We’ve greatly enjoyed reading your thought-provoking comments over the past few months, and look forward to sharing an even better blog with you in the New Year. Read more
Reversing the repo constraint
If the Fed is bothered about primary dealers lacking the balance sheet capacity to do reverse repos on a large scale, why not use its regulatory powers to ease these constraints? The Fed might want to do as much as $500bn in reverse repos. The dealers have balance sheet space for $100bn at most.
A short-term reverse repo with the central bank ought not to be the kind of asset a bank needs to set much capital aside for, nor the kind of asset that counts against crude leverage limits. I am not an expert on the regulatory side of this but I suspect the Fed might be able to do something about this if it put its mind to it. Read more
Botswana’s central bank today cut the bank rate by 1 percentage point to 10 per cent. The bank has now cut this benchmark rate by 5.5 percentage points in the past year, as inflation has eased. Inflation, falling 1.9 per cent in November to 5 per cent, is comfortably within the 3 – 6 per cent target range, and is expected to remain low because of subdued growth. Unlike India and parts of east Asia, food prices are falling in Botswana, as are fuel prices. Read more
FDIC chief Sheila Bair recently predicted more US bank failures in 2010 than in 2009. Russia is apparently predicting the same. Gennady Melikyan, the central bank’s first deputy chairman, said: “This year we revoked the licenses of 44 banks – next year I think that number will be significantly greater.” He added that an increase in bank defaults had already been noted in countries that were hit by the financial crisis earlier than Russia. Nigeria is already entering a second phase of bank bail-outs.
The Bank of England has been more cagey. In its financial stability report, the bank refers Read more
The Turkish central bank has stopped cutting rates, holding the overnight borrowing rate at 6.5 per cent and the lending rate at per cent. The bank’s press release said: “Strong base effects would be observed in forthcoming periods… leading to a significant increase in annual inflation, especially in
December, yet core inflation would remain at low levels. The Committee has emphasized that it would be necessary to keep policy rates at low levels for a long period of time.”
Other rates were also held: the late liquidity window interest rates (4pm – 5pm) kept the borrowing rate at 2.5 per cent and the lending rate at 12 per cent, and the interest rate on overnight and one-week maturity borrowing facilities (provided for primary dealers via repo transactions) at 8 per cent. Read more
Minutes from last week’s central bank meeting have countered rumours of an early rate rise in Brazil. The dovish notes forecast a “gradual recovery” with inflation “contained”. While the bank’s inflation forecast has risen since October, at 4.5 per cent it is hovering about the midpoint of the target range. The market reaction suggests traders do not expect a rate rise in the first quarter next year, meaning rates will remain at their record low of 8.75 per cent. Read more
The central bank of the Philippines has voted to hold the overnight borrowing rate at 4 per cent and the lending rate at 6 per cent. London-based research firm Capital Economics expects the first increase in the overnight borrowing rate to occur in April, rising gradually thereafter by about 25bp, to end the year at 5.5 per cent. The rate will be increased to combat inflation amid rising government spending, though price rises are expected to be modest due to the peso’s rise against the dollar. Read more
Darling steals revenue from abroad
When your public finances are in a deep hole and you need to raise money fast, there is nothing governments like more than taxing foreigners. History is littered with efforts to make outsiders pay for local public services and wars. They range from customs duties and turnpike tolls to modern airport departure taxes and hotel taxes. Let’s face it, if we could tax martians, we would. Read more
The seven member policy board voted unanimously to keep its key interest rate at 0.1 per cent, as expected. In its regular two-day meeting, the board also vowed to defeat deflation. The central bank cut the rate to 0.1 per cent a year ago, and 16 of 17 analysts who gave projections to Bloomberg for next year said the rate will remain on hold for all of 2010. Read more
| About this blog | Blog guide |
Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
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