· MPC minutes showed an 8-1 vote for the status quo. Posen switched his vote from more QE to no change.
1. the path for inflation in the short run was likely to be higher than indicated in the most recent Inflation Report central projections. The speed at which inflation would return towards target could not be judged with any precision and there were risks on both sides
2. For one member, the balance of risks continued to warrant an expansion of the asset purchase programme this month, although the decision was finely balanced
· Warren Buffett was diagnosed with Stage I prostate cancer, is undergoing treatment. Prognosis favorable
- UK Claimant Count Rate declined to 4.9% in March vs 5.0% and prev
- Thurs: US Jobless Claims, Philly Fed, Existing Home Sales, EU Cons Conf
- Fri: German IFO, PPI, Canada CPI
- Mon: China HSBC Flash PMI, EU PMIs, Australia CPI,
- Tues: Swiss Trade Balance, Canada Retail Sales, US Consumer Confidence, New Home Sales
Here is a possible scenario for the BoJ: Since 1) it doesn’t believe QE will work and 2) it is under political pressure to do more QE, it may drag its feet and pledge to do incrementally more QE over time. It may hope that after sufficient time has passed, the politicians will come around to the view that additional QE is not helpful. This strategy also limits BoJ’s balance sheet growth. If this scenario plays out, we’re likely to get additional QE increases at upcoming meetings, with a diminishing effect on asset prices.
Separately, now that the BoC has turned hawkish – it’s time to start monitoring the Canadian housing market.