Claire Jones

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Our thoughts on all things central banking, along with the more wonkish elements of economic policy, will appear on Alphaville and The World blogRead more

Claire Jones

The European Central Bank has found itself caught in the crossfire of a battle raging between the world’s leading macroeconomists.

The Bank for International Settlements’ call last month for the world’s central bankers to hurry up and raise interest rates has reignited the debate over how to explain – and tackle – the financial and economic turmoil that has persisted over the past six years. Read more

Claire Jones

The European Central Bank has revealed the details of arguably the most important element of the package of extraordinary monetary policy measures it unveiled last month to rid the eurozone of the threat of deflation.

On Thursday, the ECB announced exactly how its targeted longer-term refinancing operation, or the TLTRO, will work. Earlier forward guidance that rates were likely to remain on hold until the end of 2016 was watered down by Mario Draghi, ECB president, possibly in the hope that this would raise the take-up of the TLTRO funds.

Mr Draghi also revealed that banks would be able to borrow up to €1trn from the central bank, should they smash targets, or benchmarks, set by the ECB. Lenders are already able to borrow an initial amount of $400bn in two auctions, scheduled for September and December. The €400bn figure corresponds to 7 per cent of their lending books to businesses and households, excluding mortgage loans. Read more

John Aglionby

Despite inflation remaining extremely low across the eurozone and signs that the recovery is weaking in the single currency bloc, the European Central Bank kept its interest rates unchanged at its monthly meeting. Analysts are now looking for Mario Draghi’s assessment of the extraordinary measures introduced in June and details of any further measures..

By John Aglionby and Sarah O’Connor


Ben McLannahan

“Inflation expectations appear to be rising on the whole.”

Check out the last 11 policy statements from the Bank of Japan: you’ll find the same line, an upgrade from a milder assertion about “some indicators” last July.

But according to the second round of the BoJ’s survey of companies’ expectations for price rises – the grand-sounding “inflation outlook of enterprises”, published on Wednesday – expectations are not rising. If anything, they’re falling. Read more

Chris Giles

There are many uses of the phrase “new normal” in economics these days. Usually, it is used to signify lower growth or a different type of growth than in the pre-crisis period. Mark Carney went onto the radio this morning to talk about the “new normal” in monetary policy.

Interest rates would be materially lower in future than the 5 per cent rate widely seen as normal before the crisis. The Bank of England governor’s words have been widely reported as a big new statement of policy.

Is this a new policy?

No. Carney first talked about future interest rates being “well below historical norms” in his January speech at the World Economic Forum in Davos, which confirmed the BoE had ditched its original forward guidance linking interest rates solely to unemployment. The important passage was reported clearly in the FT at the time and is copied below. Read more

Claire Jones

Last month, students from four continents joined forces to call for reform of the economics curriculum.

In an open letter, the students said they wanted their courses to delve into a wider range of economics theories and methodologies than the standard neo-classical model that dominates undergraduate teaching, and to learn more about the implications of policy-making.

Speaking to those students was a heartening experience – all of them struck me as extremely thoughtful and articulate. Their desire for reform seemed driven by a curiosity about the world and what economics could do to improve it.

I suspect they’ll be encouraged by comments made in a speech today by the similarly thoughtful and articulate Benoît Cœuré, who sits on the European Central Bank’s executive board. Read more

John Aglionby

Mark Carney, the governor of the Bank of England, presented the Financial Policy Committee’s report on how it intends to keep the UK economy on an even keel. Most of the press conference was on what it intends to do about the booming housing market and which of its macro prudential tools it intends to use to cool it.

By John Aglionby and Claer Barrett


As Iraq appears to be descending into all-out sectarian war, the implications for the oil-dependent economy are huge. Iraq is Opec’s second-largest crude exporter, so markets are already feeling a little jittery, sending crude oil to its highest since September on Friday. Here are five charts showing how Iraq’s economy has developed since the 2003 US-led invasion of Iraq and where its vulnerabilities lie. Read more

Emily Cadman

Those hoping for a rapid pickup in UK productivity shouldn’t hold their breath.

That’s the message from a new Bank of England paper which suggests the UK’s dismal figures are more likely to be the result of “persistent effects” from the financial crisis, rather than temporary, cyclical factors which will fade away as the economy recovers.

Just under half (around 6 to 9 per cent) of the UK’s productivity gap can be explained by the hypothesis that the crisis resulted in underlying damage to the UK’s productive capacity:

 Read more

Emily Cadman

Institutional weaknesses are mainly to blame for Greece’s dire trading performance, with exports around a third smaller than they should be, according to a new paper from staff at the European Commission.

Aside from being the world’s largest shipping nation, Greece sits at the cross road between three continents and on one of the world’s busiest sea routes.

Yet, researchers estimate its exports are approximately 33 per cent lower than would be expected based on the size of the Greek economy, its trading partners and its geographic position. The Commission staff dubs this “the puzzle of the missing Greek exports.” Read more

Claire Jones

Throughout its campaign to convince everyone that the eurozone is not about to fall into deflation, the European Central Bank has drawn a distinction between two different sorts of episodes of falling prices.

The first involves a short period during which prices fall. In its monthly bulletin, published on Thursday, the ECB tries to define it, not as deflation, but as “negative annual inflation”. In the ECB’s view, a few months of falling prices will do little long-term damage to the economy. Indeed, the eurozone has already experienced this sort of deflation in the autumn of 2009.

The more dangerous sort of deflation, which the bulletin labels “outright deflation”, can, however, cause lasting pain. If what Mr Draghi has recently dubbed a “pernicious negative spiral”, triggered by ever weaker demand, was to emerge, all hope of the currency bloc’s economy returning to health anytime soon would be shot.

So how can you tell one from the other? Read more

Emily Cadman

It’s crunch time for the ECB. After more than six months of talking, the governing council has finally eased policy:

  • Deposit rates have gone negative decreasing by 10 basis points to -0.10%
  • The main refinancing rate has been cut by 10 basis points to 0.15%
  • The marginal lending facility rate has been cut by 35 basis points to 0.40%

The changes all take effect from June 11

ECB president Mario Draghi will take questions from the press at 1.30pm to explain the thinking behind the cuts

Follow all the action and market reaction here with economics reporter Emily Cadman and Lindsay Whipp in London, with Eurozone economy correspondent Claire Jones in Frankfurt.


Claire Jones

It’s crunch time for the European Central Bank. After more than six months of jawboning, pretty much every seasoned ECB watcher thinks the governing council is finally going to ease monetary policy on Thursday.

Disappointing growth, worryingly weak inflation, and the rise of anti-establishment parties in the European Parliamentary elections have only added to the sense that rate-setters must do something to stave off the threat of deflation and help stimulate lending in the real economy. What can we expect from the ECB and how will it work? Read more

Claire Jones

Lithuania looks set to become the 19th member of the euro in January 2015 having met all the requirements demanded by the European Commission. Were the Baltic state to join the single currency, as is widely expected, that would trigger a big change in the way the European Central Bank’s governing council votes on monetary policy. Read more

Emily Cadman

It’s official: money can buy you happiness. Or more precisely, having money to spend can.

That’s the conclusion from a new piece of analysis by the ONS which looks at how household spending correlates with self-reported levels of well being in the UK. Read more

Robin Harding

Andrew Levin, a Fed staffer who worked extensively on Janet Yellen’s communication reforms when she was vice-chair, sets out a set of principles for central bank communications in a paper at today’s Hoover central banking conference.

He calls for press conferences after every Fed meeting and a quarterly, Bank of England-style monetary policy report. Mr Levin is currently at the IMF but this a direction many Fed officials want to go.

Here are Mr Levin’s principles, with my highlights in bold, and comments in italic: Read more

Chris Giles

Professor Thomas Piketty has given a more detailed response to the Financial Times articles and blogs on his wealth inequality data in Capital in the 21st Century (here, here, here and here). He says it is “simply wrong” to suggest he made errors in his data.

There are a few things on which we agree. First, the source data on wealth inequality is poor. I have written that it is “sketchy” and Prof Piketty says it is “much less systematic than we have for income inequality”. Second, it would have been preferable for Prof Piketty to have used a more sophisticated averaging technique than a simple average of Britain, France and Sweden to derive an estimate for European wealth inequality. Third, the available data suggests a broad trend of reduction in wealth inequality during most of the 20th Century. Read more

Emily Cadman

French academic Thomas Piketty has issued a detailed response to criticism by the Financial Times of his work on inequality, saying it is “simply wrong” to suggest he made errors in his data.

The best-selling author of Capital in the Twenty-First Century, which has ignited an international debate on trends in inequality, said “the corrections proposed by the FT to my series (and with which I disagree) are for the most part relatively minor, and do not affect the long run evolutions and my overall analysis”. Read more

Sarah O'Connor

How do you measure what prostitutes and drug dealers do for the economy? Britain’s official statisticians have had a go – and decided their inclusion in the UK’s GDP estimates will add about £10bn to the size of the economy in 2009. But how did they get to that number? Read more