The ECB ready to maintain its accommodative policy in 2019

The ECB puts all its energy on it but inflation does not converge frankly towards the objective (2%) it has defined. Can we say, like Mario Draghi, that the Quantitative Easing has worked properly?
Yes probably on the activity. The fall of all the interest rates has modified the inter-temporal trade-off on consumers’ side favoring the immediate expenses to the detriment of the future expenses.
On inflation? Yes, if the recovery helped to avoid deflation but beyond? We can wonder. Convergence towards the ECB’s target is postponed year after year.
Forecasts on growth (convergence towards potential in 2021 estimated at 1.5% by the ECB) and on inflation, suggest, except to change the reaction function, that the ECB will remain accommodative for a extended time.

Large US trade imbalance and the Fed’s tightening

The US external trade is weakening rapidly. Its deficit has never been so important (measured in real terms and ex oil trade). Imports have a strong momentum. It reflects the White House fiscal strategy and it is done at the expense of American citizens. Not the good strategy. This large imbalance is also a good reason for the Fed to maintain its tightening bias in order to limit the domestic demand momentum. Powell has spoken many times of the non sustainable fiscal policy of the White House. This trade imbalance is just an illustration of it.

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The flattening of the yield curve and the possibility of a recession in the US.

First step the 5yr-2yr spread is now null before being negative with the Fed tightening. Then the 10yr-2yr will flatten before being negative for the same reason. This has always been a signal of recession. This time is not different and 2020 can be anticipated for it.
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The two curves have the same pattern even if levels are different. They provide the same message for 2020.
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