CNB: Michl Reaffirms His Monetarist Outlook, Flags Work On New Forecasting Model
Dec-20 09:47
The publication of the latest Central Banking interview with Governor Ales Michl yesterday may have been overshadowed by the Bank Board's rate decision, but sheds some light on the official's views on monetary policy. Note that the interview was conducted on November 15, but .
- Michl warned against excessive reliance on forecasting models and committing an error which in the automotive sector is dubbed "automation complacency." The Governor said that "often, the best approach is to step back, apply judgement and adapt to specific circumstances."
- According to the Governor, the CNB's dynamic stochastic general equilibrium (DSGE) forecasting model has (1) underplayed the role of money, (2) ignored the euroisation of the economy due to interest-rate differential with the eurozone, which weakened monetary policy transmission, and (3) was based on false assumptions about consumer behaviour in an inflationary environment - which is why the Bank Board defied its recommendations at the peak of the inflation episode.
- Ales Michl said that today's data reflects the past, "especially when we look at year-on-year inflation," which is why he monitors the momentum of core inflation and trends in monetary aggregates. Michl specifically pointed to a three-month average of M2 as an important guide. In his view, monetary aggregates are often missing from forecasting models.
- The Governor said that he does not anticipate any changes to the key macroprudential parameters, including the countercyclical buffer (CCyB) rate, in the near future.
- The CNB commissioned a review of its models and may develop new ones, which could challenge the current universal DSGE model. Michl observed that the CNB is possibly one of only three central banks in the world that still uses a DSGE model.
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CROSS ASSET: Higher Yields push USDJPY through session high.
Nov-20 09:31
- Like clock work, the continuation lower in Tnotes, now through the intraday low is in turn helping USDJPY session high, and towards 156.00.
- Next support in TYZ4 is seen towards 109.10.
- Small resistance in the USDJPY falls to 156.24, followed by 156.75 High Nov 15
ECB: Volatile Environment Keeps Financial Stability Vulnerable
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The ECB's November Financial Stability Review is here. From our Policy Team: The European Central Bank sees elevated financial stability vulnerabilities from the “volatile environment” with growth risks to the downside, geopolitical uncertainty, high valuation and risk concentration and debt sustainability concerns in some countries.
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GILT AUCTION PREVIEW: Auction / Syndication Rescheduling
Nov-20 09:10
The DMO has announced the following rescheduling:
- "The auction of a new conventional gilt in the 10-year maturity area expected to be launched by syndication in February 2025 that was previously scheduled for Tuesday 11 March 2025 is being moved to Wednesday 12 March 2025."
- "The auction of 4⅜% Treasury Gilt 2028 that was previously scheduled for Thursday 20 March 2025 is being moved to Tuesday 18 March 2025."
- "These changes take into account the planned syndication of a new index-linked gilt maturing in the 20- to 25-year area that is due to take place in March 2025, subject to demand and market conditions."
