Monthly Archives: March 2010

Inflation has fallen less than central bankers’ models would expect, Spencer Dale has said. The Bank of England’s chief economist said inflation dynamics were not well understood in economies where inflation expectations were centred around a central bank target.

“The experience of many countries thus far is that inflation appears to be more resilient than our models would suggest. Inflation responds less to measures of slack,” Mr Dale told the annual conference of the Royal Economic Society. Read more

From Bloomberg:

The European Central Bank made its final offer of unlimited funds over six months as policymakers continue to withdraw the measures put in place to fight the financial crisis.

The ECB called for bids today in a tender where the rate paid will be indexed to the average of the ECB’s main rate over the life of the loans. It will announce the results tomorrow at around 11:15 am.

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Chris Giles

As far as the economy and the election is concerned, I have been struck for some time by the similarities with the 1992 election. After finding some contemporary analysis of the 1992 election, on which I worked as a cub researcher, my memory has been playing tricks on me. There are even more similarities than I remembered:

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Central banks of the world, prepare to welcome a new addition to the family: the Gulf central bank.

Its leaders have just been announced by the new joint monetary council, in what will probably be seen as the inaugural meeting of the new joint central bank. Jurisdiction will cover Saudi Arabia, Qatar, Kuwait and Bahrain. Reuters reports the bank chairman as Saudi central bank chief, Dr Muhammad Al-Jasser. His deputy will be Bahrain’s central bank chief Mr Qassim Mohammed Fakhro.

With leaders chosen, meetings underway and an ultimate head office location of Riyadh (see map), what more is required? “There are certain legislative and financial measures that have not been completed” for the monetary union, Kuwait central bank governor Sheikh Salem Abdulaziz Al-Sabah told a news conference. Today’s meeting is expected to approve plans and a timeframe for the new institution. Read more

Chris Giles

After a rather inspiring hour of TV debate, here was my take. Who won? No-score draw, I reckon. Will it change anything? No. Was it worth it? Not really. For another take go to the Westminster blog, which is plumping for Vince Cable as the victor.

So boxed-in are the three candidates for chancellor by the budgetary arithmetic that there was broad agreement on the main tasks facing the next occupant of Number 11.

All agree that cutting the budget deficit is a top priority and it will require a tougher spending settlement than those under Mrs Thatcher in the 1980s. None wanted to tell the audience in the studio or at home what deep cuts they had in mind although they each had some small examples to give the impression they were tackling the problem.

They all accepted that pensions for public sector workers should be trimmed and those employed by the state could not have a guarantee of their jobs. They all agreed taxes would rise and did not rule out changing income tax or value added tax. A brain drain of the richest was an exaggerated threat, they chorused, suggesting their priorities lay elsewhere. The government should address inequalities and bankers’ bonuses were outrageous. Banks should lend more and this was one the necessary ingredients for securing growth in the economy.

That much was agreed, so the disagreements were relatively minor.

Alistair Darling and Vince Cable rounded on George Osborne for Read more

Simone Baribeau

If all goes well in the post-recovery world, the Americans will be saving and the Chinese will be buying, according to Paul Jenkins, Senior Deputy Governor of the Bank of Canada.

In a speech today, Mr Jenkins spelled out Canada’s view of the world’s economic future. He predicts industrial economies have a potential growth rate of between 2 and 2.5 per cent and emerging-market economies have a rate of between 5 and 8 per cent. Emerging markets’ growth will so far outstrip developing countries growth, he says, that by 2020 emerging-market economies will likely account for over 55 per cent of global output, compared with 45 per cent today.

And emerging-markets won’t just be producing more, they’ll be consuming more too. Read more

Chris will be posting on the economic aspects of the programme. Also, please note that our Westminster Blog colleagues are doing a live blog.

Romania and Hungary cut interest rates to record lows on Monday as central bankers looked to support growth following improved investor risk perception in central and eastern Europe.

The National Bank of Romania lowered its monetary policy rate from 7 per cent to 6.5 per cent, while the Magyar Nemzeti Bank in Budapest trimmed the base rate from 5.75 per cent to 5.5 per cent, the lowest since the fall of communism.

Romanian and Hungarian currencies have strengthened in recent weeks and it has become cheaper to insure against the risk of their debt defaulting, as investors bet that eastern Europe is gradually overcoming the worst of the financial crisis. Greek banks hold significant assets in Romania, but so far contagion risks appear benign. Read more

No recovery until 2011 or later: this is the base case of 31 top retail executives, including Sir Stuart Rose and Peter Marks, CEO of the Co-operative Group. The retailers also expect inflation, a hike in the VAT rate and increasing mergers and acquisitions in the industry, shows The long and winding road, a report by Sarah Butler for Kreab & Gavin Anderson.

Today’s European confidence figures, by contrast, are mostly up, driven by bullishness in the industrial sector. A lower euro is helping producers. But lower sterling is having the opposite effect on retailers. “Sterling has weakened and that will feed through to non-food prices because of Read more