Daily Archives: December 23, 2010

Merry Christmas from the Money Supply team!

We’ll see you again on January 4, 2011.

“The strongly increased risks of central banks may act as a constraint on the room for manoeuvre in future monetary policy.” That is the worst case scenario laid out by new research from the Bank of Finland. The thoughtful, comprehensive analysis of eight central banks looks at unconventional tools adopted during the crisis, concluding: “The actions by central banks during the crisis raise a number of questions concerning exit from the measures taken, the impact of the measures, central banks’ risks and independence and their governance structures.”

The turn of the year – and the final post on this blog for 2010 – make a summary of this paper seem appropriate. Which of the unconventional tools – if any – will be discarded in 2011? Read more

It’s all change in the Ukraine. Parliament has approved the replacement of the central bank chair with his deputy a year before his term had been due to end.

President Yanukovich made the request to replace Volodymyr Stelmakh on Monday, according to a statement on his website. Mr Stelmakh resigned this morning, and parliament approved the chairmanship of 34-year old Serhiy Arbuzov, with 282 of 450 legislators voting in favour. Mr Arbuzov has been first vice-governor since September of this year. Prior to this, he headed up PAO Ukrainskyi Biznes Bank, the country’s 63rd largest lender, which is based in the eastern Ukrainian city of Donetsk, Yanukovych’s home town, according to Bloomberg. Read more

Interest rates might need an “adjustment” to stem the rise in consumer prices, Brazil’s central bank has said. The country’s key selic rate has increased several times since the cuts that followed the financial crisis, but levelled off at 10.75 per cent in June.

The Bank’s inflation report, released yesterday, suggested such a rise was imminent:

Under the inflation targeting regime, deviations in projected inflation from the target of such magnitude suggest the need for implementation, in the short-run, of an adjustment in the basic interest rate, in order to control the growth pace mismatch between the domestic demand and the productive capacity of the Brazilian economy, as well as to reinforce the anchorage of inflation expectations.

Some analysts have interpreted this as a January rate rise.

Banco Central do Brasil explained that the balance of risks associated with inflation had “evolved unfavorably since the release of last Report”. Read more