Coppola Comment

In a speech in London the other day, Peter Praet discussed the ECB's unconventional policy measures. I was there, and I have to say that he deviated considerably - and rather entertainingly - from the version of the speech on the ECB website. But his core message was still the same: "Rates are expected to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases. So, no interest rate hikes for a long time to come. But that's not what his final chart says: Market expectations are that interest rates will start to rise any day now. And no, this is not expectations of rate rises due to the end of QE, which the ECB has arguably signalled for early 2018 (or at least it didn't signal that it wouldn't end then). This is the short-term rate, which is not directly affected by QE. Admittedly, future expectations of short-term rates in 2018 and beyond are close to the ECB's own predictions. But is that b...

My new Forbes post is on the limitations of central bank forward guidance, in the light of the US's taper decision and the UK's rising gilt yields. Markets will only be guided in the direction in which they were going anyway..... Read on here .