Could it be possible that central bankers might be set to get out of their “groupthink” mind-set with respect to monetary policy in the wake of the decision by the Bank of Japan to suddenly cut its benchmark rates below zero.
In the wake of the recent G20 meeting there does finally appear to be recognition amongst policymakers about the need for a change of focus.
With that in mind this week’s focus shifts to the latest central bank meeting of the European Central Bank, with expectations quite high that we could well see further steps to help mitigate the recent slowdown in economic data and prices, after the most recent numbers data showed that headline inflation went negative in February.
Having been burnt once already in December last year expectations around this week’s meeting are much more tempered, which in turn has prompted the euro to start gaining ground against the US dollar, as reports come out of disagreement between ECB members on the extent of the measures that could be taken this week.
Having gone to great lengths to say that there were “no limits” to the potential for further action at the last meeting, it is slowly becoming apparent that there are limits, and ECB President Draghi could well be starting to run out of road when it comes to his effectiveness in taking the council with him.
While another 10 point cut in the deposit rate is expected there appears to be significant differences of opinion about additional measures due to the lack of evidence that they will be in any way effective.
There has to be a real risk that whatever the ECB does it could fall short of expectations.
Mr Draghi’s biggest problem in the short term though is the weakness of the US dollar, given last week’s disappointing wages data for February.
There is also the small matter of the political charade currently taking place in the US between prospective rival Presidential candidates Donald Trump and Hillary Clinton, there has to be an argument that further US dollar strength could be difficult to attain.
Neither candidate is particularly appealing from a business perspective, given recent sound bites.
As things are the prospect of either of them in the White House in November, is likely to see most seasoned investors make their way to the White Horse for a few beers, as opposed to the White House, to calm their nerves.
One thing is certain the battle of the central banks looks set to take another interesting turn this week.
A variation of this article appears in the Print version of today's Daily Telegraph
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