Stefan Gerlach

Lisbon

Governor Waller on Signal or Noise, and the outlook for Fed policy Source: Federal Reserve Board

A very interesting speech by Gov Waller about the outlook for US monetary policy (although perhaps superseded by the events in the Middle East).
open.substack.com/pub/swissmac...

Not a bad view from the Quaibrücke in ZRH

Weak Q4 Growth and the Outlook for Swiss Inflation Annualised quarterly Swiss real GDP growth (seasonally and sport adjusted) in 2025Q4 was 0.6%, a marked improvement from the 1.8% contraction in Q3 (see Graph 1).

What does 2025Q4 real GDP growth in Switzerland imply for inflation (and for the upcoming SNB decision)?
swissmacroandhistory.substack.com/p/weak-q4-gr...

Lake of Zurich this morning

Inflation targeting, South African style Central banks around the world largely do the same thing: most target inflation and use a policy rate as their main instrument.

Out of interest, I read up on inflation targeting in South Africa. Here’s what that led to:

swissmacroandhistory.substack.com/p/inflation-...

We are mourning the passing of our friend Wolfgang Danspeckgruber, Founding Director of the Liechtenstein Institute on Self-Determination. Wolfgang was a dear partner and friend of the Mission for decades.

EU Governments May Want to Fast-Track Lagarde Succession at ECB European governments may choose to fast-track finding a successor for Christine Lagarde at the European Central Bank to avoid having to deal with a far-right French president after 2027 elections.

EU governments may wish to fast track Lagarde succession.

www.bloomberg.com/news/article...

Trump’s New World Order Is Pushing Sweden to Warm Up to the Euro Geopolitical concerns have bolstered interest in dropping the krona for Europe’s common currency.

I suspect Sweden will join the euro in the not too distant future:

www.bloomberg.com/news/article...

ECB: The next move is up The ECB met on 5 February.

In today’s post I argue that the ECB’s next move will be up.
swissmacroandhistory.substack.com/p/ecb-the-ne...

Small Central Banks Can’t Escape Global Interest Rates Policy rates are domestic. Financial conditions are global.

Small central banks operating independent monetary policy are constrained by global bonds markets.
open.substack.com/pub/swissmac...

Tog över centralbank efter kaos: ”Tomt blad” Intern konflikt förde henne till andra sidan jorden. Men Nya Zeelands jantelag lever hon inte upp till. ”Jag har bett om ursäkt till utrikesministern”, säger Anna Breman, landets första kvinnliga cent...

A good read, if you know Swedish and are a subscriber!

www.svd.se/a/gkaQB1/ann...

When Politics Set the Exchange Rate: The Ostmark’s Black Market Rate A historical detour

Some recent European monetary history in today’s post.

open.substack.com/pub/swissmac...

When Politics Set the Exchange Rate: The Ostmark’s Black Market Rate A historical detour

Some recent European monetary history in today’s post.

open.substack.com/pub/swissmac...

FOMC leaves rates unchanged. Here is the statement:

www.federalreserve.gov/monetarypoli...

This figure displays the kernel density estimate of banks’ pre-invasion exposure to Russian and Belarusian borrowers. Exposure is defined as the sum of outstanding loans and debt securities vis-à-vis Russian and Belarusian firms, scaled by the bank's book equity (2021 averages). The sample is restricted to banks with positive exposure that report to both the AnaCredit and SHS databases. The debate about the economic consequences of Russia’s invasion of Ukraine has focused on supply-side concerns such as soaring energy prices and severed supply chains. However, this overlooks the role of the financial sector. Using granular transaction data, this column shows that the outbreak of war acted as a ‘silent monetary tightening’. Exposed banks faced immediate higher funding costs and reduced credit supply, an effect equivalent to a policy rate hike of nearly 60 basis points, well before the ECB acted. Geopolitical tensions appear to influence both the stance and the effectiveness of monetary policy more directly and powerfully than previously assumed.

Falko Fecht, Stefan Greppmair, & Björn Imbierowicz (@bundesbank.de) show that the outbreak of war in #Ukraine acted as a 'silent monetary tightening'. Exposed banks faced immediate higher funding costs and reduced credit supply.
cepr.org/voxeu/column...
#EconSky

The Riksbank’s Balancing Act Disinflation is pulling policy one way, a strengthening economy the other

Sweden’s Riksbank meets this week and is unlikely to change policy, but the trade-offs are getting sharper. Disinflation has been faster than expected, even as the real economy improves. What matters now is how the Riksbank explains that tension.

open.substack.com/pub/swissmac...

Sight deposits and SNB FX intervention A rough and ready measure

What can we learn about FX intervention from data on SNB’s sight deposits?
open.substack.com/pub/swissmac...

The SNB’s Tight Control of SARON Evidence since 2019

A short post about the SNB’s ability to control SARON.
open.substack.com/pub/swissmac...

Croatian central bank governor elected ECB’s second-in-command Boris Vujčić will replace Luis de Guindos at the European Central Bank

A very good choice! (But hard to go wrong with such a strong pool of candidates.)

www.ft.com/content/25fa... Croatian central bank governor elected ECB’s second-in-command

Implementing Monetary Policy at the SNB From Policy Decisions to Market Rates

In today’s post I look at the SNB’s implementation of monetary policy — how it ensures that market interest rates reflect its policy decisions. This is hugely important but something many macroeconomists pay too little attention to.
open.substack.com/pub/swissmac...

Central banks close ranks An unprecedented show of support for the Fed

My reactions to the central bank letter in support of the Fed and Chairman Powell:
open.substack.com/pub/swissmac...

London

It Is Time for a German ECB President Why the case against one is weak

Some thoughts on why a German ECB president should no longer be controversial. open.substack.com/pub/swissmac...

Central bankers and celestial navigation Letter to the FT

I have practised my letter writing skills. open.substack.com/pub/swissmac...

The ECB, Bank of England, Riksbank and Norges Bank Meetings Inflation Still Too High, Policy Choices Diverging

In today’s post I compare the policy decisions yesterday of the ECB, BoE, Riksbank and Norges Bank. The most important distinction is between the Bank of England and Norges Bank on the one hand, and the ECB and the Riksbank on the other.

swissmacroandhistory.substack.com/p/ecb-bank-o...

Governor Miran speaks again Miran wants faster easing; the FOMC wants proof

Stephen Miran has delivered his second major monetary policy speech. In his first speech he claimed that the neutral rate had fallen sharply. In this one, he instead contends that inflation will fall quickly and the Fed should act now.

swissmacroandhistory.substack.com/p/governor-m...

SNB Interest Rate Setting 2021–25 It’s all about inflation

In today’s post I analyse SNB policy from 2021 to 2025. The SNB was slow to tighten as inflation rose, before raising rates aggressively. Two decisions stand out: the large cut in December 2024 and the choice to hold rates in September this year.

swissmacroandhistory.substack.com/p/snb-intere...

Kevin Hassett Says He Would Be Independent at the Fed. Some Who Know Him Are Worried. President Donald Trump has said he has narrowed down his choice for the next chair of the Federal Reserve to one person, and hinted that it will be Kevin Hassett, now director of the White House’s Nat...

Barron has a good piece on why Kevin Hassett’s path to the Fed chair appears in doubt. The article draws on conversations with former colleagues, several of whom now question whether Hassett could maintain genuine independence in a second Trump administration.
www.barrons.com/articles/kev...

The Italian Bond Conversion of 1906 How Italy lowered its interest payments

In today’s post I look at the Italian bond conversion in 1906. It shows how a government can reduce its interest burden by locking in improved credit conditions, without default or coercion.

swissmacroandhistory.substack.com/p/the-italia...