is on track to move back to 2% over the next two years. …and stresses importance of communication to reduce the uncertainty of rate hikes Although he stressed the interconnectedness of economies means that normalisation in the US will cause market turbulence internationally, he mentioned the Fed’s communication will help reduce the uncertainty. In this speech he didn’t mention anything about when the Fed will raise rates.
Growth in eurozone bank lending % annual growth (adjusted for sales and securitization)
3 2 1 0 -1 -2 -3 -4 10
11
12
13
14
Non-financial corporations
15
16
Households
Source: Thomson Reuters Datastream, ABN AMRO Group Economics
Eurozone bank lending continues to rise The ECB report about Monetary developments in the euro area showed that growth in broad money supply M3 stabilised at 5.0% in February. The counterparts of money supply revealed that bank lending in the eurozone continues to increase. The monthly flow in loans to nonfinancial corporates (adjusted for sales and securitisation) was EUR 18bn in February, lifting the outstanding amount to EUR 4360bn, while loans to households increased by EUR 9bn to EUR 5652bn. Changes in bank lending tend to follow economic growth with a delay and the pick-up in annual growth in loans seems to reflect the pick-up in GDP growth in the final quarter of 2014 and the first half of 2015. Considering that GDP growth lost some momentum in the second half of last year, with qoq growth stabilising at 0.3% qoq in Q3 and Q4, we expect credit growth to stabilise at around the current level in the coming quarters.
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Daily Insight – Further ECB easing - 22 March 2016
Day
Date
Time
Country
Monday Monday Monday
28/03/2016 28/03/2016 28/03/2016
14:30:00 16:00:00
US US US
Tuesday Tuesday Tuesday Tuesday Tuesday
29/03/2016 29/03/2016 29/03/2016 29/03/2016 29/03/2016
01:30:00 10:00:00 11:30:00 15:00:00 16:00:00
Wednesday Wednesday Wednesday Wednesday Wednesday
30/03/2016 30/03/2016 30/03/2016 30/03/2016 30/03/2016
Thursday Thursday Thursday Thursday Thursday Thursday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday
Period
Latest outcome
Consensus
PCE deflator core - % mom PCE deflator core - % yoy Pending home sales - % mom
Feb Feb Feb
0.1 1.7 3.5
0.2 1.8 1.5
JP EC US US US
Unemployment - % M3 growth - % yoy Fed Williams speaks in Singapore S&P/Case Shiller house price index Conference Board cons. confidence - index
Feb Feb
3.3 5.0
3.2 5.0
Jan Mar
0.5 96.2
0.7 93.5
01:50:00 06:30:00 11:00:00 14:00:00 14:15:00
JP NL EC DE US
Industrial production - % mom Producer confidence manufacturing - index Economic sentiment monitor - index CPI - % yoy ADP nat. employment report - thousands
Feb P Mar Mar Mar P Mar
-6.2 3.1 103.8 0.0 213.8
-5.5 103.6 0.2 195.2
31/03/2016 31/03/2016 31/03/2016 31/03/2016 31/03/2016 31/03/2016
09:55:00 10:30:00 11:00:00 11:00:00 13:00:00
DE GB EC EC CZ US
Unemployment change - thousands GDP - % qoq Core inflation - % yoy CPI - % yoy Repo rate - % Fed's Dudley speeks on Financial Crises
Mar 4Q F Mar A Mar Mar 31
-10.0 0.5 0.8 -0.2 0.1
-5.4 0.5 0.9 0.0 0.1
01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016
01:50:00 03:00:00 03:45:00 09:00:00
JP CN CN NE EC GB EC US US US US US US US RU
Tankan business conditions large enterprises PMI manufacturing - index (official) PMI manufacturing - index (HSBC) - flash PMI PMI manufacturing - index PMI manufacturing - index Unemployment - % Change in employment private employment - thousands Change in employment total - thousands Unemployment - % Markit - Flash PMI Univ. of Michigan cons. confidence - index ISM manufacturing - index Fed Mester speaks in NY GDP - % yoy
1Q Mar Mar Mar Mar F Mar Feb Mar Mar Mar Mar F Mar F Mar
12 49.0 48.0 51.7 51.4 50.8 10.3 230 242 4.9 51.4 90.0 49.5
10 49.4 48.4
4Q
-4.1
10:30:00 11:00:00 14:30:00 14:30:00 14:30:00 15:45:00 16:00:00 16:00:00
Key Economic Indicators and Events
ABN AMRO
0.7 92
2.9 103.5 0.0 190
0.7 -0.4
51.8 51.4 51.2 10.3 196 203 4.9
10.3 190 200 4.9
90.7 50.6
90 51.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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