Daily Archives: January 19, 2011

Robin Harding

The St Louis Fed has just launched a brilliant new resource called FOMC Speak. It’s an archive of all public comments by members of the FOMC including interviews and video.

Kudos to the St Louis Fed, which is also responsible for FRED, the best place to find US economic data.

China’s doing it. Brazil’s doing it. Turkey’s doing it. Now Serbia has also substantially increased the proportion of deposits banks will need to keep with the central bank.

The reserve requirement on foreign-currency deposits has been hiked to 30 per cent from 25 per cent. They have been kept constant on dinar deposits of less than two years, and cut to zero on dinar deposits of more than that. Many Serbs and Serbian businesses prefer to deal in euros, perhaps remembering hyperinflation in the 1990s. 

*Updated 1509GMT

Interest rates will be a quarter of a point higher from tomorrow in Poland, after the MPC voted to increase them. The key refi rate will be 3.75 per cent. The move was expected, after bullish signals in December followed by strong hints from council members in the new year. Those comments suggested this would be the start of a rate normalisation policy, rather than a one-off reactive decision. All else equal, expect further rate rises ahead.

Headline inflation rose to 3.1 per cent in December, driven by higher energy prices. Initial estimates suggest core inflation rose, too. “The inflation rise,” said the Bank, “was accompanied by a rise in inflation expectations.”  This was given as the main reason for the rate rise in today’s news conference.

Governor Marek Belka has also said in recent months that he saw a decreased risk of strong capital inflows into Poland. Inflationary “hot money” inflows are encouraged by rate rises, which increase the return to investors. If those inflows are subsiding, Poland would be liberated to raise interest rates without fear of undue inflation.

Effective tomorrow, the 25bp rate rise will be the first 

Chris Giles

In a mixed set of British labour market figures today, unemployment was up, the claimant count was down, and earnings growth was rather flat. There was nothing in the figures to suggest inflation is getting out of control and when you look at the details of the Labour Force Survey data, it becomes clear that the employment picture will worsen over the next two releases.

How can I be so sure? Because the official employment and unemployment figures are based on a rolling three-month average, but the Office for National Statistics also publish  monthly data for transparency. November was a shocker. The charts show this, with the employment rate falling to its lowest level since the crisis started offset by a spike in inactivity not unemployment. 

Is the PBoC changing its toolkit? Comments from an MPC member suggest the Bank might favour rate rises over reserve requirements to combat inflation.

“It is reasonable to see an intensive adjustment of the monetary policy in the first quarter,” said Li Daokui, according to Xinhua news wire. A rate rise is possible this quarter, he said. The one-year deposit and lending rates stand at 2.75 and 5.81 per cent, respectively, following 25bp rises in October and December 2010. 

Italy’s economic recovery will remain weak and below the eurozone average over the next two years, the Bank of Italy forecasts in a report that diverges from more upbeat government predictions while underlining the need for structural reforms.

Noting a slowdown in gross domestic product growth in the last quarter of 2010, the central bank predicted on Tuesday that Italian GDP would grow at a similar pace of 0.9 per cent in 2011 and 1.1 per cent in 2012, boosted by rising exports but held back by weak consumer spending and the government’s austerity programme. Modest growth would not be enough to produce a robust recovery in employment, the bank said.