Skip to Content
Credit Insights

Central Bankers Telegraph Monetary Policy Changes

Commodity prices continued to sink across the board the last week.

Central bankers were out in force last week giving speeches and interviews in order to telegraph their next moves to the markets. While it appears increasingly likely that the U.S. Federal Reserve will lift rates in December, officials have gone out of their way to let the markets know that the rate of further future increases will be exceedingly slow. For now, it appears the most likely outcome will be "one and done" for the near term. Fed Vice Chairman Stanley Fischer telegraphed a rate rise during a speech to the Federal Reserve Bank of San Francisco by saying, "In the relatively near future, probably some major central banks will begin gradually moving away from near-zero interest rates." While he said no decision has been made yet, he did say the Fed has "done everything we can to avoid surprising the markets and governments when we move, to the extent that several emerging-market (and other) central bankers have, for some time, been telling the Fed to 'just do it.' "

European Central Bank President Mario Draghi gave a speech in Frankfurt during which he bolstered the case for expanding easy monetary policy in the eurozone. He said that he thought the ongoing easy monetary policy was the dominant force spurring economic growth, but noted, "Downside risks to our baseline scenario for the euro area economy have increased in recent months" and "The strength of the underlying recovery is modest....The present upswing which started in 2013 is the weakest euro area rebound since 1998." Summing up the current situation, he said, "The recovery remains very protracted," and concluded, "If we decide that the current trajectory of our policy is not sufficient to achieve that objective [2% inflation target], we will do what we must to raise inflation as quickly as possible." The combination of these statements appears to advocate the expansion of the ongoing asset-purchase program and even lower (or more negative, as the case may be) interest rates at the ECB's next monetary policy meeting Dec. 3.