Someone, somewhere, has been counting. They have counted, for example, the number of times Ben Bernanke has said ‘inflation’ in the past few years in his testimony to Congress (it has been falling, and the word ‘deflation’ doesn’t show up at all*).
Discussion of institutions is rising fast, however. ‘Federal’ and ‘reserve’ are the biggest winners – ‘federal’ was said 46 times in the latest speech, almost 7 times the wordcount three years ago, and double the wordcount six months ago. ‘Congress’ and indeed ‘institutions’ are new entrants, as is ‘system’. ‘Facilities’, not shown on chart, made a strong entrance this year, with a count of 18. Read more
Analysts agree that Ben Bernanke’s prepared testimony ahead of the House Financial Services Committee this morning was largely uneventful.
“You know Bernanke did not say very much, when there is an active debate as to whether weak new home sales or Bernanke’s testimony was moving markets more. Oddly the home sales data may have even won that contest,” wrote Alan Ruskin, chief international strategist at RBS.
So what hasn’t changed?
The Federal funds rate, as Mr Bernanke and everyone else at the Fed have stated repeatedly, is likely to remain low for an ‘extended period’, even after the discount rate – the rate at which banks borrow money directly from the Fed – rose by 25bp last week.
But his testimony to Congress wasn’t limited to his written statement. Among his comments during the question and answer period:
- Bernanke on the cost of interest rates on reserves: Unless I’m mistaken, this is the first time Mr Bernanke has addressed the cost of paying interest on bank reserves. He has said previously that it will likely be the most important means of tightening monetary policy when it’s time to begin tightening, but not estimated its cost. In the hearing, he said the cost would be ‘within tens of basis points’ of increasing the federal funds rate. “[It's] not a tremendous difference.”
Ben Bernanke will welcome an audit, defend the Fed’s independence and make a case for the Fed’s role in regulation when delivering his monetary policy report to Congress today.
Temporary inventory sell-offs contributed to 4 per cent growth in the second half of last year, Mr Bernanke will say in this speech. Demand must grow in the private sector to plug the gap when the inventory bounce ends. Private sector demand is already growing at a moderate pace, driven in part by a recent pick-up in consumer spending and business investment in equipment and software. Read more
The Polish central bank has kept the 7-day reference rate on hold at 3.5 per cent, as expected. The economy has been growing while inflation has been falling, making the timing of a rate rise uncertain.
This month’s board contained three new members, whose relatively bearish views made a rate rise this month less likely. Traders are also becoming more cautious, pricing in a 0.7 percentage point rise in the next six months. Last month they were pricing in a 0.8 percentage point rise. Read more
The People’s Bank of China’s current account increased by 69 per cent during 2009, ending the year at $42.6bn, while its financial account enjoyed a net inflow of $14bn, the first net inflow since 2005. Taiwan News said the record balance surplus reflected an increase in the bank’s reserve assets – which are likely to rise further this year as China uses banks’ reserve ratios as a means to limit the amount of money in the economy. The last such move was on February 18.
Russia is getting richer. The rouble is gradually being allowed to strengthen, which will allow Russians to import more, addressing their trade surplus. The process is being carefully managed, however, with the central bank cushioning each move.
Local dealers are again reporting a $700m purchase of foreign exchange with a 5 kopeck reduction in the floating rouble band boundary. (A kopeck is one hundredth of a rouble.) Read more
Neighbours Namibia and Botswana have kept their main rates on hold today. Namibia has kept its repurchase rate at 7 per cent for the fourth consecutive month, while Botswana has kept its main lending rate at 10 per cent. Namibia and Botswana neighbour South Africa, the continent’s largest economy, and Namibia generally follows South African monetary policy. South Africa kept its rate at 7 per cent for the fourth month, on January 26.
Inflation in all three countries is at similar levels, albeit in different directions. South African inflation ran at 6.2 per cent in January, above the 3-6 per cent range for the second month, but falling toward it from December’s level of 6.3 per cent. Inflation in Namibia – also above target but slowing – is currently about 6.3 per cent. Botswana has just exceeded its target range of 3-6 per cent, with inflation rising to 6.1 per cent in January. Read more
China might soon be littered with incomplete building projects and half-built roads.
Chinese banks have been ordered to trawl through existing loan agreements that are ultimately used by local governments to raise funds – and stop lending to those projects backed only by expected fiscal revenues. The aim is to reduce the chance of default. Read more