Daily Archives: July 15, 2010

James Politi

The Federal Reserve rarely comments on the passage of a single piece of legislation. But this time, Ben Bernanke, Fed chairman, could not resist.

After winning all of the biggest battles in the fight over financial regulatory reform – cementing the Fed’s power while safeguarding its independence – Mr Bernanke put out a statement today praising passage of the bill in the Senate, calling it a “welcome and far-reaching step toward preventing a replay of the financial crisis.” President Barack Obama’s signature on the legislation is expected in the coming days. Read more

The overhaul of the US financial sector cleared its last big hurdle in Congress on Thursday as 60 senators voted in favour of the legislation, which introduces a raft of restrictions on banks to curb risk.

More than a year after the mammoth legislative effort began, Democrats managed to persuade three Republican senators to support the Dodd-Frank bill, enough for the 60-vote supermajority needed to bring debate to a close. Read more

James Politi

To say that Janet Yellen, Sarah Bloom Raskin and Peter Diamond got off lightly at their confirmation hearing before the Senate banking committee would be an understatement.

With most members distracted – or absent- by the imminent final vote in the Senate on financial regulatory reform, the event itself only lasted about 90 minutes. And if ever it was in doubt, it now seems abundantly clear that the three nominees will be comfortably, and swiftly, confirmed to the Federal Reserve board of governors.

 Nevertheless, I was able to extract a few interesting nuggets from question-and-answer period. The most timely question came from Jeff Merkley of Oregon for Janet Yellen, who is slated to take over from Don Kohn as vice-chair. He asked where she stood on the dominant debate over US fiscal policy – should there be more stimulus or should authorities immediately start reining in the deficit ? Read more

Slightly more bullish than last month: this is what we can glean from minutes just released of the Polish central bank’s June 30 meeting.

While the council settled on holding rates constant, this month “some members … indicated that interest rates in Poland were running at a level lower than the natural rate for the Polish economy. According to those Council members further economic recovery and a growing risk of inflation running above the NBP inflation targetmight speak in favour of raising the interest rates.” There was no mention of these bullish views in last month’s minutes.

James Politi

Janet Yellen has just released her statement to the Senate banking committee, where she – along with Sarah Raskin and Peter Diamond, other nominees to the Federal Reserve board - faces a grilling from lawmakers today on her bid to become vice-chair of the Federal Reserve replacing Don Kohn.

Ms Yellen, president of the San Francisco Fed, is predictably cautious as she introduces herself to the panel: “I am wholeheartedly committed to pursuing the Fed’s congressionally mandated goals of maximum employment and price stability and to strengthening our programme of supervision and regulation, building on the lessons learned during the financial crisis.”

Her statement gets a little meatier later on, and, reading through the lines, there are two main messages. On monetary policy, Ms Yellen still believes plan A is an eventual tightening. And to Congress, Ms Yellen is very clear: independence is crucial to central banking, so hands off the Fed ! Read more

“It is odd that the new regulatory structure makes an unrepentant BOE even more powerful with respect to regulatory matters,” writes former MPC member Sushil Wadhwani in The Future of Finance, a collection of essays. “In my time at the MPC at the Bank, I was surprised by the lack of interest in issues relating to financial markets. Indeed there seemed to be a deliberate policy to run down resource in the Financial Stability wing.”

Strong words. But the argument against giving regulatory powers to the Bank of England is not, however, that they don’t deserve them. Rather, Dr Wadhwani argues that monetary policy and macro-prudential policy need to be able to work against each other, or, as he puts it, “the use of monetary policy to ‘lean against the wind’ is critically important in its own right and to the success of the ‘macroprudential’ policy to be adopted by the [Financial Policy Committee].”

If you want to browse historical key policy rates across the globe, look no further than our new interest rates tab. Please let us know what you think: if you find it useful, we’ll add more countries to it.

The Hungarian cabinet has rejected the ECB’s opinion over a plan to cut central bankers’ pay, so the legislation will proceed to a vote next week.

The ECB feels the bill could compromise central bank independence. They argue the pay cut should only apply to successors of the current governor, Andras Simor, to allay concerns that the bill is intended to pressure current management. Adding to these fears will be the fact that the ruling Fidesz party has called for Mr Simor’s resignationRead more

As expected, the Bank of Japan has held its key rate at 0.1 per cent and did not announce any new easing measures. But the Japanese economy is now forecast to grow at 2.6 per cent in the year to March 2011, up from April’s forecast of 1.8 per cent. The new forecast fits with yesterday’s estimate of 2.4 per cent from the IMF.

Deflation continues in Japan, and the BoJ response on this issue was: Read more