The Bank of Canada put out its quarterly Monetary Policy Report. The outlook for Canada was little changed from October, with the economy expected to return to full capacity in the third quarter of 2011.
And a note of Canadian pride over how well the country has withstood the global recession seemed to seep into the report. Read more
After noise earlier in the week, Reuters is reporting that the Senate’s vote to confirm Ben Bernanke to a second term as Fed chair won’t happen on Friday. That leaves one more week until his term expires. It’s not clear what will happen if the vote doesn’t take place before then, but one likely outcome is that Don Kohn will take over as interim chairman, a move unlikely to appease Mr Bernanke’s critics.
The “tremendous expansion” of the NY Fed’s balance sheet, the bank has created a new “Special Investments Management Group,” the bank said today.
The new group will separate out the management of new investments from its financial risk management. Read more
What wonderful, but slightly awkward timing.
Shortly after Barack Obama proposes breaking up deposit taking banks that engage in too risky business, up pops Paul Tucker, Bank of England deputy governor with responsibility for financial stability, to remind everyone that banking-style risks emerged all over the financial system in recent years, with little or no relationship to whether the entity was a deposit taking institution or not.
This was far from a deliberate spoiler, the speech was in the diary well before Read more
Why are people selling Goldman today? I’m not a trader and I would caution against taking any big positions based on policy that still lacks details. But it seems to me at first glance that Goldman and Morgan Stanley could end up benefiting in some ways from the Obama crackdown on the banks.
Goldman and Morgan can simply give up their bank charters and go back to being non-bank financial firms. Yes, they would still be subject to tougher prudential standards under the administration’s wider reg reform plan. Yes, they would lose access to central bank loans. Read more
The Serbian central bank has left its key policy rate, the two-week repo rate, at 9.5 per cent. The deposit and lending rates are at 7 and 12 per cent, respectively. The key rate, held at its lowest in two years, is the third highest in Europe after Iceland and the Ukraine.
Bloomberg reports extensive strike action in Serbia in response to wage freezes agreed as part of a $3bn loan agreement with the IMF last year. Inflation was 6.6 per cent in December and is rising. The central bank estimates Q1 inflation will come in at the higher end of its target range of 4 – 8 per cent. Read more
Since the launch of the eurozone more than a decade ago, inflation in the region has, typically, been pretty stable. But the European Central Bank is having to get used to the volatility created by rapidly-changing oil and food prices. Its January monthly bulletin highlights the latest challenge: “base effects” - the impact of changes in prices 12 months earlier - are going to exert significant upward pressure on annual inflation rates during 2010, even though price pressures remain extremely weak (and, some might argue, the risk of deflation has not totally disappeared). ECB economists calculate that base effects from energy and food components will push headline inflation up by 1 percentage point in the period from November 2009 to November 2010.
Romania could be awash with euros in February, with the possible delivery of $3.2bn delayed and future loan installments from the IMF and EU.
The International Monetary Fund said it will probably resume payments of its $30bn bailout loan for Romania, frozen on November 6 during government collapse. “We’re in discussions for the conditions for the disbursement” of more funds, Jeffrey Franks, head of an IMF mission to Bucharest, told reporters after visiting Romania’s central bank today. “I have reasons to believe it will go ahead.” Read more
Norwegian banks will be overcapitalised and British banks undercapitalised under the new Basel rules.
So says research from Matrix Group, which considered the fate of European retail and corporate lending banks under the regulations.
The paper concludes that changes to bank capital under new Basel regulations will be a ‘game changer’ for the sector, and will “increase the quantum of capital in the system, improve its quality, force out complexity from balance sheets and ultimately drive down ROE”.
That seems to be a thumbs-up for the new rules, which are intended to create a safer system at the expense of shareholder return. But it’s not good news for Lloyds or HSBC, two of the three British banks studied. Read more