G20 nations must implement policies agreed at the latest summit, otherwise “large imbalances may re-emerge, with the attendant risk of disorderly adjustment.”
This from the Bank of Canada’s latest Monetary Policy Report, which finds Canadian growth “proceeding largely as anticipated” and risks to Canada’s economy roughly balanced. Read more
Creating a central fiscal agency for the eurozone is one of two solutions suggested in a new staff paper from the IMF. The current (decentralised) system doesn’t work properly, argues the paper, because buffers are not built up in good times; there is insufficient central risk management; and decentralised crisis response is inefficient, increasing the chance of ad hoc bail-outs.
“The case for binding fiscal constraints in a fiscally decentralized monetary union ultimately rests on the fact that all members’ solvency constraints need to be simultaneously satisfied, effectively exposing the credibility of the common currency to fiscal policy mistakes by the weakest performer,” reads the paper.
Centralising European functions has two proposed elements: a central fiscal agency, and the creation of a single European bond. Such moves would require changes to the Treaty on the Functioning of the European Union. Less radical suggestions, requiring minimal legislative changes, include broader sanctions such as financial penalties in good times, and reduced voting rights in bad times. Read more
With a short, sweet statement, the Bank of Brazil raised the key policy rate to 10.75 per cent late yesterday. A rise had been expected – some thought the rate would go to 11 per cent, in line with the two previous 75bp rises – to combat inflation. “Assessing the macroeconomic situation and prospects for inflation, the Committee decided unanimously to raise the Selic rate to 10.75% pa, without bias,” reads the statement (according to Google Translate).
This is the third consecutive rise since April 29, when the Selic target rate stood at 8.75 per cent; the rate was last increased on June 10.
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Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
