Israeli interest rates are likely to remain on hold for longer, after data showed an unexpected drop in the inflation rate from 3.9 to 3.8 per cent. In a Bloomberg survey, none of 11 economists predicted a fall. Consumer prices dropped 0.7 per cent in the month.
The Israeli central bank was one of the first to raise rates following the financial crisis. Since August of last year rates have risen three times from a record low of 0.5 per cent to 1.25 per cent. Read more
The new Greek government is “beginning to change the course of the Titanic”, the Greek Finance Minister told journalists today, in a rather unfortunate turn of phrase. George Papaconstantinou admitted the country was in a ‘terrible mess’, but said his government had the backing of the public to push through its package of austerity measures.
Public relations experts might rue the terms chosen by Mr Papaconstantinou, but most of what he said was reassuring. Importantly for the eurozone, he stressed that cutting the Greek budget deficit four percentage points this year was of “paramount importance”. Read more
Apparently, the Spanish intelligence agency has been enlisted to help find out what is behind recent “speculative attacks” in the financial markets.
The Economic Intelligence Unit – created to defend the economic, commercial and industrial sectors in Spain – wants to know whether investors’ behaviour and “Anglo-Saxon media aggression” can be explained by market fundamentals, or whether something more sinister is behind the moves. Read more
The central bank of Belarus will cut the refinancing rate by 50 basis points to 13 per cent, effective February 17. Last year, the bank lowered the rate once in December – to 13.5 per cent from 14 per cent. The bank has said it expects further falls, to 9-12 per cent, in 2010.
Many emerging economies are cutting rates – or, indeed, devaluing their currencies – because of large inflows of capital strengthening their currencies and harming exports. Investors have been, until recently, braving the risk to benefit from higher interest rates. This does not appear to be the case in Belarus. Following an IMF-imposed 20 per cent devaluation of the ruble last year (chart, circled), the currency has weakened further against the dollar. Read more
The Ghanaian central bank has all but declared war on the high interest rates charged by banks to consumers, and is threatening measures such as interest rate caps to bring them down.
Although the central bank’s base rate is 18 per cent – down 50bp in November – the country’s banks are charging average rates of about 30 per cent. The central bank has criticised the stickiness of the interest rates – banks are quick to raise them but slow to let them fall. Read more
Yikes. Hot on the heels of a similar American proposal, the UK government is considering issuing bonds to finance infrastructure projects.
Purchase of these so-called ‘green bonds’ would see the British public lending the government money for infrastructure, including low-carbon energy production. It is unclear at this stage how the bonds would pay. If they were performance-related, and infrastructure projects were loss-making, they would of course be a very poor buy. Read more
Sovereign debt in Dubai is seen as riskier now than it was last November, during the Nakheel crisis. The cost of insuring Dubai debt is now 6.62 per cent*, meaning it costs $662,000 to insure $10m Dubai sovereign debt against default. A month ago today, it cost $415,000. But current rates are some way off their highs a year ago, when it cost $940,000.
Markets are pricing in more risk after news emerged that creditors of Dubai World might receive just 60 per cent of their investment back. The rising cost of insurance is not due to illiquid trading: Dubai CDS volumes are high and increasing (see chart). Read more
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Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
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