Recap: The Most Relevant Remarks From Central Bankers This Week

Wow… what a week, right? With so many remarks from central bankers, it’s hard to follow up on everything. We’ve compiled the most relevant quotes from each of them and put them together so you can easily understand where monetary policy is heading.

The week began with European Central Bank President Mario Draghi speaking with students of the University of Lisbon on growing income inequality within the bloc.

“Is this a seriously destabilising factor that we should cope with? Yes it is [...] We have to fight against inequality,” explained Draghi, arguing that education, innovation and investment in human capital, especially for young generations, are the right way to do it.

A day later, the ECB leader kicked off the annual ECB Forum in Sintra, with an unexpected change in his rhetoric on monetary policy tightening, one of today’s hot topics. Draghi, a loyal defender of quantitative easing and low interest rates, seemed to have opened up doors for a future adjustment on the bank’s policy if economic growth continued to be strong.

“As the economy continues to recover, a constant policy stance will become more accommodative, and the central bank can accompany the recovery by adjusting the parameters of its policy instruments -- not in order to tighten the policy stance, but to keep it broadly unchanged.”

While some analysts said the ECB could be on track for a tapering announcement in the following months, the 60-billion bond buying program is likely to remain in place for some time.

Also on Tuesday, Federal Reserve Chairwoman Janet Yellen participated at a meeting in London. However, she didn’t provide with relevant statements on monetary policy and reiterated that "the system is much safer and much sounder," while assuring that:

"After the financial crisis, those who see the damage in that type of thinking have played a major role in ensuring that we have a more appropriate system of supervision and regulation, hopefully for a good long time."

Bank of England Governor Mark Carney was another central banker talking the microphone this week at the ECB Forum. His comments on a possible rate adjustment boosted the pound vs the dollar to the 1.2915 level.

“Some removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional. [The decision] will depend on the extent to which weaker consumption growth is offset by other components of demand including business investment, whether wages and unit labour costs begin to firm, and more generally, how the economy reacts to both tighter financial conditions and the reality of Brexit negotiations. These are some of the issues that the MPC will debate in the coming months.”

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