All Eyes are on the Central Banks. Why?

Investors have become a little exited of late, judged by the rally in financial assets since early June. There focus has been on the Central Banks’ and in particular those of the US, the UK and of Europe.

Hope has been increasing that all three of them would be offering more stimulation, by way of more of Quantitative Easing, in the expectation that yet more debt will boost the economy. The expectation had been for the Federal Reserve Chair, Ben Bernanke, to announce something new at the annual Jackson Hole conference, but nothing transpired, increasing the pressure on the Bank of England and the ECB to deliver today at their respective policy meetings.

 

ECB head, Mario Drahgi, has been particularly vocal in respect of his powers, in particular on his understanding on the legality, or otherwise, of his intended actions, which the German Bundesbank suggests is illegal.

Either way, it is the German electorate who will pick up the major part of the future tax liabilities to pay for any ECB stimulus and judged by the chart above, they are likely to be displeased. Consumer confidence in Germany is following the trend seen for the wider Euro-Zone, lower.

There is a saying that “Talk” is cheap, “action” is required. The next few days may be very revealing.

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