Daily Archives: December 22, 2010

Poland held rates but appeared bullish; the Czech Republic held; and Croatia has cut the rate it pays to commercial banks on their mandatory monetary reserves in local currency to 0.25 per cent from 0.75 per cent.

Meanwhile, Hungary has received a ticking off from the ECB for tardy timekeeping, and the Ukrainian President is apparently trying to replace his central bank governor with an ally. Read more

Hawkish comments from Poland’s central bank governor, following ambiguous data from the last minutes. The Bank kept its reference rate on hold at 3.5 per cent, as expected, but comments from Marek Belka suggest a rate rise is on the horizon.

Commenting on what he said was a decreased risk of strong capital inflows into Poland in the event of an interest rate rise, Reuters reports the governor telling a news conference: “This changes slightly the risk balance in favour of rate hikes or in favour of the start of a tightening cycle.” Mr Belka also reiterated his view that the Polish zloty has strong potential to appreciate. Read more

There are 5,193 more central bankers now than last year, apparently, with the world total standing at 340,342. This from data contained in the Central Banking directory 2011, published today, which suggest the 1.5 per cent rise this year is universal, evident across regions and among large and small central banks.

The expansion is a modest reversal of the trend in recent years. Central banker numbers have been dwindling, by 241,900 or 39 per cent over the past decade. Read more

The mushy middle on the Monetary Policy Committee is still dominant. Seven of the nine members voted to keep interest rates at 0.5 per cent at the December meeting, with Adam Posen dissenting by calling for more quantitative easing and Andrew Sentance preferring a tightening of monetary policy. So far, so boring.

But in this unchanged stand off, the majority of the Committee have moved modestly towards greater concern on inflation. The key sentence is this: Read more

Ralph Atkins

A final few market operations to oversee today and Thursday, and then the ECB will shut down for Christmas (although the euro’s monetary guardian insists, of course, it is “permanently alert”).

ECB policymakers need a good rest: 2011 could be stressful. The eurozone debt crisis remains far from resolved; what happens to Spain in coming months could prove crucial. And probably in the next six months we will learn who will succeed Jean-Claude Trichet as ECB president when he steps down in October.

With all that going on, setting interest rates might seem the easy part of the ECB’s work in 2011. But it does not make it any easier to forecast what could happen. Read more

The Posen-Sentance dichotomy continues. Minutes from the Bank of England show a repeat three-way split among voting patterns, in the formation 1-7-1. Adam Posen wanted to keep the base rate at 0.5 per cent, but increase quantitative easing by £50bn; Andrew Sentance wanted to raise the base rate by 25bp and keep the stock of assets at £200bn. The remaining seven between them voted, as we know, for no change.

Minutes also show increased uncertainty on inflation:

The MPC noted that inflation was likely to rise further over coming 6 months and could well reach 4% by the spring, somewhat higher than the November Inflation Report central projection.

The Committee’s central view remained that the persistence of spare capacity within the United Kingdom, which reduced underlying price pressures, was likely to cause CPI inflation to fall back as the impact of temporary factors waned. But the pace and extent of that fall in inflation was highly uncertain and was likely to depend upon a number of factors.

 Read more