Daily Archives: March 23, 2010

New rules for Venezuela’s central bank will allow government use of ‘excess’ reserves, Bank financing of government-led projects, and a permanent seat on the Bank board for the Finance Minister.

From Bloomberg:

Venezuela’s National Assembly approved changes in the rules governing the central bank to increase the government’s influence on the institution and to allow it to finance state projects.

 Read more

Simone Baribeau

President Barack Obama is reported to be looking at San Francisco Fed president Janet Yellen to fill Donald Kohn’s vice chairman seat when he leaves this summer. So what had Ms Yellen been looking at to boost the US economy?

Housing, she said in a speech today.

Ms Yellen, San Francisco Fed president, said last year she “became hopeful that the sector would provide a significant boost to the economy this year.”

But then, she said, the market seemed to have stalled. Indeed, home sales data released earlier today and the impending end of the home buyer tax credit bode poorly for a home price bottom.

Optimism on housing is nothing new for Ms Yellen (or, as we know, other FOMC members). Read more

Alistair Darling says the Budget is all about choice – choose Labour and get measures that get growth going; choose anyone else and suffer the consequences.

And what about explaining how to lower borrowing? Read more

Nigeria is a step closer to setting up an Asset Management Company, after ten banks were rescued last year with bad debts of about $6.7bn. The Senate will now produce a version of the bill, before the two houses form a common document. The ten banks will have to pay back their loans through the new company. The bill’s passage has been swift: the proposal only became official in January.

Ralph Atkins

Greece was last night offered a significant concession by the European Central Bank, which indicated for the first time that it might continue providing liquidity against Greek bonds, even if the country were further downgraded by ratings agencies.

Jean-Claude Trichet, president, said his “working assumption” was that Greece would not face problems. But in a noticeable softening of the ECB’s stance, he added that if that assumption was “too optimistic . . . then we would look at the situation”. Read more

The blue chip head of Serbia’s central bank has resigned unexpectedly, with two and a half years left of his term in office. From Reuters:

Serbia’s central bank governor Radovan Jelasic, considered by bankers and investors as a moderate voice of reason during the economic crisis, said on Tuesday that he would resign for personal reasons. Read more

Will Alistair Darling’s budget tomorrow reinforce the image of Labour as a tired government ready to lose or as a party that understands the challenges of coming years and knows what it would do with power? Although  the Budget looks likely to have been written by losers, there is still a chance the chancellor is a winner at heart.

If he is, Mr Darling will have to tick quite a few boxes in my courage checklist. I do not expect any big economic or fiscal numbers to change, so courage is defined by how much he is willing to tell the British public about the government’s existing fiscal plans: Read more

Ralph Atkins

The rift over Greece between the German government and the European Central Bank is growing. Jean-Claude Trichet, ECB president, struck a noticeably more strident tone late on Monday in his appearance before the European Parliament. Whereas Angela Merkel has opposed aid, Mr Trichet backed explicitly bilateral loans for Greece (so long as they did not amount to a subsidy). What was more, he took a clear swipe at the German chancellor’s proposal that countries unwilling to shape-up should be thrown out of the eurozone. Expulsion would go against everything the eurozone stood for, and was legally “impossible,” Mr Trichet said.

Watching him, I felt this was another side of Mr Trichet we were seeing – the part that in his career as a French Treasury official saw him help drive forward Europe’s economic integration. Now, the eurozone has a duty to help its weakest member, he seemed to be saying. Read more

France, Japan, the US, the UK and peripheral eurozone countries will face six years of austerity starting in 2012, just to get their public finances back into some sort of order. So says the OECD, the Paris-based international organisation in a highly sensible paper compiled for the G20 countries.

The most interesting aspect of the paper is its recommendations on the speed of deficit reduction. It calls for consolidation plans, “contingent on the recovery”. That, of course, is easy to say, and less easy to do. But it has a good stab:

“Countries with weak demand growth and policy interest rates at close to zero should consolidate at a slower pace, whereas countries with high growth and greater scope for further relaxation of monetary policy, if needed, should improve budgets more quickly. Likewise, countries with low budget deficits and public indebtedness can afford to consolidate more gradually than countries with high deficits and/or high debt, especially if financial markets are not confident about their authorities’ commitment to consolidation”

And the danger of spillovers from one country to another are highlighted. Read more

Prices in February rose 3.0 per cent compared with a year earlier, down from 3.5 per cent in January. New data from the ONS shows that static prices now, compared with rising prices a year ago, are largely behind the drop in the consumer prices index.

(Latest data is based on a new basket of goods, and no data based on the old basket was available from the ONS for a true comparison. Not even a whiff.)

There were downward contributions from: recreation and culture, particularly games, toys & hobbies; household bills, principally gas bills; household equipment; and alcohol & tobacco. The only significant upward pressure came from prices on women’s outer clothing. Read more

Robin Harding

Japan’s quarterly Flow of Funds data is out today which means an update on who is doing what in the huge Japanese government bond market.

The data is as of the end of December 2009. It covers both JGBs and Treasury Discount Bills and I’ve tried to group it in the same categories used by the Ministry of Finance. A few notes:

- Foreigners have continued to ditch Japanese government debt and are down to 6.2 per cent of the total market, the lowest since mid-2007. Read more

Perhaps for old times’ sake, the inaugural meeting of a new uber-network took place at the Bundesbank in Frankfurt. The next one is being held at the central bank of Kuala Lumpur, and subsequent meetings are planned for Asia, the Middle East and Africa.

The network consists of central banks, sovereign wealth funds, regulators, asset managers and retail banks. Membership is by invitation, and discussions are under the Chatham House rule. Reasons for meeting range from tips on investment strategies to regulation proposals. But one unnamed attendee observed “it ma[de] sense” for buyers and sellers of government bonds to get together. From ft.com:

Central banks and debt management offices are on a charm offensive

 Read more

Simone Baribeau

Dennis Lockhart, president of the Atlanta Fed, threw a wrench into the conventional interpretation of the Fed speak phrase “extended period.”

The common interpretation of “extended period” (as in, the Fed is expected to maintain exceptionally low rates for an “extended period”) is at least six months. Read more