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ECB's Draghi May Be Ready to Change Course, but the BOJ Is in It for the Long Haul: Market Recon

"Domestic inflation reflects domestic monetary policy." --Martin Feldstein

I'll Gladly Pay You Next Tuesday...

So, a horse walks into a bar... no that's not it... maybe it was three guys and a chicken. Wait, wait, ahh, let's just tell it like it is. The Bank of Japan... wait for it... delayed it's own forecast -- yet again -- for reaching 2% consumer level inflation. The BOJ says that you can expect, or rather they expect to see, 2% inflation by March of 2020 (they really, really mean it this time), or roughly a year later than previously suggested.

Nobody really thought that the BOJ would stick to their projections anyway. This is the sixth time that this particular expectation has been pushed out since Haruhiko Kuroda became Governor in 2013. That's averaging a change roughly one and a half times a year. I have a better idea, Haruhiko. Just tell the folks of Japan that you are trying your best, but that you simply do not know. How refreshing would that be from a central banker?

By the way, as we have said in this column in previous days, the BOJ was acting a little more unpredictably than were other high-profile central banks around the world. The Bank of Japan decided this morning to keep the target for the Japanese 10-year paper at 0%, and it's short-term deposit rate at -0.1%, despite the bank having acknowledged at the last meeting that the economy was "expanding moderately." A dovish BOJ. Who would have thought it? At their last meeting, by the way, the BOJ had raised full-year guidance on GDP from 1.6% to 1.8%. The U.S. dollar suddenly finds a bid this morning, and that "badly in need of a revamp" U.S. dollar index creeps closer to 95. Next up, Super Mario.

Does the European Central Bank officially alter policy today? Not likely. What markets will do today is watch and listen. Listen to that craft-master of the spoken word, ECB President Mario Draghi. Draghi is a pro, and he will speak at 08:30 a.m. ET.

He will not get pinned down. He will leave enough room to leave you wondering about the future -- and his own ability to wiggle out of anything. He also will not back-track. Growth in the eurozone can be expected to hit 3% quarter-over-quarter on an annualized basis this year, perhaps even this quarter. Simply put, not only is Europe not a basket case, they are hotter than we are. (Uh... Sarge, we're not at all hot. Oh, yeah... uhm, sorry guys, I forgot. But they are.)

Listen, gang... the European Central Bank has had their foot on the gas for a while, still buying almost $70 billion worth of bonds a month, which has bloated their balance sheet to $4.9 trillion. That's larger than the Fed's balance sheet, for those scoring this game at home...


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