Daily Agenda: What Central Banks and Homer Simpson Have in Common

European Central Bank presidentMario Draghi’s speech today in Frankfurt puts the euro zone’s central bank back in the spotlight. Reiterating his earlier pledges, Draghi said, “We will do what we must to raise inflation and inflation expectations as fast as possible.” European bond markets reveal just how far the ECB needs to go. Long-term sovereign debt for recovering nations including Ireland andSpainis hovering near record-low yields and private-sector investment — property and financial assets — remains negligible. The question for investors is whether the ECB can achieve their goals and what that will take. “He is clearly outright quantitative easing, buying government bonds directly,” says Gary Jenkins, chief credit strategist for London–based hedge fund firm LNG Capital. “This is the same message that he has delivered multiple times in the past and I have no doubt, if push comes to shove they will eventually act on it despite political controversy.” As to how effective this path might be, Jenkins, who spoke with亚博赞助欧冠今天早上,有一些疑问,although he believes it is still likely to be deployed.“Central banks are like Homer Simpson. They keep touching the hot stove and saying ‘D’oh!’ over and over until someone pulls them away.”

PBOC injects liquidity.Policymakers at thePeople’s Bank of Chinamade a 25 basis point cut today to the one-year deposit rate, lowering it to 2.75 percent, as well as a 40 basis point reduction in the refinancing rate. This marks the first time since 2012 that China’s central bank has adjusted benchmark rates. Separately, multiple local media sources reported that the PBOC injected an additional 50 billion yuan ($8.16 billion) into short-term call markets to prop up liquidity. Some market participants speculate that the slate of large initial public offerings scheduled for the coming weeks may have prompted the bank to lower money market rates in part to smooth the process.

Japan’s political opposition gears up.Japanese Prime Minister Shinzo Abehas dissolved the country’s lower house of parliament, sending opposition parties leaping to refine their campaign strategies for a December 14 special election. Democratic Party of Japan leaders are planning an attempt at regaining power in the Diet through a populist platform attacking the impact of a falling yen and inflationary pressure in an economy where real wages continue to contract.

U.K. debt expands.Public sector borrowing data for October saw overall debt levels rise in line with consensus forecasts. As a result, deficit forecasts from the U.K.’s Office for Budget Responsibility are likely to be increased for the first half of 2015, making tax cuts less politically viable.

Portfolio Perspective: U.S. Existing Home Sales Surprise to the Upside—Ksenia Bushmeneva, TD Economics

The U.S. home sales report released yesterday was undoubtedly very positive. After reaching a trough in March, sales have been on an upswing, staying above the 5 million annualized mark for five consecutive months.

Several factors are working in favor of prospective home buyers, such as still-low mortgage rates — down nearly 50 basis points from the start of the year — rising inventories, moderating home price growth and robust job creation. That being said, not everything is hunky-dory. Ideally we would see a growing share of sales going to first-time home buyers. The lack of movement on this front suggests continued constraints on homeownership.

As it did last year, winter weather may pose a near-term speed bump to the housing market. It’s not even December, yet the northern regions of the U.S. have already seen record-low temperatures and excessive snowfalls, which could lead to in reduced sales and housing construction.

Ksenia Bushmeneva is an economist atTD经济学, part of TD Bank Group, in Toronto.