This week we turn our focus on central bank policy. We are in the middle of a very significant few days for central banks; the Bank of Japan (BoJ) and Federal Open Market Committee (FOMC) meetings over the next two days follow on from last Thursday’s European Central Bank (ECB) meeting. Richard Barwell, in “Decoding Draghi”, offers a more positive interpretation of the ECB’s announcements on March 10, arguing that the market has underreacted to some significant, market-friendly policy changes. One of these changes was the extension of quantitative easing (QE) to include corporate bond purchases, a measure which was expected to be adopted at some point in the future but which few market participants expected to be announced last week. Victoria Whitehead, in “ECB corporate bond buying”, argues that these measures represent a significant additional market positive for euro investment grade corporates, which are already in short supply and strong demand in an environment of ongoing hunger for safe yield. Lastly, Steve Friedman previews the upcoming FOMC meeting, in which he expects that the Federal Reserve will be able to successfully signal increasing confidence in growth and inflation normalisation whilst keeping rates on hold in the face of still-present downside risks.
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