Bernanke’s remarks today suggest that Friday’s better-than-expected jobs report has not changed the stance of Fed policy too much.
That is not a great surprise. The Fed was not expecting the Friday numbers. They were materially better than expected and might shave a quarter point off policymakers year-end 2010 unemployment forecasts. But one month’s data is just one month’s data. And even confirmation that labour market stabilisation is coming a bit sooner than recently expected does not change the basic calculus as far as policy is concerned.
In basic macro terms, the battle between Fed hawks and doves will be joined in earnest only after we get two or three months of 200,000-plus job creation with an accompanying decline in unemployment. At that point hawks can say
The following is a summary of research by Pivot Capital (h/t Naked capitalism)
China’s capital spending boom will not be sustained at current rates and the chances of a hard landing are increasing. The coming slowdown in China has the potential to be a watershed event for world markets similar to the sub-prime crisis.
China’s current expansion cycle is surpassing historical precedents in its duration and intensity. Growth is being powered by investment, principally from the government (measured by gross fixed capital formation), which accounted for almost 90 per cent Chinese growth in the first half of 2009. This has led to overcapacity. But what is more worrying is
Jean-Claude Trichet, European Central Bank president, is giving evidence in the European parliament. His message on the eurozone economy is the same as at his press conference last Thursday: things are improving but he’s still cautious. Steps taken to unwind emergency liquidity support measures had “no meaning” for the ECB’s interest rate policy.
The questioning is yielding some interesting twists, however. So far Mr Trichet has expressed disappointment at last week’s compromise deal over new European Union supervisory structures. “It is not our first best” solution, he said, but
Eastern Europe is looking for ways to reduce dependence on loans denominated in foreign currencies, particularly the euro and Swiss franc.
Officials at the EBRD meeting in London this weekend agreed to find ways to develop local currency markets in order to reduce dependence on foreign currency credits. Officials are not looking to regulate but to encourage voluntary moves by banks to tighten rules on foreign currency loans. Officials plan to meet again early next year, preparing concrete proposals by spring.
Today’s papers are full of what I know to be well-sourced speculation that the chancellor will introduce some levy on bankers’ bonuses in the pre-Budget report on Wednesday. We do not know exactly what the chancellor is planning. With the PBR not yet finalised, I am not sure the UK Treasury does either. But this is the position as I see it:
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