Reading some of the recent comments by central banks there seem to be three emerging themes over the last few months.

  • One, the move to negative rates is not having the intended impact on markets. It is not jump-starting investments and the impact on risky assets is muted.
  • Two, there is a need for policy coordination to control both rates and currencies. The spill-over effect of monetary policy across countries is greater than expected and the only solution is for central banks to work together on policy alternatives.
  • Three, central banks are tired of doing the having macro lifting and want support on the fiscal side. This has not been forthcoming. Given this fact, central banks see a greater need for coordinate to increase their market power.

What does this mean for market behavior? First, uncoordinated monetary policy will have diminished effect; consequently, market participants should b muted in their response to single central bank action. Second, any signs of coordination should the focus of your attention. Third, Fed actions will cautious for the simple reason rating rates will be inconsistent with central bank policy coordination. Coordination is not the new new thing but is likely to be a key focus of central bankers.