Rabo: The Big Bingo-Moment For Monetary Policy Remains Some Ways Off Tyler Durden Thu, 11/12/2020 - 08:49 By Bas van Geffen of Rabobank Markets once again seemed more interested in the booming Singles’ Day sales and central banks (see below) than they were paying attention to the (geo)political events developing around the US and China, or the never-ending saga of Brexit – where the deadline once again appears to be fluid, and negotiators’ time to reach a deal now stretches until the 19 November EU summit. Reuters and other outlets reported that Hong Kong lawmakers may resign as they protest the disqualification of four members of the assembly on the basis of new security laws imposed by China. Foreign officials were quick to respond to the local government’s move to oust the four assembly members. UK Foreign Minister Raab called it a an assault on Hong Kong’s freedoms as set out in the UK-China agreement. US National Security Adviser O’Brien said that the CCP “flagrantly violated its international commitments”, and that the US would “continue to […] identify and sanction those responsible” for undermining the freedom of Hong Kong. Even though the US government is entering a transitional phase into the new Presidency (which is still a bit of a risk of its own, considering President Trump’s refusal to concede), we have noted in the past that one of the few common factors between the Republicans and Democrats is their more hawkish stance towards China – although President Biden’s methods may differ from Trump’s approach. For example, Biden may seek to find more support on the global level, rather than Trump’s preference for bilateral actions. Nonetheless, equity markets are looking green on my screens, and there appear to be few signs of geopolitical risk-off moves. Central bank easing may just be sedating markets through what would have otherwise been another rough patch. The ECB’s annual event started yesterday with the opening remarks by President Lagarde. Since remote working remains the standard, the ECB’s annual event has been moved from Sintra to Sintranet (excuse the terrible pun). Indeed, just like the Fed’s Jackson Hole, the event is now being held in a completely online format. Even though videoconferencing has become much more normal for many people, I’m sure people will have their ‘Zoom bingo’ cards at the ready for digital hiccups during the event, like people talking while on mute, people forgetting to mute their lines, or outright connection issues. But the big bingo-moment for monetary policy remains some ways off. Where FOMC Chair Powell used his introductory remarks at Jackson Hole to update the Fed’s look at their inflation target, the ECB is clearly still too early in its strategy review for such a formal commitment. In fact, President Lagarde spent surprisingly little time on the strategy review during her introductory remarks – although many other parts of the program do relate to the elements of the ECB’s review. She did, however, give a few more hints of what to expect come December, although she refrained from clear details. Notably, Ms. Lagarde said that “the key challenge for policymakers will be to bridge the gap until vaccination is well advanced and the recovery can build its own momentum.” As my colleague noted in yesterday’s Global Daily, that will probably only begin somewhere in the first half 2021. In this context, President Lagarde’s remarks highlights that the recent Pfizer news, while of course very welcome, is not sufficient. So her remarks sounded a bit more cautious than those of Dutch Governing Council member Knot the day before. Regarding the composition of the forthcoming stimulus, Ms. Lagarde noted that “the PEPP and TLTROs have proven their effectiveness [...] They are therefore likely to remain the main tools.“ This is in line with our earlier thoughts that the stimulus package will comprise of asset purchases and LTROs, but not a rate cut. However, she kept all options on the table, and her speech appeared aimed at striking the right balance to keep all asset classes, from bonds to equities and FX happy. Meanwhile, the Turkish central bank is also doing some soul searching. After a turbulent weekend, in which President Erdogan fired CBRT Governor Uysal and appointed Agbal as his replacement, the Turkish President expressed his support for the Bank yesterday: “Like everywhere else around the world, in our country it is the central bank’s job to determine and implement policies needed to curb inflation,” he said, adding “I support every step that they will take”. Furthermore, he promised that policy makers will be in contact with international investors. The markets were hopeful that this marks a change in Turkey towards more market-friendly policies, and the TRY’s rout has been stemmed for now. However, since this isn’t the first time a CBRT governor has been replaced by Erdogan, some caution remains warranted. After all, the proof of the baklava is in the eating.