Cool Video: Tough Call for ECB with John Authers of the Financial Times

I am in London this week visiting clients. I had the opportunity to chat with John Authers of the Financial Times about the outlook for the ECB meeting and Yellen's ascension to the chair of the Federal Reserve Board.

My key points are that the move to a negative deposit rate seems like a high risk and last resort move. It would likely inject more volatility and be potentially highly disruptive, without necessarily addressing bank lending or disinflation. I am more inclined to see a cut in the lending rate (now 75 bp) and more discussions about Draghi's Davos comments about buying bank bonds backed by loans to small and medium size businesses and households.

Turning to the Federal Reserve, I fear that Obama and Bernanke have set Yellen up to be a weak leader. The implication for investors is that confidence in the Fed's course is weaker than it otherwise would be. The salience of this point will increase as circumstances change, such as continued stress in the global capital markets or a series of data that suggests growth in H2 13 is not going to be sustained. I worry that that unusually harsh weather in January may again distort the headline non-farm payroll report, while the failure to extend emerging jobless benefits may see the unemployment rate fall (for the wrong reasons).