Daily Archives: August 4, 2010

Central banks are debating whether they should extend their remit to spot asset price bubbles – but research from the Bank for International Settlements has just found that the ageing population will depress, if not reverse, price rises in future.

“In English speaking countries it seems that baby boomer purchases drove up house prices in the past, while their sales will drive real house prices down in the future,” writes author Előd Takáts. The US has apparently enjoyed an 80 basis point per annum (bppa) boost to date, but is facing a negative impact of 80bppa in future. Read more

Another day, another hint from Chinese regulators about the future opening up of the country’s capital account. The latest statement from Safe today said that it was considering introducing new foreign exchange instruments, as well as containing a pledge to push forward with selective capital account reforms.

There was no information about what these new products might be – market participants say that FX options are likely to be the next new development.

The hints about new openings in the foreign exchange market are partly directed at an overseas audience where there are already grumblings about the slow pace of change in the exchange rate since the initial fanfare (see chart). As Mark Williams at Capital Economics pointed out today in a note entitled ‘Return of the Peg’, the renminbi barely moved at all against the US dollar during July. Indeed, “the renminbi has actually weakened in trade-weighted terms since the reform was announced”. Read more

Ralph Atkins

The US sneezes, and the rest of the world catches a cold. Or maybe not these days?

Germany’s current dynamism reflects the increasing strength of its trading links with fast-growing Asian economies. The region’s rising importance forms part of a marked change in German export shares in the past three “crisis years,” according to economists at Unicredit’s Munich office. The chart, showing changes since 2007, shows how dependence on the US has fallen. Read more

A crunch meeting of the monetary policy committee on Wednesday will reveal the Bank of England’s verdict on the new coalition government and the emergency Budget.

Will the MPC judge the proposed spending cuts so damaging to recovery that it has to crank up the printing presses again and inject more money into the economy? Is the global and UK recovery so strong that the Bank can head for the exit and relinquish its extraordinarily loose monetary policy? Or will the MPC be so paralysed by uncertainty over the future that it will again do nothing? Read more

Portfolios have been rearranged among deputy governors at the RBI. India’s central bank made the announcement late yesterday, giving little explanation. In particular, key changes have been made to the remit of deputy governor Dr K C Chakrabarty. The Times of India reports:

Departments like rural and urban cooperative banks have been re-allocated to Usha Thorat while departments of payments and settlement systems have been given to Shyamala Gopinath. Department of administration & personnel management, including works related to Right to Information Act, will be under Subir Gokarn. All these departments were earlier under Chakrabarty.

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