Daily Archives: October 13, 2010

Chris Giles

If Adam Posen made “the case for doing more”, and David Miles argued “the case for not doing less”, Andrew Sentance has just pressed “the case for doing less, you idiots”.

I cannot recall a moment in MPC history in which the members have been so openly hostile to each others’ views. It does appear to be war on the MPC.

Robust debate is to be welcomed, since reasonable people should be able to disagree on an analysis of the economy. I, for one, am delighted about the absence of false consensus on the Committee these days.

But the argument on the Committee is quite extreme. Mr Sentance accuses other members of not taking the Bank of England’s remit seriously and clearly feels no need to address directly the arguments put forward by other members.

Let’s try to synthesise where the differences between the members really lie.

How does Mr Sentance’s differ from the other two?  

James Politi

The Great Recession of 2007-2009 hit hardest in two areas: sun-belt states such as Arizona and Florida that were exposed by the housing boom and bust, as well as rust-belt states like Michigan and Ohio that were already suffering from the erosion of America’s manufacturing base. Interestingly enough, Texas and the Midwest, which bore the brunt of the 1980-1982 recession, managed to escape most of the pain this time around. 

The worst-off communities in this cycle were the focus of a conference this morning organised by the Brookings Institution’s Hamilton Project, which conducts research on economic policy and counts Robert Rubin, former treasury secretary, and Roger Altman, former deputy treasury secretary, as senior advisers. 

** Updated: 16.54 – Confirmed by first deputy chairman Alexei Ulyukayev, according to Reuters, who said the move from 3 to 4 rouble-width boundary was part of the course of moving towards a policy of inflation targeting and a more flexible rouble exchange rate. He also said the central bank had reduced the size of interventions at the corridor’s boundaries to $650m from $700m.

Traders are reporting a widening of Russia’s exchange rate boundaries, as the currency hits an eight-month low. Bank Rossii, the country’s central bank, has been defending a ‘floating corridor’ of 33.4-36.4 roubles against a euro-dollar basket. To defend the range, the Bank would sell foreign currency when the exchange rate is in the upper third, 35.4-36.4 .

Bloomberg reports traders saying that Bank Rossii is no longer defending the 36.4 limit. Two traders are quoted as saying the corridor has been widened 50 kopeks in both directions, to 32.9-36.9. The Russian currency has weakened to 42.1875 against the euro in intraday trading, the lowest since early February (see chart). 

Axel Weber has urged the ECB to consider exiting its support measures, saying the risks of waiting were greater than the risks of doing nothing. At a speech in New York on Tuesday, AFP reports the Bundesbank president saying: “It is necessary, from a monetary policy point of view, not to postpone the exit from non-standard measures for too long. There are risks both in exiting too early and in exiting too late. I believe the latter are greater than the former.”

Professor Weber, who is in the running to become ECB president next year, also repeated his view that the central bank’s bond buying program should come to an end, saying: “These securities purchases should now be phased out permanently as part of our non-standard policy measures.” The statements are on message for the ECB governing council member, who opposed the bond buying programme, and recently dismissed its role as “minor”. ECB bond purchases fell to near-zero levels last week, having shot up the week before.