Some relief at last for the Federal Reserve: Tom Donohue, president of the US Chamber of Commerce, has spoken out in support of Fed independence and QE2.
Via The Hill:
“We must maintain the independence of the Fed and be very careful not to louse that up on Capitol Hill,” Donohue told reporters in a press briefing after a speech at the Chamber.
I’m surprised that today’s CPI numbers aren’t getting more attention given all the (ridiculous in my view) recent speculation that the Fed might curtail QE2 short of $600bn. Today’s core CPI was up only 0.6 per cent on a year ago.
Are politicians enslaved to the markets? EU officials are falling over each other to reassure bond markets, in particular, that there is plenty of money should Ireland need it. Ireland has not requested aid, and it is Irish banks rather than the Irish government that are likely to need funds. Irish banks, like all eurozone banks, would approach the ECB and not the Irish government for their regular liquidity needs.
But no matter. Irish politicians find themselves surrounded by hands thrust forward, stuffed with cash, which at present they politely refuse. It is a sensible strategy, on the face of it. Given Irish ministers’ refusal to accept cash they don’t need, continued offers should surely reassure markets that cash is readily available.
Problem is that the clamour creates both momentum and fear. Fear without momentum can ebb away, but fear with momentum demands a climax. A climax in this case would probably be a bail-out of Irish banks. But would it really help? Read more
As any reader of this blog knows, I have campaigned for years for the Bank of England to improve the transparency of its forecasts. Small and welcome improvements have been made, but the Bank’s inflation report still fails to describe the Bank’s forecasts adequately in a way that fosters a focus on the risks to inflation and growth.
The Bank says it is concerned to avoid a narrow focus on central forecasts. It lost that battle years ago, precisely because it kept the details of its forecast secret for a week after publication. Every intermediary has a reasonable urge to find out what the forecast is before being able to focus on the risks.
Because I like to be helpful, here are some graphs the Bank could produce that would be informative, based on probabilities alone and allow a focus on risks. They come from the statement in the latest Inflation report that, “the Committee judges that at both the two and three-year points there is only a one-in-four chance that inflation will be within 0.5 percentage points of the 2% target. The question is how to represent this fact graphically. Read more
Chile has again raised rates, though it has suggested the pace of rate hikes may slow due to lower-than-expected inflation:
Inflation has proceeded slightly below expectations… With respect to the dollar, the peso remains fairly unchanged since the last meeting. Read more