Analysts at ANZ explained that while Yellen and Draghi weren’t quite the one-two punch combination that markets thought they could have been, they still appeared to work in tandem to deliver a clear message on a different (and perhaps slightly less market-sensitive) topic: financial system regulation.
“Both warned of the dangers of rolling back regulations put in place since the financial crisis. While Yellen did admit to having sympathy that some regulations might be too onerous for community banks, she stated that “the balance of research suggest that the core reforms we have put in place have substantially boosted resilience without unduly limiting credit availability or economic growth.” Draghi later stated that
“When monetary policy is accommodative, lax regulation runs the risk of stoking financial imbalances….Regulators should be wary of rekindling the incentives that led to the crisis.”
They’d probably never admit it, but it certainly felt as though the message was being directed at President Trump and a US administration that has talked about repealing large swathes of Dodd-Frank. Draghi also commented on the increased threat of protectionism. Tension within his own party is meaning President Trump is having difficulties getting reforms enacted.
But there are some clear vocal disagreements from other pockets too.”