Bernanke on the Fed’s fiscal calculus
Ben Bernanke is testifying at the House today (it’s pretty dull) but he has spelled out the Fed’s estimate of what a $60bn cut to federal spending in FY11 (i.e. in the remaining months until the end of September) would do to the economy.
It would cut 0.1-0.2 percentage points from output this year and 0.1 percentage points next year. At some unspecified time horizon, it would lower employment by 200,000. Read more
The process of replacing Andrew Sentance is well underway: the job was advertised in The Economist, and apparently a lucky few even received emails from the government directing their attention to the ad. We reckon about 30 applications will have been made, 10 of which from serious contenders. Ultimately, George Osborne will choose the external member from a shortlist, helped by a recommendation from the interview panel. (Incidentally, Ireland’s hiring too.)
What will all this mean for the balance of opinion on the monetary policy committee? Andrew Sentance is the Bank’s chief hawk, voting for a 50bp rate rise at the last meeting. He is coming to the end of his second term. It is likely his replacement will be less hawkish. But importantly his term doesn’t end till May 31st. This means he will vote in the all-important meeting on May 4-5, which will follow the Q2 GDP estimate.
Inflation is beginning to slow in Russia, after one rise in bank reserve requirements in January and another one in February – the latter complete with the rate rise markets had been expecting for months.
A Reuters news flash tells us inflation slowed to 0.1 per cent in the week to February 28, bringing the price increase for the month as a whole in at 0.8 per cent, under expectations. Annual inflation has been rising steadily from a low of 5.49 per cent in July of last year, standing at 9.58 per cent at the end of January. The latest data should mean annual inflation to February fell slightly to 9.56 per cent. Read more
The zloty has fallen against the euro after Poland’s central bank decided to keep rates on hold. A large minority of analysts had expected a raise, following above-target inflation data, plus last month’s decision to increase rates 25bp, the first such move since the financial crisis. Signals from the Bank itself had been mixed.
(This paragraph is an update 1530 GMT) Comments from the central bank governor suggest this is a pause rather than a change of heart. “Some members of the Monetary Policy Council saw the January hike as the start of a cycle and I am one of them,” governor Marek Belka told a news conference. Read more
For the first time since July 2009, the Philippines’ central bank has suggested it might be forced to raise rates. Inflation expectations have risen and “the scope for keeping rates has narrowed,” said governor Amanda Tetangco, according to Reuters news wire. “The BSP (Bangko Sentral ng Pilipinas) will make any adjustments to policy as and when necessary.”
The lending (repo) rate is at 6 per cent and the borrowing (reverse repo) rate is at 4 per cent. Read more
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Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
