Monthly Archives: March 2011

Many investors fear that the Fed’s impending exit from QE2 will have a very damaging effect on the financial markets. Whether they are right will depend on the nature of the exit, and its impact on bond yields. Read more

The financial markets remain torn between their concerns over “black swans” (exogenous shocks from oil prices, food prices, and the Japanese earthquake) and the improving state of the global economy.  Read more

So what did the Chancellor actually do today to change macro-economic strategy in the UK Budget? Read more

Gavyn Davies is guest editing FT Alphaville today. Follow his posts. Read more

Britain’s Chancellor George Osborne has embarked on an audacious shift in the mix of fiscal and monetary policy. But despite unexpectedly high inflation figures on Tuesday, and ongoing worries about growth, the current combination of tight fiscal and easy monetary policy remains the best chance of avoiding a sovereign debt crisis while ensuring acceptable increases in gross domestic product.  Read more

Gavyn Davies will guest edit FT Alphaville on Wednesday, UK Budget day. Join him there for rolling coverage of the day’s news.  Read more

This has been a week for seismologists, nuclear scientists and military strategists, rather than for economists. (And they call economics the dismal science!) Read more

The sudden surge in the value of the yen to a new all-time high against the dollar is a new headache for the Japanese authorities, just at the moment when they did not need one. In the aftermath of the Kobe earthquake in 1995, the yen temporarily surged by almost 20 per cent against the dollar, and a repeat of that episode now would greatly add to deflationary pressures in the economy. Fortunately, however, the Bank of Japan should be in a position to stop this from happening, and other G7 economies will hopefully realise that this is one area where they can really help Japan. There may not be many occasions where co-ordinated foreign exchange intervention is the right thing to do, but this is certainly one of them. Read more

The Fed has just completed its regular FOMC meeting in Washington. The statement which followed the meeting was, for the most part, noncommittal about future changes in monetary policy. Admittedly, the language on the economic recovery and the labour market was more upbeat than last time, and the warnings on inflation were upgraded a notch, but there was no indication of what the Fed intends to do when QE2 ends in July. The committee probably had only a preliminary discussion of that issue today, leaving the real debate to be held at the next meeting in late April. What will they decide about the timing of their exit strategyRead more

Normally, I write a summary of the week’s major economic events on a Sunday morning. This week I am going to leave the heart-rending events in Japan to be covered by the news teams, and instead focus on two other developments which have important ramifications for the global economy – the slowdown in China, which is becoming increasingly accepted by a previously sceptical economics profession; and the moderately promising deal on sovereign debt which was announced by EU leaders in the early hours of Saturday morning. Read more