Daily Archives: May 25, 2010

Simone Baribeau

Is this the beginning of a Federal Reserve versus regional bank split?

Three regional bank presidents indicated they thought the discount rate should be increased by 25 bp to 1 per cent, according to the minutes of the discount rate meetings, released today. None of the Fed governors voted for the action and the nine regional bank presidents also recommended against increasing the rate. Read more

Simone Baribeau

Nope, I won’t be quoting bail-out critics. There was literally a theft.

Via Reuters Read more

Simone Baribeau

In which US cities are home prices likely to fall?

One measure is to look at the amount home prices have fallen, relative to the increases in their rental prices. Moves in rental prices tend to represent fundamental changes in the value of a property (people are paying only what it’s worth to stay there) rather than bubble-induced speculation about the future value of the property. In markets where there are bubbles, eventually, home prices should fall back in line with rental prices. Read more

Chris Giles

The Brookings Institution and the Financial Times are today launching a new index to take the pulse of the world economy. It is a wonderful online tool which allows the user to look at trends in the world economy, in each G20 country, and in its component parts all on a consistent basis.

Devised principally by Eswar Prasad, professor at Cornell University and Senior Fellow at the Brookings Institution, the index show how emerging markets are leading the global recovery, how growth in trade and industrial production has risen back to pre-crisis levels, while employment still lags. It also shows how finanical indicators were leading the real economic recovery until the past month, when they have dived. Read more

Simone Baribeau

The National Bank of Poland today announced (as expected) that it would hold its policy rates for the eleventh straight month.

No surprise, though the country is suffering with above target inflation. But few European countries (notably Norway) have raised rates, and the eurozone crisis is causing others, who may have been on the cusp of following suit, to hold off. Read more

Simone Baribeau

Simone Baribeau

$21bn.

That’s the amount the Congressional Budget Office estimates the Federal Reserve’s credit programmes cost US taxpayers.

Of course, that’s not on a cash basis. The CBO has previously estimated that the Fed will be paying the Treasury around $70bn a year in 2010 and 2011 (compared to payments of between $18bn to $34bn from 2000 to 2008) because of the expected higher yields of the riskier-than-normal assets the US central bank bought to stabilise the economy during the crisis.

But, of course, there is risk. They might pay out less. They might not pay out at all. And, in many cases, the price the Fed paid for them wasn’t discounted for the associated risk. Now the CBO has estimated the amount the Fed overpaid – $21bn. Here’s there breakdown. Read more