Daily Archives: December 15, 2009

Moody’s sovereign risk review is best described as sobering. There’s a risk of accelerating interest rate rises in 2010. There is also a risk of disorderly market conditions. We should limit our expectations on how much BRIC can help. And there is little comfort for Greece: euro membership may help with liquidity, but it is no protection against the risk of long-term insolvency. Key points below: Read more

… in a competition no-one would want to win. In its sovereign risk review, Moody’s has compiled a “misery index” – the addition of the forecast unemployment rate to the forecast fiscal deficit, 2010. It isn’t pretty. The UK’s forecast fiscal deficit – the highest of any country on the chart – places the country in a higher state of misery than Iceland, and only just less miserable than Greece. The top five are not, perhaps, surprising – but numbers six and eight should give us pause for thought.

Agustin Carstens has advocated the continued independence of Mexico’s central bank, and promised greater openness and transparency to the senators who will vote to ratify his nomination as chief. The incumbent, Guillermo Ortiz, will apparently stop chairing the Bank of International Settlements if – as looks likely – he leaves the Bank of Mexico. Carstens is a likely replacement. Does anyone know what Ortiz will do?

Mexico has just been downgraded to BBB from BBB+ by Moody’s, following a similar downgrade by Fitch on November 23. Read more

Now there’s a refreshing approach. The Vietnamese central bank has denied a plan to bail out banks following rumours of a liquidity crisis in the sector. “The central bank is pursuing a stable monetary policy and trying to curb credit growth. No money pumping. No higher interest rates,” said governor Nguyen Van Giau. Commercial banks recently increased deposit rates in an effort to attract more capital, leading to rumours that the central bank would inject as much as 20,000bn dong ($1.05bn). Read more

An imminent rise in the interest rate is unlikely. The Reserve Bank of Australia said it was in a suitably “flexible” position following three consecutive rate increases. Indeed, it transpires there was some debate over the last increase of 25bp. Minutes of the RBA meeting on December 2 noted: “The question … was whether it was more appropriate to take a further step at this meeting or to hold the cash rate steady pending a further evaluation of developments.”