Markets Weekly March 16, 2024

Hello my friends, today is March 16th and this is Markets Weekly. So this past week, not much happening in markets, basically some sideways moves trending lower, but this past week was also the passing of a major quarterly options expiry. And usually what happens is that after these large quarterly expirries happen, the market has more room to move. So let's see what happens next week. Now today I want to talk about three things. First, we have to talk about the inflation data that came out last week that seems to suggest that progress on disinflation is stalling and maybe maybe inflation is going to stabilize at a rate that is comfortably above the Fed's 2% target. Secondly, let's talk about what's happening in Japan. We got a lot of leaks the past week that the Bank of Japan is really, really this time around going to raise interest rates.

大家好，今天是3月16日，这是《市场周报》。所以在过去的一周里，市场并没有太多的变动，基本上是一些横向走势向下，但是这周也是一个重要的季度期权到期的时期。通常在这些重大季度到期之后，市场会有更多的空间来运动。让我们看看下周会发生什么。今天我想谈论三件事。首先，我们要谈论上周发布的通胀数据，这些数据似乎表明通胀放缓的进展正在停滞，也许通胀将稳定在高于美联储2%目标的水平。其次，让我们谈谈日本正在发生的事情。过去一周，我们得到了很多消息，日本央行这次真的很可能会加息。

Finally, exit negative interest rates and maybe even get rid of yield curve control. Let's talk about what's happening over there. And lastly, let's talk about the ECB's new operating framework. The ECB, like the Fed, has been shrieking their balance sheet and that has led them to change how they implement monetary policy. Let's talk about what their new framework is and how the Fed might potentially learn from them. Okay, starting with inflation. So just for some context, as you guys know, last month's inflation reading was higher than expected and it shocked the market. Now this past week, really kind of a replay. Inflation remains higher than many economists expect. So CPI looks like we had slight acceleration on a month over month basis and it looks like if you take a step back, it looks like on an annual basis that CPI seems to be stabilizing somewhere between 3% and 4%, which of course is comfortably higher than the Fed's 2% target.

最后，退出负利率，甚至可能摆脱收益率曲线控制。让我们谈谈发生了什么事。最后，让我们谈谈欧洲央行的新运作框架。欧洲央行和美联储一样，一直在扩大其资产负债表，这导致他们改变了货币政策实施方式。让我们谈谈他们的新框架是什么，美联储如何有可能向他们学习。好的，让我们从通货膨胀开始。所以作为背景，正如大家所知道的，上个月的通胀数据高于预期，震惊了市场。现在这个星期，实际上是一种重演。通货膨胀仍然高于许多经济学家的预期。CPI看起来在月度基础上有轻微加速，而且似乎如果我们退一步看，CPI似乎在3%到4%之间稳定，这当然明显高于美联储的2%目标。

Now one of the things that seems to be putting upward pressure on CPI inflation is this shelter component which has a large weight and was widely expected by many market participants to gradually decelerate and maybe go into deflation. But that just doesn't seem to be happening and if you take a step back, you can see that it looks like shelter inflation on a month over month basis is stabilizing at a pace that is above the pre-pandemic trend. Now there's some interesting work out that seems to suggest that one of the reasons for this upward pressure on shelter inflation might just be the tremendous surge in migration that the US is seeing. Again, a lot of this migration is illegal so we don't have super good statistics but some work suggests that last year alone the US increased its US migrants into the US were about 3 million people and if you have 3 million people coming into the country then obviously they have to live somewhere and maybe that's going to contribute to some upward pressure on shelter inflation and that's also what I'm going to be writing about this week looking to Canada as an example just what happens when you have tremendous amounts of migration.

目前，似乎对CPI通货膨胀产生上升压力的一个因素是住房组成部分，这一部分权重很大，许多市场参与者普遍预计它将逐渐放缓甚至陷入通货紧缩。但事实似乎并非如此，如果你退一步看，你会发现住房通货膨胀在月度基础上似乎正在以高于疫情前趋势的速度稳定。现在有一些有趣的研究表明，导致住房通货膨胀上升压力的原因之一可能是美国正在经历的移民激增。再次强调，很多移民都是非法的，所以我们没有非常好的统计数据，但一些研究表明，仅去年美国就增加了大约300万移民，如果有300万人涌入国家，显然他们需要住所，这可能会对住房通货膨胀产生一些上升压力。我在本周也将针对这一问题撰文，以加拿大作为例子，探讨当大规模移民涌入时可能会发生什么。

How does that in fact various aspects of inflation and what it might mean for monetary policy. Now in addition to CPI we also got PPI and PPI again was higher than expected and it looks like just looking at the past few months on a month over month basis it looks like it's not decelerating. Now PPI is important to many people because PPI feeds into PCE which is the inflation measure that the Fed cares about the most. Some forecasts on PCE are showing that we'll still suggesting that we're going to have continued disinflation in PCE inflation but I think these hotter than expected numbers do slow, I guess push forward the expectation of when PCE is forecast to finally trend towards the Fed's 2% target. Now the market took a look at this data and you know kind of reacted pretty notably to it so the first thing of course is to look at how the market is pricing in the path of monetary policy.

这实际上涉及通货膨胀的各个方面以及对货币政策可能产生的影响。现在除了消费者物价指数（CPI）外，我们还有生产者物价指数（PPI），而PPI又高于预期，从过去几个月的数据来看，它似乎并没有减缓。现在PPI对很多人来说很重要，因为PPI会影响到个人消费支出价格指数（PCE），这是美联储最关心的通货膨胀衡量指标。一些对PCE的预测显示，我们仍然有持续通货紧缩的趋势，但我认为这些高于预期的数据会推迟PCE最终趋向美联储2%目标的预期时间。市场对这些数据进行了分析，并且对此做出了显著的反应，首要的是观察市场对货币政策走势的定价。

Now recall earlier in the year the market was pricing in as many as 7 rate cuts for this year. In December the Fed had guided towards 3 cuts based on their dot plot and next week at the Fed's meeting we're going to get another dot plot. Now the market has been looking at the hotter than expected inflation data over the past 2 months and has radically changed its mind and today the market is pricing in 3 cuts this year basically they're on the same page as the Fed as of Friday. Now this is also impacting long-aditated interest rates as well so if you look at the 10 year yield you can see that it's up about 20 basis points over the week which is pretty notable. In a large part of that is the market reevaluating the path of policy where the market is taking that the Fed is going to be cutting fewer at a slower pace than the market thought earlier.

现在回想一下，今年早些时候市场上曾定价多达7次降息。在12月份，美联储根据他们的点图指引表示将降息3次，下周的美联储会议我们将会看到另一个点图。现在市场已经注意到过去两个月以来超出预期的通胀数据，并彻底改变了主意，今天市场定价今年将会有3次降息，基本上他们与上周五的美联储的意见一致。这也影响了长期的利率，所以如果你看看10年期收益率，会看到一周内上涨了大约20个基点，这相当明显。其中很大一部分是市场重新评估政策路径，认为美联储将以市场早前预期的程度更慢地降息。

Now over the past 2 years I've noticed that the market seems to be interpreting these changes so the equity market seems to be interpreting these changes in interest rates a little bit more differently. In 2022 as we all know equity market did terribly interest rates were going up and equity market was selling off but since last year I've noted that the market seems to care less and less about the rise in interest rates either the long-aditated interest rates or the path of Fed policy. It looks like they might possibly shake this off as well. One of the implications of this could be that the Fed simply still isn't very tight and so even as interest rates rise it's not really restrictive. So we'll know more about what the Fed is thinking this coming week at the Fed meeting and of course I will be back to give you an update on that could be late though since I'm traveling on that day.

在过去的两年里，我注意到市场似乎对这些变化的解读方式有所不同，因此股市似乎对利率的变化有了一些不同的解读。2022年，众所周知，股市表现糟糕，利率上升，股市在抛售，但自去年以来，我注意到市场似乎越来越不在意利率上升，不管是长期利率还是美联储政策的路径。看起来他们可能也会很快摆脱这种担忧。这可能的一个含义是美联储仍然不太紧缩，因此即使利率上升，也不会真正限制市场。我们将在本周的美联储会议上了解更多美联储的想法，当然我会回来给你一个更新消息，不过可能会晚一些，因为我当天正在旅行。

Okay, the second thing that I want to talk about is the Bank of Japan. So as we all know the Bank of Japan even as everyone in the Western world has been hiking interest rates to try to tame inflation the Bank of Japan has done nothing. Now inflation hit the US, hit your land, hit Canada, hit the UK, it also hit Japan as well. So if you look at Japanese inflation data you know that inflation has been comfortably above the Bank of Japan's 2% target for some time. However, now context matters here. Japan has also been struggling with a disinflation for a long time and so the Bank of Japan has been very slow in raising interest rates thinking that you know we've had such a long period of disinflation you know I don't want to find I don't want to raise interest rates the moment that I see some inflation because that's kind of what I've been wishing for for decades. So the Bank of Japan has been telling everyone that they want to make sure that this bout of inflation is sustainable and the key thing that they've been watching is higher wages. They want to have what they call a quote unquote virtuous cycle of higher wages and higher inflation which in the West we call a wage price spiral but if you're coming from an era of disinflation then you call it a virtuous cycle.

好的，我要谈论的第二件事是日本银行。正如我们都知道的，即使在西方世界的所有人都在加息以试图控制通货膨胀，但日本银行却没有采取任何行动。现在通货膨胀影响了美国、你们的国家、加拿大、英国，同时也影响了日本。因此，如果你看日本的通货膨胀数据，你会知道通货膨胀已经在一段时间内稳定地超过了日本银行的2%目标。然而，背景也很重要。长期以来，日本一直在与通货紧缩抗争，因此日本银行一直在非常缓慢地加息，认为我们经历了如此长时间的通货紧缩，我不想在看到一些通货膨胀时立刻加息，因为这是我数十年来一直期盼的。因此，日本银行告诉大家，他们要确保这波通货膨胀是可持续的，他们一直关注的关键是更高的工资。他们想要实现他们所称的“更高工资和更高通货膨胀的良性循环”，在西方我们称之为“工资价格螺旋”，但如果你是来自通货紧缩时代，你就称之为良性循环。

Now in Japan wages are set in the large part and kind of like a collective bargaining consensus format and we have results from the latest bout of negotiations and it looks like wages are going to be rising comfortably above 5% and that's basically the highest rate it's been increasing for a long time and that I think goes a long way towards moving Japan into a virtuous cycle of higher wages and highest higher inflation. So as they move towards that cycle the Bank of Japan now feels more comfortable in adjusting the monetary policy stance. So in heavy leaks that the Bank of Japan is probably going to be raising interest rates and its upcoming meeting so all that means is it's not going to be negative anymore and potentially even scrapping yield control. Now recall the Bank of Japan has this loose yield curve control framework where 10 year JGBs are not supposed to go above 1% it's not binding at the moment.

现在在日本，工资主要是以一种类似于集体谈判共识的形式进行确定的，我们已经有了最新一轮谈判的结果，看起来工资将舒适地上涨超过5％，这基本上是长时间以来增长最快的速度，我认为这在很大程度上有助于将日本推向更高工资和更高通胀的良性循环。因此，当他们朝着这个循环迈进时，日本央行现在感觉更容易调整货币政策立场。所以在强烈的泄露下，日本央行可能会在即将举行的会议上加息，这意味着它将不再是负利率，甚至有可能取消收益控制。现在回想一下，日本央行有一个宽松的收益曲线控制框架，其中10年期国债不应超过1％，目前这一框架并不具有约束力。

Now again the market took a look at this and immediately reacted just as you thought that it would. Again you have Japanese yen appreciating because of course you know if the Bank of Japan is raising interest rates and that's bullish for the currency and you could see some movement in the interest rate curve as well. But I think something interesting though is that the movement hasn't been very strong. Now I remember maybe one or two years ago people were talking about how this could potentially have tremendous financial stability implications because the yen is a funding currency too many too many trades across the world. If the Bank of Japan is hiking rates maybe that blows those trades apart but as you can see it doesn't seem like that's going to be the case. In fact on the rates perspective this looks like it was well telegraphed you don't see a big movement in the two year JGBs. On a currency basis it doesn't seem to have that much of an impact I think in large part because even if the Japanese Bank of Japan raises interest rates above zero you still have a very large interest rate gap between the US and Japan and of course the market is recently expecting that the Fed only cuts rates three times this year.

现在市场再次关注这一点，并立即做出了你所预料的反应。日元再次升值，因为你当然知道如果日本央行加息，这对货币是利好的，你也可以看到利率曲线上的一些波动。但我认为有意思的是，这种波动并不是很强烈。我记得也许一两年前人们谈论过这可能对金融稳定产生巨大影响，因为日元是全球太多交易的资金货币。如果日本央行加息，也许会打破这些交易，但正如你所看到的，似乎并不会出现这种情况。事实上，从利率的角度来看，这看起来被充分传达，我们并没看到两年期国债有很大的波动。从货币基础来看，它似乎影响不大，我认为主要是因为即使日本央行将利率提高到零以上，美国和日本之间仍存在很大的利率差距，当然，市场最近预计美联储今年只会降息三次。

So again the interest rate gap remains very large even if Japan does anything in this upcoming meeting I suspect that it's probably not going to be that impactful in the market. Because at the end of the day Japan is still going to be at zero interest rates even if it's not negative and inflation there is comfortably above 2% monetary policy appears to be quite loose. So that's definitely something to look forward to in the coming meeting.

因此，即使在日本采取任何举措，利率差仍然非常大，我怀疑在即将到来的会议中它可能不会对市场产生太大影响。因为归根结底，即使日本的利率不是负利率，通货膨胀率仍然稳定在2%以上，货币政策似乎相当宽松。因此，这绝对是我们值得期待的在即将到来会议中的事情。

Okay so the last thing that I want to talk about is the ECB's brand new operating framework. So if you are central bank you have an operating framework that you use to basically express changes basically to implement changes in interest rates. For example if you are looking at the US the policy rate is the federal funds rate and the Fed implements changes in the federal funds rate by toggling interest on reserves and the reverse repo facility offering rate. Now by changing the RAP rate and the IR rate the Fed can basically make the Fed funds rate go up or down.

好的，所以我想要谈论的最后一件事是欧洲央行全新的运作框架。如果你是一家中央银行，你有一个运作框架，用来表达基本上实施利率变化。例如，如果你看看美国，政策利率是联邦基金利率，美联储通过调整准备金利率和逆回购市场利率来实现联邦基金利率变化。现在通过改变逆回购市场利率和准备金利率，美联储基本上可以使联邦基金利率上升或下降。

Now the ECB in their new framework is changing slightly how they implement monetary policy. Now to be clear the ECB has three rates instead of two like the Fed. So at the bottom of their rate spectrum they have the deposit facility rate which you can think of as interest on reserves. Above that they have the main refinancing operations which is like their discount window and on top of that they have the marginal lending facility which is like emergency loans on an overnight basis to banks.

现在欧洲央行在他们的新框架下稍微改变了他们实施货币政策的方式。现在要明确的是，欧洲央行有三个利率，而不是像美联储那样只有两个。所以在他们的利率范围的底部，他们有存款利率，你可以把它看作是准备金利息。在这之上，他们有主要再融资操作，就像他们的贴现窗口，再上面他们有边际借贷设施，就像向银行提供的隔夜紧急贷款。

So over the past few years we note that the ECB like the Fed has been engaging in a lot of asset purchases and when the central bank goes and buys assets that increases the amount of reserves in the financial system and so the ECB like the Fed has significantly increased their balance sheet and is now in the process of shrinking their balance sheet. Now the ECB's framework from my perspective has two key changes and one that sets it apart from how the Fed is approaching this. The first major change is that they are moving from a supply driven framework when it comes to a demand driven framework and the second is that they are changing the spread between the main refinancing operations and the deposit facility from 50 basis points to 15 basis points.

在过去的几年里，我们注意到欧洲央行（ECB）和美联储一样，一直在进行大量的资产购买。当央行购买资产时，会增加金融系统中的储备金数量，因此欧洲央行和美联储都大幅增加了它们的资产负债表，并现在正在缩减资产负债表。现在从我的角度来看，欧洲央行的框架有两个关键变化，一个是与美联储做法不同的地方。第一个主要变化是他们从供给驱动的框架转向了需求驱动的框架，第二个变化是他们正在改变主要再融资操作和存款利率工具之间的利差，从50个基点减少到15个基点。

So in US terms you can think of them as narrowing the spread between interest on reserves and the discount window. So the first change is what I find the most interesting. So as central banks in the world are gradually shrinking their balance sheet they are facing a question just how much can they shrink their balance sheet. In Fed terms this is basically trying to figure out what is the lowest comfortable level of reserves. Now everyone knows that the banking system needs a certain level of reserves to function well but the problem is no one really knows what that level is.

因此，以美国术语来看，你可以把它们看作是在利息准备金和贴现窗口利率之间的差距缩小。我认为第一个改变是最有趣的。随着世界各国央行逐渐收缩资产负债表，他们面临一个问题，他们能收缩多少资产负债表。在美联储的术语中，这基本上是在尝试找出最舒适的准备金水平是多少。现在每个人都知道银行体系需要一定水平的准备金才能良好运作，但问题是没有人真正知道那个水平是多少。

So what the Fed is doing is that they're slowly shrinking their balance sheet and then looking at market signals such as where repo rates are. Let's just looking at where the fund to fund is, looking at the balance in reverse repo facility and so forth. The Traded Gauge, whether or not they are shrinking the balance sheet too much whether or not the financial system needs more reserves. So they are focusing it basically on a supply basis where they're trying to figure out just how much reserves should they supply or should they take away from the financial system.

因此，联邦储备委员会正在逐渐缩减其资产负债表，并关注市场信号，如回购利率的情况。他们正在查看基金之间的资金流动情况，观察逆回购设施的资产余额等等。他们正在观察交易规模，以确定他们是否在过度缩减资产负债表，以及金融系统是否需要更多的储备。因此，他们基本上是从供给方面进行关注，试图弄清楚他们应该向金融系统提供多少储备，或者应该从金融系统中收回多少储备。

Now the ECB is approaching this in a different way. Now they're not trying to figure out from a supply basis just how much reserves the banking system needs instead they're going to figure out from a demand basis. So what they're doing is that they're going to try to encourage their banks to tap the main refinancing operations whenever they need reserves. This main refinancing operations is basically like a destigmatized discount window. So what they're saying is that whenever a bank needs more reserves they can just go and they can borrow from the ECB.

现在欧洲央行采取了一种不同的方式。他们不再试图从供给的角度来确定银行体系需要多少储备金，而是从需求的角度来确定。因此，他们要尝试鼓励银行在需要储备金时使用主要再融资操作。这个主要再融资操作基本上类似于一个没有污名化的贴现窗口。因此，他们的意思是每当银行需要更多储备金时，他们可以去向欧洲央行借款。

And we can look at increased participation in these refinancing operations as indicator as to how much reserves the banking system needs will hold these, will hold these main refinancing operations periodically and looking ahead we will have even longer term of facilities as well. So what will happen is that as they gradually shrink the balance sheet if the banks need more reserves they'll just participate more in these operations. So they won't have to guess just how much reserves the financial system needs because you know if they shrink the balance sheet too much for whatever reason the banks can just go and borrow from the ECB.

我们可以将这些再融资操作参与的增加视为银行体系需要持有多少储备的指标，这些主要再融资操作会定期进行，未来我们还将提供更长期的设施。因此，随着它们逐渐缩减资产负债表，如果银行需要更多储备，它们将会更多地参与这些操作。因此，他们不必猜测金融体系需要多少储备，因为你知道，如果由于某种原因资产负债表过度缩减，银行可以向欧洲央行借款。

So problem solved no need to do any calculations we'll just let reserves will basically be available on demand to the banking system through these operations whenever they want. Now related to this point is they're changing of the spread between the main refinancing operations and their deposit facility. The spread was 50 basis points now it's 15. Now the purpose of this change is to encourage banks to borrow from the ECB again to make it basically reserves on demand by decreasing the cost of carry. But they still maintain a small spread between borrowing from the ECB and the deposit facility rate and they want to maintain the small spread because they still want to have some degree of intermarket activity.

问题解决了，不需要进行任何计算，我们将让储备基本上随需应变地对银行系统开放，他们想要时可以利用这些操作。现在与此相关的一个问题是主要再融资操作和存款利率之间的差价的改变。差价曾经是50个基点，现在变成了15个基点。这个变化的目的是鼓励银行再次向欧洲央行借款，通过降低持有成本使得基本上基金随需可得。但他们仍然保持欧洲央行借款和存款利率之间的小差价，他们希望保持这个小差价是因为他们仍然希望保持一定程度的市场活动。

So for example they would select banks to participate in the markets the money markets and so that the money markets don't completely wither away. So for example what if money market rates are trading at five basis points above deposit facility rate in US terms five basis points above interest on reserves. Well then the bank can go borrowed from the market rather than going to borrow from the ECB. It's their way of compromising between encouraging borrowing from the ECB and still maintaining some degree of money market activity. Now from my perspective this demand driven framework is a much smarter way to approach shrinking the balance sheet. No one has any idea what the lowest current level of reserves is and to be perfectly clear something like that is going to be dynamic like anything else in markets and it's going to change according to market sentiment.

因此，例如，他们会选择银行来参与货币市场，这样货币市场就不会完全消失。例如，如果货币市场利率以基点在美国存款设施利率以上五个基点在准备金利息以上五个基点进行交易。那么银行可以从市场借款，而不是从欧洲央行借款。这是他们在鼓励从欧洲央行借款和仍然保持一定程度的货币市场活动之间找到的妥协方式。从我的角度来看，这种需求驱动的框架是处理缩减资产负债表的方法。没有人知道当前准备金的最低水平是多少，要非常清楚的是，这样的事情会与市场上其他任何东西一样动态，会根据市场情绪而变化。

Now we see some indication that the Fed may be trying to follow in this way as well. One indication is that the Fed seems to be pushing for a destigmatized discount window which of course would be very helpful. And of course we have the standing repo facility which in a sense allows dealer affiliated bank dealers affiliated with the bank and commercial banks themselves to borrow reserves from the Fed whenever they want. So and to the best of my knowledge it's considered to be a facility without any stigma. So in that instance you can continue to shrink your balance sheet and not worry about overshrinking it because in case you overshrink it the banks will feel comfortable just tapping these facilities. I suspect that this is ultimately the path the Fed is moving towards as well although it's going to take a bit longer to get there because we still have stigma around the discount window.

现在我们看到一些迹象表明美联储可能正在尝试以这种方式跟随。一项迹象是美联储似乎正在推动一个没有污名化的贴现窗口，这当然会非常有帮助。当然，我们还有存款准备金回购设施，从某种意义上讲，它允许与银行有关联的交易商以及商业银行随时向美联储借入准备金。据我所知，这被认为是一个没有污名的设施。因此，在这种情况下，您可以继续缩减您的资产负债表，而不用担心过度缩减，因为如果您过度缩减，银行将感到轻松地利用这些设施。我怀疑美联储也最终会走向这条道路，尽管要更长一些时间才能到达那里，因为我们对贴现窗口仍存在污名。

Alright so that's all I prepared for today. Thanks so much for tuning in and of course I will be back with my FOMC debrief on Wednesday. And if you're interested in hearing more about my thoughts check out my blog at FedBad.com and of course my course is at CentralBanking101.com. Talk to you guys soon.

好了，今天我准备的就是这些。非常感谢你们的关注，当然我会在周三回来进行 FOMC 总结。如果你想了解更多我的想法，请访问我的博客 FedBad.com，当然还有我的课程网站 CentralBanking101.com。很快再和你们见面。