Written with Aline Goupil Raguénès
Last week, during her speech at the Congress, Janet Yellen, the president of the Federal Reserve, highlighted the importance of inflation expectations stability. Stability is key in the design and calibration of monetary policy.
Nevertheless, when we look precisely at these expectations, there are doubts on their stability in the current period. Continue reading
Stock markets are trending downward very rapidly everywhere in the world. In France the CAC40 has lost 13.8% of its value since the beginning of the year. At the same time, interest rates converge to 0% or below. In Tokyo, the 10 year government bond yield is now below 0%. According to the FT yesterday, the volume of government bonds that is traded below 0% has now reached USD 6tn close to one third of the market.
How can we understand this phenomena?
Financial markets momentum depends mainly on expectations. Those latter are usually conditioned by economic prospects. But it is not sufficient at this moment. Communication from central banks is key to understand the current financial market behavior. Continue reading