Divyang Shah, Senior IFR Strategist
When it comes to the transmission mechanism for monetary policy its not just a matter of supply but also demand.
In contrast to the demand situation in the eurozone and the UK there is “stronger demand” from firms in the US. Overall lending standards might still be tight and easing a touch for the US, eurozone and the UK, but what is interesting is the way in which demand is evolving.
We have focused on the demand side of the equation for the UK and RBS for example today highlights that the bank is “desperate” to lend but no one wants it.
A similar picture exists in the eurozone where Draghi in his introductory statement highlighted how the recent Bank Lending Survey “confirmed weak demand for loans in the euro area”.
The divergence between the Fed, ECB and BoE largely reflects the contrasting economic pictures where healing in the US economy compares to a UK economy moving sideways and eurozone contracting.
