BoE rate cuts ahead?

Very interesting speech today from the Bank of England's Chief Economist, Andy Haldane.

The transcript can be found here:

http://www.bankofengland.co.uk/publications/Documents/speeches/2015/speech810.pdf

 

The bit the market cares about is:

 

"I do not currently see an immediate case for

a policy change in either direction. If one

were required, given the asymmetry of

inflation risks, I think the chances of a rate

rise or cut are broadly evenly balanced. In

other words, my view would be that policy

may need to move off either foot in the

immediate period ahead, depending on which

way risks break."

It would appear that the BoE considers the deflationary threat to the UK is greater than the market has been pricing.

To be fair to Mr. Haldane, he has been putting out cautionary messages since last October, for example:
http://www.telegraph.co.uk/finance/economics/11168724/Andrew-Haldane-interest-rates-could-stay-low-for-longer-in-gloomier-economy.html 

One thing is for sure, Short sterling rallied hard and the curve flattened as higher rate probabilities were loosened.  Similarly the Pound has had a tough session against vs. EUR and USD.

That Haldane has upped the ante the day after the Fed dropped "patient" comes not as a great surprise. It would suit the BoE if the Pound were to decouple from the USD.

Pointing the finger at Varoufakis

Yanis Varoufakis was recently accused of "sticking the finger" to Germany in a lecture he gave in Zagreb in 2013.  The background to the story can be found here:
http://www.telegraph.co.uk/finance/economics/11474348/Greeces-rock-star-finance-minister-denies-sticking-the-finger-to-Germany.html

Unsurprisingly, the story was grabbed by the German media, most notably Gunther Jauch, one of their most respected TV hosts, and caused great offence around the general public.

Varoufakis vehemently denied the accusation and described the video as doctored, but even the Telegraph poll suggested only 10% of viewers believed it thus.

Well it turns out it was a very elaborate hoax, which has been revealed by Suddeutsche.de. The article and YouTube can be found here:
http://www.sueddeutsche.de/panorama/varoufakis-bei-guenther-jauch-boehmermann-wir-haben-stinkefinger-gefaelscht-1.2400559

In the YouTube, there are English subtitles from minute 3.  It is worth watching. It shows how an actr was used with green screen technology to mock up the gesture. It is also quite alarming how even "experts" can be completely fooled by doctored imagery.

I haven't seen much press yet apologizing to Mr Varoufakis.

The Patient is dead.

The Fed has dropped "patient" from its statement.

The dot plot can be found here:
http://www.federalreserve.gov/monetarypolicy/fomcprojtabl20150318.htm

Front Dec dollars have rallied 10 ticks on the more benign plots, the S&P is up 30 points and ten year Notes are up three quarters of a point. 

Let's hope Europe doesn't spoil the party.

Are the stars about to align?

A fairly crucial meeting of the FOMC today, and the wording of the statement is eagerly anticipated. Will "patient" be removed, and will the market be able to infer a June or September lift off in rates?

Meanwhile, Greece is staggering towards another debt maturity on Friday, and plans as to how it meets the redemption seem sketchy at best, as it requests 11th hour meeting with EU leaders on Thursday.  The IMF today referred to Greece as its "most unhelpful client in 70 years", an accolade indeed. 

In Sweden, the Riksbank surprised markets with a cut in its repo rate to -25bp.

So do we get a clear signal from the Fed, lifting the dollar to ever more dizzying heights, whilst Europe slides further into deflation and Greece edges closer to a potential default?

One wonders why equity markets are so robust.