Can Mario Draghi from the ECB boost expectations for action?

Mario Draghi can he enhance the expectations of action?

This week, the European Central Bank's annual forum in Sintra, Portugal, is for investors an essential pow-wow of central bankers, academics and economists on "monetary policy issues".

This event is often a market driver, especially in 2017, when ECB President Mario Draghi sent the euro flying, claiming that the "threat of deflation was gone."

This year, the topics to be treated will not be missed.

Mr. Draghi is in a delicate situation. After the last central bank's interest rate decision, it gave up strong suspicions that further monetary stimulus, in the form of rate cuts or even bond purchases, could be the gloomy global economic outlook. But markets have so far largely failed to meet its usual charms. The Bunds rebounded, but mainly on geopolitical fears, while the euro held up well. Policymakers are confused by traders' reluctance to subscribe to Draghi's message, but investors wonder if the central bank really has the chance to unleash a new wave of firepower and what will happen if Mr Draghi resigns in October.

Adding to the pressure on Mr Draghi, market-based future inflation expectations suggest that investors have little confidence in the rate's ability to return to the ECB's target. Sintra offers the President of the ECB a forum to try to remedy the situation. Katie Martin

Will the Fed confirm a likely rate cut?

The meeting of Federal Reserve decision makers on Wednesday will be the most important event for financial markets this week, with the potential to either reinforce the recent recovery or neutralize it.

Although almost all economists surveyed by Bloomberg expect the central bank to keep interest rates between 2.25% and 2.5% – and the markets expect a 20% probability of a reduction – we expects officials to make strong allusions to an easier policy. is in the mail. The futures market for federal funds indicates that there is a very high probability of rate cuts in July and some investors, such as Pimco, estimate that a half percentage point reduction is a possibility . The Fed likes to be predictable and if it plans to ease its monetary policy in July, it will likely want to signal it forcefully at this week's meeting.

However, this could lead to a fall in markets if the Fed did not anticipate a reduction in future rates. Some officials made it clear that they were inclined to cut interest rates, but others did not. Fed Chairman Jay Powell has not been hired, even though he insisted the central bank would be "agile" and would monitor economic data for signs of worrying weakness. . Jan Hatzius, chief economist at Goldman Sachs, broke with his Wall Street counterparts and predicted that the Fed would not even cut rates later this year.

"The committee is facing a delicate balancing act," he said in a note. "On the one hand, President Powell and his colleagues must continue to signal that they would respond to significant adverse shocks by relaxing their policies. On the other hand, they will not want to entertain the hope that the cuts are imminent. . . In such an environment, the right thing to do is to retain the optional character. " Robin Wigglesworth

Could the Bank of Japan surprise at its monetary policy meeting next week?

Japan's central bank will hold its next monetary policy meeting in Tokyo on Thursday. Faced with the prospect of a rate cut by the US Federal Reserve, some have begun to speculate that the Bank of Japan could act in concert to mitigate the impact of a dollar weakened. by the easing of the United States.

For now, at least, this outlook is long, as badysts do not expect any action from the Fed at its own monetary policy meeting next week. Marcel Thieliant, senior Japanese economist at Capital Economics, said that although the Japanese economy is expected to slow down over the months, the BoJ "remains concerned about the impact of low interest rates on the economy. financial stability and we believe that it will keep the political parameters unchanged. in the foreseeable future ".

Pressure on the Japanese economy could increase if other central banks begin to cut rates and push up the yen, and the currency's safe-haven status could be further boosted by investor panic if the United States and China can not reach an agreement at the G20 summit in Osaka. at the end of this month.

According to Mr. Thieliant, what could ultimately force the bank is the increase in the sales tax that will come into effect on October 1, but only if it seriously impairs consumer demand. Given that previous increases in tax rates and interest rates in Japan were quickly followed by recessions, this is a real possibility. Hudson Lockett