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Draghi's QE Compromise

  • All signs point towards the ECB adopting sovereign QE in the New Year.
  • But given Draghi’s desire to appease the German-led opposition, the design of the policy seems bound to be second-best.

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Abe: Third time lucky?

Last weekend’s election saw Shinzo Abe triumph for the second time in two years to take office as PM for the third time. This stands Abe in good stead to be Japan’s longest serving leader in more than four decades. More importantly, it gives Abenomics the time it needs to re-establish firmer economic growth and reflate Japan on a lasting basis. 

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Jump-starting Germany: A menu for Merkel

  • German policymakers need to act to jump-start the stalled economy.
  • But complacency, compromise and the near-religious obsession with the balanced budget suggest the German economy will remain sluggish.
  • That’s bad for Germany. And terrible for the euro area. 

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Kuroda waves his wand again

  • The BoJ today defied expectations and unleashed a further expansion of its already massive QQE programme.
  • Not least by facilitating reforms to the GPIF pension fund, the new money  to be created by the BoJ will keep JGBs well supported, give a boost to domestic equities, and further weaken the yen.

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Rouble Trouble

Russian asset prices have got hammered as events in Ukraine and sanctions start to bite. Despite recent reports to the contrary, the current CBR leadership is likely to resist the imposition of capital controls. But as ever in Russia there are countless risks and almost anything is possible.