Daily Archives: December 16, 2009

The Czech National Bank Board decided at its meeting today to lower the two-week repo rate by 25 basis points to 1 per cent. The Lombard rate was also lowered by 25 basis points to 2 per cent. The discount rate remains unchanged at 0.25 per cent. The new interest rate levels come into effect on December 17, 2009.

The Swedish central bank will keep the repo rate at 0.25 per cent in order to “attain the inflation target of 2 per cent and to support the economic recovery”. The repo rate is expected to remain at this level until Q4, when it is forecast to rise to 0.4 per cent. Also unchanged are the deposit rate at -0.25 per cent and the lending rate at 0.75 per cent.

Deputy Governor Lars Svensson entered a reservation against the decision Read more

The European Central Bank said it will lend banks €96.9bn in its third and final auction of 12-month cash. The Frankfurt-based ECB said 224 banks participated in the auction. The cost of the loans will be indexed to the ECB’s benchmark rate over the next year rather than fixed at 1 per cent. Economists’ expectations ranged from €75bn to €100bn demand.

There is already nearly €520bn of 1-year money in the financial system, around 80 per cent of the ECB’s outstanding open market operations. None is due for repayment until a sizeable €442bn at the end of June next year. Read more

Brazil’s central bank said on Tuesday it will exchange $892m of foreign bonds from the federal government in its portfolio for domestic debt. The bank said in a statement the move was part of a plan to eliminate all holdings of Brazilian foreign debt in its portfolio, which at one point held as much as $4 billion worth of the securities. The debt swap will have no effect on Brazil’s international reserves, the bank said.

New Irish central bank governor Patrick Honohan wants a full enquiry into who and what was to blame for the financial crisis. He has dismissed a judicial probe, saying it would have insufficient flexibility. In a largely unprecedented intervention by a central bank governor, Mr Honohan has suggested a detailed examination of the activities of banks, the civil service and key politicians.

Simone Baribeau

Fed chairman Ben Bernanke responded to Senator Jim Bunning’s written questions posed as a part of the confirmation hearing. In responses to 70 questions ranging from the transparency of the Fed to the use of Tarp funds as capital, to the Fed’s agency debt purchase programme, Mr Bernanke restated his positions and defended his tenure as Fed chief.

He also sought to dampen concern on asset bubbles, saying there was “not much evidence to suggest that the stock market is currently in a bubble” and that “it is not clear [the gains in gold's price] have been out of line with fundamentals”. But then, his first reason for reticence in using monetary policy to lean against bubbles was that “we would have to be confident in our ability to detect bubbles at an early stage in their development.”