Home Week in Macro Central Banks Rethink the Future

Central Banks Rethink the Future

While Brexit continued to distract the world, last week was dominated by central bank decisions to accommodate a more uncertain future. The Fed held rates, Norway increased them and France and the Netherlands went green.

In the intersection of macroeconomics and sustainable finance, we reported on moves from the central banks of France and of the Netherlands to align their asset management policies with the transition towards a sustainable and carbon neutral economy. DNB became the first central bank to sign the UN’s PRI while France has also decided to start integrating ESG into its asset management.

Across the pond, the Fed was also rethinking the future, albeit not in shades of green. The US central bank met and decided to keep rates on hold. More importantly, the materials published included projections from the members of the FOMC regarding their expectations of the future path of the target Fed Funds rate, which clearly showed a dovish revision of expectations since December. According to this information, it now seems unlikely that the Fed will raise rates this year, realigning it with the ECB, BoJ and BoE, who have remained dovish.

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On the same day, in Norway, Norges Bank went the other way and increased its key rate from 0.75% to 1% at its monetary policy meeting. The expectation is for another rate hike throughout 2019, unless international growth slows down.

Politically, Ukraine stands before a fateful crossroads ahead of the first round of its presidential election on March 31. With the very real possibility that a comedian – whose calling card is to impersonate a president – will reach the second round scheduled for April 21, Ukrainians face a choice that will fundamentally determine the course of the country for the next five years. Between disenchantment with corruption that the current administration of President Petro Poroshenko is perceived to have failed to overcome, economic and social conditions have nevertheless improved, making the choice for Ukrainians a more fundamental one between East and West.

Another week, another drama in the saga that is Brexit. Following the refusal of House of Commons speaker John Bercow to allow Prime Minister Theresa May to hold yet another vote on her Brexit plan, Mrs May was forced to ask the EU for an extension to Article 50, meaning the earliest the UK can now leave the EU is April 12. This triggered a further leadership crisis and rumours of jockeying for a replacement for Mrs May, while the week culminated in mass demonstrations in London. In the week ahead MPs will debate possible alternatives to the government plan while Mrs May will see whether she can still get a third vote for her plan, setting up whether the House of Commons will hold a vote for it or hold indicative votes for an alternative plan

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