"Recovery" Fable Unravels As BOE Cuts Growth Forecast, Eurozone Slashes Inflation Outlook

Tyler Durden's picture

As you might have noticed, the “recovery” story is starting to fall apart.

Central banks across the globe are running out of excuses for why trillions upon trillions in global QE have been an abject failure when it comes to resuscitating global demand and trade.

Far from creating the type of robust “recovery” Ben Bernanke envisioned when he set the stage for what has become an eight-year-old foray into Keynesian insanity, round after round of monetary madness has only set the world on a race to some nightmarish Krugman “bottom” where the effective lower bound is breached only to see cash banned so PhD economists can strip citizens of their economic autonomy.

On Thursday we get the latest admissions from central bankers who are increasingly forced to admit that things aren’t going as (centrally) planned.

The Bank of England on Thursday cut its growth forecasts to 2.2% from 2.5% in its latest inflation report and also released minutes from its latest monetary policy meeting. Inflation will remain below 1% for the balance of the year, the bank says, and will not hit 2% until Q1 2018.  Or as Haruhiko Kuroda would say: “We see signs that inflation is moving towards our target.”

Growth in 2017 was also revised lower to 2.4% from 2.7%. “The softer forecasts imply tougher times ahead for chancellor George Osborne’s deficit reduction plan,” FT writes. “Weaker growth would translate into lower tax receipts, making closing the gap between expenditure and revenues harder.”

In his letter to the chancellor, Mark Carney opened the door for MOAR. “Were these downside risks to materialise, market expectations of the future path of interest rates could adjust further to reflect an even more gradual and limited path for bank rate increases than is currently priced,” he said. “The committee could also decide to extend the asset purchase facility or to cut the bank rate further towards zero from its current level of 0.5 per cent."

"[China's economic rebalancing, more capital flows, tighter financial conditions, and increased market volatility] pose downside risks to growth in the United Kingdom via trade, financial and confidence channels," Carney told a news conference," Carney told reporters on Thursday. "The outlook for trade is particularly challenging with net exports expected to drag on UK growth over the forecast period."

The newly released minutes show that Ian McCafferty, the only voting member arguing for a hike, abandoned his dissenting view to join his compatriots in a decision to remain on hold.

So, yeah. So much for that BOE rate hike.

Meanwhile, in the deflationary paradise that is the eurozone, the EU Commission has cut its 2016 growth forecast to 1.7% from 1.8% citing worsening performances from Germany, France, and Italy. 

More worrisome was the inflation outlook. The commission slashed its outlook for inflation by half to just 0.5% this year

"Europe's moderate growth is facing increasing headwinds, from slower growth in emerging markets such as China, to weak global trade and geopolitical tensions in Europe's neighborhood," Commission Vice President Valdis Dombrovskis said in a statement.

“With the assumed path of energy prices, inflation should remain very low in the first half of this year,” Pierre Moscovici said in Brussels. “It should then rise slightly in the second half when the impact from the past sharp falls in oil prices abates.”

Sure it will. That's of course assuming oil doesn't continue to slide. 

For his part, Mario Draghi blames a "conspiracy." “There are forces in the global economy today that are conspiring to hold inflation down,” the former Goldmanite said in a speech in Frankfurt on Thursday. “Those forces might cause inflation to return more slowly to our objective," he added.

That's ok. Maybe the refugees will boost consumer spending. 

Of course you shouldn't expect any of this to derail policy makers in their lunatic quest to "fix" what's holding back global growth and trade and what's keeping inflation stuck in neutral. On that note we close with comments from the ECB's Yves Mersch:

"I cannot tell you what we will be doing because this depends on 22 other colleagues who also have their opinion."

 

“We have further possibilities, our toolbox is not exhausted, but I will not fuel any expectations by giving you comment one instrument rather than another one."

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jtmo3's picture

Who cares. Stawks are up!

Silver Bug's picture

Exactly, this "recovery" has been a complete and utter farce. It has been a complete illusion create by fiat money and thus, rising stock prices. The illusion is crashing and the man on the street isn't buying the bull anymore. Another massive correct is on the way.

 

http://schiffblog.blogspot.ca/2016/02/gold-is-still-going-to-5000-peter-...

Oldwood's picture

But I thought this was supposed to be "recovery winter", or something like that. WTF!

BlueStreet's picture

But Tom Lee says it only feels like a recession so nothing to worry about. Deer meet headlights. 

Truth Eater's picture

Who is buying stocks???  iRobot traders are just messing with us.

Dr. Engali's picture

Sorry, that was me. I bought a round lot of Apple and it made the whole index go up.

Atomizer's picture

LMFAO. Now buy a round of Facebook to make everything look rosey. 

Dr. Engali's picture

I keep telling them that they need to print moar and faster but do they listen to me? Nooooooooo...., they had to go and try to raise rates.

 

 

~ The Krugmeister

 

madbraz's picture

close the NY FED for half a day and it all falls apart instantly

ejmoosa's picture

I still argue that inflation can exist in a market with falling prices.  What if prices would fall 20% without inflation but only fall 15% because of inflation?  Is there a clear way to tell the drom in price from a falling level of demand and a rise in price due to monetary policy?

No.  

It's a folly to think we do not have eveh higher prices that we should have when we know that monetary policy around the world had injected more paper cash than in the hsistory of mankind, and that there is no inflation from it.

Atomizer's picture

That's ok. Maybe the refugees will boost consumer spending. 

Are you a stupid cunt? The United States of America taxpayer is fronting the bill for illegal immigrants.  Why don't you pull one dollar from you right pocket and place it into your left pocket? Nothing has changed asshole. You wonder why we're so pissed off with the antics of economic policy. 
Atomizer's picture

Open link. Click on slide show. It a power point view. Don't have Zerohedge member authority to copy-paste 18 page document. They are creating new verbal economic slang terms. It's a fucking riot. 

03 Feb/Seven don'ts and one hope: The nexus between prudential and monetary policies

Atomizer's picture

The gem file is saved as sp160203_slides.pdf. Have a good laugh! 

Sorry for inaccurate info, my BlackBerry autoloads to PowerPoint. 

MASTER OF UNIVERSE's picture

In term of Financial Engineering the elite of Economists in the World don't have even a remote clue what they are doing. Furthermore, the inversion of growth has manifested since the 2008 Economic Crash, and that inversion will never be overcome by Central Banks, banksters, or Wall Street. In brief, the old model of so-called Macro-Economics is a completely defunct fraudulent anachronism today. The one per cent are desperate to retain their corrupt power, but their power was effectively Financially Engineered out of their criminal grubby hands forever way back in March of 2008 when Bear Stearns imploded the entire Western World economy, SUCKERS.

 

Note: I control the one per cent now, and I also control the Central Banking Oligopoly outright. No Jew motherfucker will ever control the economy ever again.

 

Zero sum end game, motherfuckers!