Change in Fed’s Mandate Among Potential ‘Grey Swans’: Nomura
(Bloomberg) -- Trump’s disapproval of the Fed and Chair Yellen could threaten the central bank’s independence and prompt an audit in 2017, or more radically change its mandate, Nomura strategists led by Bilal Hafeez and Charles St-Arnaud write in note listing 10 unlikely risk events for next year described as “grey swans.”
- Fed mandate changes could see inflation targeting that includes asset prices, Taylor-rule based rate decisions for predictability and reintroduction of gold standard
- All of the above would drive rates higher than expected, support USD and push yields higher
- Other “grey swan events” could include reversal of Brexit, U.S. productivity surge, return of EM capital controls and discontinuation of paper money in favor of electronic system
- Also mentions unlikely possibilities of China entirely floating its currency, Russian aggression in Ukraine and Baltic countries, failure of a financial central counterparty (CCP), Japan PM Abe losing power and surge in Japanese inflation
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HALISTER1Source: BFW (Bloomberg First Word)
People Bilal Hafeez (Nomura Holdings Inc)
Charles St-Arnaud (Nomura Holdings Inc)
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