The latest reason to oppose Peter Diamond as a governor of the Fed could cause some long-term problems.
Senator Richard Shelby:
“It’s come to our attention recently that Professor Diamond’s nomination does not comply with the express language or the implied intent of the law. According to Section 10 of the Federal Reserve Act – and I quote – “In selecting the members of the board, not more than one of whom shall be selected from any one Federal Reserve district, the president shall have due regard to a fair representation of the financial, agricultural, industrial, commercial interests, and geographical divisions of the country.” That’s the Federal Reserve Act. That’s the laws of the land.”
“It appears Professor Diamond, whose nomination papers indicate he is – and I’ll quote – “of Massachusetts – Massachusetts” – and current board member Daniel Tarullo, whose nomination papers also indicated he was of Massachusetts, cannot serve at the same time and comply with Section 10 of the Federal Reserve Act.”
Hmmmm. Good economists are not evenly distributed around the US. Read more
Here’s the latest update on the White House’s search for a replacement for Larry Summers, the departing director of the National Economic Council. As this blog wrote on Monday, Roger Altman, chairman of Evercore and former deputy treasury secretary, is definitely in the mix for the post.
So much so, that he was spotted near the Oval Office on Tuesday as he was about to be interviewed for the job by none other than Barack Obama, US president. Although discussions have gotten pretty serious with Mr Obama, it doesn’t necessarily mean that the job is his, of course, and it is still unclear whether he can be considered the absolute front-runner. Read more
Mutiny, or playing by the book? Austria is threatening to withhold its part of the EU loan to Greece, saying the country has failed to get its finances in order. “From the Austrian point of view, there is no reason to release the (aid) contribution in December with the (Greek) numbers as they are at present,” finance minister Josef Proell told a ministers’ meeting in Vienna according to the national Austria Press Agency.
On Monday, Eurostat again revised up past and future Greek budget deficits. Last year’s deficit is now thought to be 15.4 per cent of GDP, compared with previous estimates of 13.6 per cent. This year’s deficit has been revised up to 9.4 from 7.8 per cent. Read more
Seoul raised its base rate 25bp to 2.5 per cent today, citing rising inflation and an appreciating currency, as well as – more positively – continued growth expected in South Korea.
Growth in the country has moderated recently, slowing to 0.7 per cent in the three months to September, from 1.4 per cent in the three months prior. Nonetheless, continued growth is expected, and Goldman Sachs analysts expect the base rate to reach 3.25 per cent by the end of 2011. Read more
If Dublin successfully avoids using the European Union’s rescue fund to resolve its banking and fiscal problems, it will probably win friends in Berlin. Germany’s exact view on what Ireland should do is murky, but officials are adamant that Berlin has not pressed for outside intervention.
That makes sense. For Angela Merkel, chancellor, and Wolfgang Schäuble, finance minister, an EU bail-out for Ireland would undoubtedly mean more unwelcome headlines in Bild of the sort the mass-market newspaper ran earlier this year over profligate Greeks and how German taxpayers were paying for the excesses of other eurozone countries.
But the view in Frankfurt is different. Read more
With UK inflation in October still too high at 3.2 per cent, another quarter has gone by with annual price rises more than one percentage point higher than the 2 per cent target. So, it’s letter writing time again.
As we have come to expect, much of the content of Mervyn King’s letter to George Osborne is pretty boiler plate stuff, presenting again the argument in last week’s inflation report.
The three-sentence summary. Inflation is high due to a series of one-off price level changes – VAT rising to 17.5 per cent, commodity price rises and higher import prices. Inflation will remain high in 2011 as VAT rises to 20 per cent, but then is likely to fall back to target or below. There is great uncertainty and now is not a time to be complacent about inflation.
The interesting thing about the letter – and Martin Weale’s speech yesterday – is what is meant by the Bank governor’s statement that:
“the chances of inflation being above or below the target in the medium term are evenly balanced.”
No surprise: the ECB stepped up its bond purchases last week as Irish yields soared in the resale market, and Greece and Portugal issued new debt at inflated yields. Quite how high the yields would have been in all three cases were it not for ECB intervention, we can’t tell. But the ECB bought €1,073m bonds in its security market programme, the highest since 2 July, barring one episode in October (see chart).
More PIGS* woes today, as the Greek budget deficit worsened. In line with last week’s rumours, the deficit is now projected to reach 9.4 per cent of GDP, missing the 7.8 per cent target by some margin. In Portugal, the finance minister spoke on the possibility of a bail-out – judging the risk to be “high” for external, not domestic, reasons. Contagion was spreading like ‘wildfire’, he said, and no eurozone member could feel safe.
Dublin is still resisting aid, while the debate is shifting to deposit outflows from Ireland’s largest banks. Read more