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Normalization

After the Fed decision on Wednesday, yesterday it was time for the ECB. As expected, rates in Europe had no change at 4% for the Depoait facility rate. It’s not clear what the oficial path will be for rates in Europe, but everything points toward normalization, which means lower rates during 2024, as Europe tries to increase its gdp growth. When it comes to full normalization, the next step is to reduce the balance sheet. The Fed and the ECB have been somehow disciplined and continue to gradually reduce it. China, through the PBoC, on the other hand, continues to pump money as they face growth headwinds and deflation. And Japan continues its own fight with the yield curve and the currency, and they’re fighting to keep inflation about 3%. There are coordinated efforts on the west when it comes to momentary policy, to lower inflation and normalized balance sheets, but not so much on the East, where they have different objectives.


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Chart source: FT



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