The curate's egg of negative rates
"IMF supports move to negative rates by some central banks." "Negative rates could fuel fresh 'boom and bust', IMF warns." The two apparently contradictory headlines appeared on Sunday. It seems that the International Monetary Fund sees negative rates as both a good thing and a bad thing.
The "good thing" piece was written by José Viñals, the IMF’s financial counsellor and director of monetary and capital markets. His angle was that "overall, [negative interest rates] help deliver additional monetary stimulus and easier financial conditions, which support demand and price stability." The "bad thing" piece noted the risk that "Negative interest rates may induce boom and bust cycles in asset prices." It was penned by José Viñals, the IMF's financial stability chief… hang on, isn't that the same bloke?
Not only is it the same writer but the two headlines refer to the same blog on the IMF website. Sr. Viñals's own headline "The Broader View: The Positive Effects of Negative Nominal Interest Rates" implies a tilt towards the good-thing interpretation. However, under the heading "Are there unintended consequences?" his conclusion is yes, possibly. With further downgrades to the IMF's global growth outlook expected this week, no wonder confused investors seek the shelter of the safe-haven yen, franc and euro.
Sterling dodges production bullet
Against the run of play, sterling had a reasonably good day on Friday. That is not to say it strengthened: it was down by an average of -0.2% against the other dozen most actively-traded currencies. But it did well to avoid getting buried by disappointing ecostats.
The UK industrial and manufacturing figures have a seemingly endless capacity to disappoint investors and Friday's were no exception. Both were lower on the month and the year. Britain's trade deficit narrowed in February but was still wider than expected. Yet investors held back from punishing sterling.
It seemed, in fact, as though they just couldn't be bothered on Friday. The Norwegian krone and the South African rand were the biggest movers, strengthening by nearly 1%, and the US dollar brought up the rear with a -0.5% decline. Otherwise there was not a lot to see. Sterling was steady against the euro, the Swiss franc and the Aussie dollar.
Only the most imaginative investors will be able to find inspiration among today's meagre crop of economic statistics. The most important of them, for Chinese inflation, are already out, showing consumer prices rising by 2.3% in the year to March and producer - factory gate - prices falling by -4.3%.
The only Euroland data relate to Italian industrial output. There are no US statistics and nothing from the UK until midnight, when the British Retail Consortium releases its retail sales figures for March. So make the most of the Norwegian inflation numbers at ten o'clock.
And don't worry, today's thinly-populated agenda is the quiet opening to what could be an eventful week. UK inflation will get things going tomorrow.