US Open – Low Rates Here to Stay

Mixed End to the Week

European stock markets are heading for a mixed end to the week, with those in the US taking a similar approach after venturing back into record territory on Thursday.

The promise of lower rates for longer was music to the ears of Wall Street bulls, with the banks loving the steepening of the yield curve that accompanied the statement.

In theory, by aiming for 2% average inflation, the central bank should hold off a little longer before raising interest rates. Whether they do so to any significant degree is another thing. They haven’t had a great record of reaching their previous target.

And the fact remains that we are nowhere near the point of a tightening cycle so it will be a long time until we actually see this new policy in action. For now, little has changed. The taps will be on for the foreseeable future as the economy recovers from the wreckage of the pandemic, hopefully aided by a vaccine later this year.

Japanese stocks slip as Abe offers resignation

Japanese stocks took a hit overnight as rumours began circulating that Prime Minister Shinzo Abe would resign for health reasons.

The rumours were confirmed this morning, bringing a sad end to Abe’s eight year reign, the longest serving leader in the country’s history. The timing is also not ideal as the country grapples with the pandemic but this is the primary reason for his resignation as he didn’t believe he was up to the task due to his health.

Abe’s resignation comes a year before the end of his term so I can’t imagine there’ll be any dramatic change, as far as policy is concerned, not until after the election. After that, the country may move onto a new model after almost a decade of Abenomics, which did not deliver the inflation the Prime Minister hoped to achieve.

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