The BS Filter: 4 Takeaways From This Week's Central Bank Nonsense

Takeaway: Here's our take on some of today's top financial stories.

The BS Filter: 4 Takeaways From This Week's Central Bank Nonsense - central bankers cartoon 06.29.2016 

1. Fed

San Francisco Fed head John Williams kicked off a loaded week of central planning with this gem:

"It is getting harder and harder to justify interest rates being so incredibly low given where the U.S. economy is and where it is going. I would support an interest rate increase. I think that the economy can handle that. I don’t think that would stall, slow or derail the economic expansion."

 

The sentiment was reiterated by Fed Chair Janet Yellen in today's testimony before the House Financial Services Committee:

OUR TAKE: The Fed is obscuring reality for convenient (false) narratives about the U.S. economy. The data will win.

2. European Central Bank

This is the latest nugget from ECB President Mario Draghi in a speech to German Parliament today:

The BS Filter: 4 Takeaways From This Week's Central Bank Nonsense - draghi quote

OUR TAKE: A more clear summation of what Draghi actually meant would be: "Yes, ECB policies have gouged European bank profitability but some banks are still profitable." Not exactly a resounding defense of the ECB's unprecendented policies. 

3. Bank of japan

In BoJ Govenor Haruhiko Kuroda's first speech since the central bank's radical new proposals last week, he said the BoJ stood "ready to use every available tool to achieve its 2% inflation target." Kuroda continued, "There is no better opportunity than now to completely get out of deflation. Talking about the limits of monetary policy does not help at all."

In case you missed it, last week, the BoJ said it would try to keep 10-year JGB yields around 0%, instating what is effectively a ceiling on yields. The IMF gave the policy shift the thumbs up. “The change in the framework has made it clear that there are still tools available that allow monetary policy to be as accommodative as possible for the future and raise inflation expectations,” Luc Everaert, the IMF's chief for Japan, said in an interview in Tokyo on Monday. “We support it and we also find that the framework allows monetary easing to be more sustainable and more effective. New measures allow more flexibility and they can be kept in place for a longer time.”

OUR TAKE: We disagree with the IMF's assessment. The BoJ cannot pull the country out of its protracted multi-decade malaise. Click here to read what Hedgeye Senior Macro analyst Darius Dale has to say about the BoJ's "stench of desperation."

4. Bank of England

Finally, a bit of truth from a central banker. Britain is transitioning from “strong growth to something less than that,” Bank of England governor Mark Carney said earlier today, as individuals and businesses struggle with Brexit-related uncertainty. 

“We had expected in August that the economy would slow materially during the second half of this year, relative to relatively strong growth in the first half of this year,” Mr Carney said in an interview with Herald Scotland. “Broad brush, that is what we are seeing.

OUR TAKE: From Hedgeye CEO Keith McCullough...