ECB: Nagel Sees "Profound Challenges" in Using R* As Monetary Policy Guide
Feb-12 17:39
ECB's Nagel joins a set of other ECB policymakers in downplaying the importance of the neutral rate of interest, r*, for near-term monetary policy in his lecture today in London at the 'Official Monetary and Financial Institutions Forum'. Key excerpts below:
- "The idea of the natural rate serving as a guiding star for monetary policy comes with profound challenges", citing high estimation uncertainty.
- Whilst discussing a range of different "r-stars", Nagel cites the conclusion from a recent academic paper from Prof. Ricardo Reis of: "Focusing exclusively on the return on government bonds as the measure of r-star, while neglecting the return on private capital, leads to the wrong policy advice" .
- "There is no reason to act hastily in the present uncertain environment", again steering away from an accelerated cutting cycle.
- "In my opinion, proceeding in a data-driven and gradual manner has served the ECB Governing Council well [...] Using r-star alone to navigate the monetary policy universe could be like flying almost blind. But having it as one of many instruments in your cockpit is highly useful", reiterating the well-known data dependance.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
SECURITY: Gaza Ceasefire Deal To Be Announced As Soon As Today, Jerusalem Post
Jan-13 17:26
The Jerusalem Post reporting that a Gaza hostage-for-ceasefire deal, "will likely be announced Monday night or Tuesday morning" following an agreement for the exchange of 33 hostages held by Hamas in Gaza, accompanied with a "staged withdrawal of IDF forces from Gaza." Sources told JP that the IDF "would not fully withdraw from Gaza until every single hostage was released."
- The JP notes that negotiations for the latter stages of a withdrawal, and completion of hostage exchanges, will take place on the 16th day of the ceasefire. JP adds that, "Diplomatic sources said a cabinet vote and an expected High Court of Justice ruling on petitions to block the deal would also be necessary."
- The White House confirmed a short time ago that US President Joe Biden spoke today with Amir Sheikh Tamim bin Hamad Al Thani of Qatar to discuss the ceasefire release deal based on the framework Biden outlined in a speech on May 27, 2024.
- Amichai Stein at Kan reports on X: "Qatari Emir now meets with Hamas delegation to discuss deal."
- White House National Security Advisor Jake Sullivan is due to appear at the White House press podium in next few moments. He is likely to discuss the deal along with preparation for Biden's final foreign policy speech of his presidency at 14:00 ET 19:00 GMT today. LIVESTREAM
LOOK AHEAD: Tuesday Data Calendar: PPI, Fed Speakers
Jan-13 17:20
- US Data/Speaker Calendar (prior, estimate)
- 14-Jan 0600 NFIB Small Business Optimism (101.7, 101.5)
- 14-Jan 0830 PPI Final Demand MoM (0.4%, 0.4%), YoY (3.0%, 3.5%)
- 14-Jan 0830 PPI Ex Food and Energy MoM (0.2%, 0.3%), YoY (3.4%, 3.8%)
- 14-Jan 0830 PPI Ex Food, Energy, Trade MoM (0.1%, 0.3%), YoY (3.5%, --)
- 14-Jan 1000 KC Fed Schmid (text TBA, Q&A)
- 14-Jan 1500 NY Fed Williams open remarks (text, no Q&A)
FED FUNDS FUTURES: BLOCK: Aug'25 Fed Funds Buy
Jan-13 17:16
- +9,600 FFQ5 95.86, post time offer at 1211:45ET, DV01 $400,000. The August contract trades 95.86 last (-0.010)
Related bullets
Related by topic
EUR/USD
Bunds
Germany
Euribor
European Central Bank
Schatz
Bobl
