How much fire power do Central Banks have? – ANZ

By FXStreet Analysts at ANZ explained that markets continue to fret over how much firepower central banks have left and whether reassuring words and pre-emptive actions will be sufficient to keep the global expansion on track.

Key Quotes:

“Activity sides of economies have generally fared reasonably well thus far, but with inflation already very low, the risk is that an adverse global shock could generate a bout of sustained outright deflation, which is likely causing some sleepless nights in the central bank fraternity. Today, no change is expected by the BoJ, given Kuroda’s positive view on the economy and the impact of the January rate cut.

Risks, however, are skewed to more policy easing in the coming months given the likelihood that inflation is unlikely to hit its 2% inflation goal by late next year. Today’s RBA minutes will help ascertain whether the change in wording at its most recent policy assessment signals a more explicit easing bias. More easing is expected by the PBoC this year, but the timing and form of policy easing looks reasonably fluid at this stage.

The main game in town this week remains the Fed and while the probability of a March hike is sitting at just 6%, Yellen is …read more

Source:: FX Street