Daily Archives: February 11, 2011

Robin Harding

Professional forecasters have become more optimistic in the Q1 survey by the Philly Fed but I’m not bowled over by their wild enthusiasm.

 

Robin Harding

Paul Krugman politely ticks off my boss Gillian Tett (and a polite ticking off from Mr Krugman is a signal honour) for saying that gaps are opening up betwen US regions based on state level unemployment.

As Mr Krugman notes, there aren’t many people in low unemployment states such as the Dakotas or Nebraska. 

Some small- and medium- sized deposit-taking banks will need to keep more funds with the central bank following a lending binge at the start of the year, according to reports in the official China Securities Journal.

Without citing sources or giving details, the newspaper said the People’s Bank of China had tailor-made reserve ratios for various city commercial banks, reports Reuters. Bloomberg points out that it is unclear whether the ratio has risen or fallen. Given the general move to combat inflation in China, an overall tightening is likely, however. 

Bullish comments from the Bank of Korea today, even as it kept the 7-day repurchase rate on hold at 2.75 per cent. By the Bank’s own forecasts, consumer price inflation will rise above the 3 per cent target to 3.5-4 per cent this year. South Korea’s central bank surprised markets with a 25 basis point rate rise in mid-January – one of a number of inflation-fighting techniques the Bank has introduced.

Inflation is firmly on the Bank’s radar; the statement leaves no room for doubt. The strength of conviction suggests another rate rise is not far ahead: 

The Vietnamese central bank has devalued its currency by about 9.3 per cent, the third devaluation of the dong in a year and the sharpest since at least 1993. Despite high inflation, the State Bank of Vietnam fixed the currency’s reference rate at 20,693 per dollar today versus 18,932 yesterday.

The move is an attempt to address the gap between official and black market exchange rates, which was roughly 8.5 per cent yesterday. A weaker dong will also help exporters and should address the country’s trade deficit.

But the devaluation could be disastrous for inflation, already high at 12.2 per cent last month. The target is 7 per cent. The move suggests the bank is prioritising growth over inflation, which is supported by recent comments from the government. “One of our top priorities now is to stabilize the macro economy in order to maintain the pace of growth,” Bloomberg quotes Nguyen Van Thao, deputy chief administrator of the ruling Vietnamese Communist Party’s Central Committee, saying on January 19.