- Central banks seems to be very concerned about the slowdown in the economic cycle sparked by trade tensions. As a consequence, they have been intensifying their communications about their willingness to act.
- While economic data fill up a mixed bag of signals, we are convinced that the quality of growth will likely lead to further economic weakness. However, we don’t think a recession is likely in the next 12 months.
- Markets will need a successful and consistent policy mix (ie, fiscal and monetary accommodation) to enjoy a further boost.
- Central banks are in a difficult position. Market participants require intensified efforts that might come at the cost of credibility erosion for central banks or could increase the perception that central banks are not independent of the government. Furthermore, if central banks read something worrisome such as high refinancing needs on debt burden in the US, they might have to align monetary policy with fiscal policy.
No systemic risk from SVB failure, but watch out for areas o...