European Central Bank policymakers are gathering in Frankfurt ahead of their meeting tomorrow. They have quite a few decisions to make, which together will set the course of ECB liquidity provision for at least the next few months. Likely to set the general tone will be what Jean-Claude Trichet, ECB president, has to say about future provision of unlimited 12 month liquidity. As I have already written, it seems almost certain he will announce that the December offer will be the last. Less clear is whether the terms will be tightened.
Competitive devaluations threaten trade wars, says Michael Pettis, citing the Vietnamese devaluation. The theory is that countries unable to devalue will be forced to raise tariffs. This comes as North Korea strikes two zeros off its currency, the won. But the picture is more complex than that. Chris Giles agrees that competitive devaluations could lead to currency trade wars, but argues the devaluation of the dong – still under pressure – is not the trigger. Neither is the won.
Creditors of Dubai World, including hedge funds and banks, have formed a group. It seems that investors in $3.5bn of Nakheel’s bonds will form 25 per cent of the issue, meaning they can block bond restructuring plans.
Eurozone finance ministers have discussed who might be the European Central Bank’s new vice-president, according to Jean-Claude Juncker, Luxembourg’s prime minister, who chairs their meetings. So the race is off.
Thus far there are three candidates:
Spencer Dale, the Bank of England’s chief economist, explained his lonely vote against extending quantitative easing at November’s monetary policy committee meeting in a speech today. Though his view is not pivotal on the Committee, his views shed some light on the MPC’s thinking.
First, Dale says he wasn’t that far from the consensus to increase QE by £25bn. I am sure this is true. He says that because of the uncertainty surrounding the degree of spare capacity, “my preference was to aim to grow the economy a little less rapidly“.