Falling bond yields are aggravating the underfunding of defined benefit pensions, and further quantitative easing will make the problem worse still. This from Jacob Funk Kirkegaard at the Peterson Institute, with a piece entitled: Central banks should also be wary what they buy.
Accounting rules are leading to stricter funding requirements in the US, argues Mr Kirkegaard. This in turn forces pension plan sponsors to increase their contributions to underfunded schemes.
China has temporarily increased the reserve ratio required from six large commercial banks banks. For two months, the banks will need to keep 17.5 per cent of depositors’ balances on hand, instead of 17 per cent. With banks hoarding more cash, money supply and credit availability will fall in China. In two months’ time, the reserve ratio is expected to return to 17 per cent.
The surprise move, reported by Reuters from four unnamed sources, may be a response to rising capital flows, rather than a prelude to monetary tightening. It could also be intended as a warning to banks rumoured to have stepped up their lending in September, above government targets.
Stanley Fischer’s mantelpiece must be full. He’s just won another central banker award, this time Central Bank Governor of the Year from euromoney magazine, which has been running the award for 30 years.
Just yesterday, Sunday, he was awarded best Middle East central bank governor from magazine Emerging Markets. Last month, he was one of only seven central bankers to be awarded an ‘A’ grade by Global Finance magazine.