Daily Archives: June 29, 2010

Alan Beattie

The US will have much less room to grow than it believes and should therefore tighten fiscal policy more rapidly, according to estimates by the International Monetary Fund.

In the first report of the G20’s “mutual assessment process”, by which leading economies are supposed to hold each other accountable for growth, the IMF suggests that the “advanced deficit countries” – dominated by the US – should tighten fiscal policy more rapidly than planned. Read more

James Politi

Remember Ben Bernanke, Fed chairman, and Hank Paulson, then treasury secretary, heading up to Capitol Hill in September 2008 in desperation, begging lawmakers to spend a whopping $700bn to save the financial system? That may seem like distant history by now, but that money came in very handy again today.

After the death of Robert Byrd, the Democratic senator from West Virginia, yesterday, the prospects for passage of the massive financial reform bill, whose different versions were so ably reconciled during a series of marathon negotiating sessions on Capitol Hill last week, suddenly hit a wallRead more

James Politi

Today US economists received the latest reminder of how imperfect some of the consumer surveys really are.

The Conference Board’s consumer confidence survey today showed a sharp drop in June, to 52.9 from 62.7 in May. There are plenty of good reasons for the drop, which Federal Reserve officials pointed out in their monetary policy statement last week, including the reluctance of employers to hire new workers and a troubled housing sector. Plus, there is the sovereign debt crisis in Europe and even the disconcerting oil spill in the Gulf of Mexico.

But why, in that case, did the University of Michigan’s consumer sentiment survey only last week show confidence at its highest level since January 2008 ? Read more

Amendments to Serbia’s central bank law have been adopted by MPs today that could both help and hinder the Bank’s independence. A new governor is expected soon, now that the law has been approved.

Under the new rules, Serbia’s president will be able to nominate the bank governor. Previously, the governor was previously named and approved by parliament. Parliament will still confirm the nomination by majority vote.

Presidential nomination raises the fear of political meddling. Reuters expands:

The last governor, Radovan Jelasic, resigned in March after six years in office, with analysts saying he was unwilling to ease monetary policy in line with government demands to help the economy, which contracted three percent in 2009.

But many interpret the law overall as strengthening the independence of the bank. Belgrade media Read more

James Politi

President Barack Obama held one of his periodic White House meetings with Ben Bernanke, Fed chairman, this morning, and the ensuing statement may have caught the attention of some central bank watchers.

Naturally, Mr Obama said he and Mr Bernanke “share the view that the economy is strengthening”. But of course, with unemployment stuck at 9.7 per cent, the president could not avoid stating that “we’ve still got a lot of work to do”.

Later, Mr Obama’s remarks get potentially more significant. He says “both of us emphasized…that if we can make sure that we continue to do the things that we’re doing, deal with folks who need help – so passing unemployment insurance, for example; making sure that we are working to get credit flowing to small businesses that are still having some difficulties in the credit markets; strengthening consumer confidence – then we think the general trends will be good…”

So does that mean that Mr Bernanke has abandoned his long-held position of not taking a position on particular tax and spending initiatives Read more

The Dutch finance minister Jan Kees de Jager has called on the Dutch National Bank to formulate a remedial plan within the month, after a commission found their internal supervision wanting.

Investigating the bankruptcy of small Dutch bank, DSB, the Scheltema commission concluded that the DNB should never have issued them a banking licence in 2005. While the financial position of the bank was sound, the report concluded that fundamental improvements in corporate structure had been needed and should have been identified. (DNB aside, the 348-page report blamed unprofessional management and poor governance for DSB’s collapse.)

Responding to the commission’s report, Mr de Jager said: “The internal supervision within DNB needs to be changed, for instance via the supervisory board … the supervisory board needs to exercise more control of DNB’s supervisory tasks. The law needs to be changed and I will change the law.” Read more

A key interbank rate has jumped 9 per cent, indicating fears about the health of eurozone banks when 1,121 of them must repay €442bn to the ECB on Thursday. The rate at which banks lend to each other in euros, euribor, has only recently started climbing, following dramatic falls since the crisis.

Market reaction might seem belated, given how widely trailed this liquidity halt has been. A story this morning about Spanish banks lobbying the ECB has probably helped. Read more

Euroskeptic and on the dovish wing: that’s the quick profile of the newest member of the central bank board, Kamil Janacek. Eurosceptic president Vaclav Klaus is due to make the announcement about now. Currently chief economist of Komercni Banka, a Czech bank, Mr Janacek, 67, has known Mr Klaus for more than 45 years. He will be filling the only vacancy on the seven-member board.

The President is rearranging several key figures right now. Current board member Vladimír Tomšík, just 36, is due to be confirmed as deputy governor today, and new Czech prime minister Petr Necas was sworn in yesterday. Read more

Start pricing in a 25bp rise in Q4: that’s the message from the Thai Finance Ministry. The policy rate – the one-day repurchase rate – is currently at 1.25 per cent and has been on hold since April 2009, having been cut in four consecutive decisions from 3.75 per cent in August 2008.

Ralph Atkins

Spanish banks have been lobbying the European Central Bank to act to ease the systemic fallout from the expiry of a €442bn ($542bn) funding programme this week, accusing the central bank of “absurd” behaviour in not renewing the scheme.

On Thursday, the clock runs out on the ECB financing programme – the largest amount ever lent in a single liquidity operation by the central bank – under the terms of the one-year special liquidity facility launched last summer. One senior bank executive said: “We are fighting them every day on this. It’s absurd.” Read more