I’ve been off helping in our Tokyo bureau for ten days so time to catch up on the Fed news.
The March FOMC meeting
The committee took the opportunity to do a substantial rewrite of the first two pars of its statement, which made sense, as it was starting to get pinned down by fear that any change would be seen as a signal of early changes to QE2.
The main effect of the rewrite is to focus the statement on the danger of high headline inflation – but make clear that the FOMC expects it “to be transitory”. I’m a touch surprised by the transitory line given that some members of the committee are clearly concerned that it will be otherwise. Read more
…is starting to look quite convincing.
Bank regulators attacked amid push for higher capital - FT
Poor suffer as wealthy Americans pay off debts – FT Read more
The sums involved in propping-up Ireland’s banking system are so great – and the chances so small of them falling dramatically any time soon – it was inevitable the European Central Bank would want to find a better, longer term solution.
Currently, the total amount of ECB liquidity and “emergency liquidity assistance” provided by the Irish central bank, both essentially on an ad-hoc basis, is not far south of €200bn.
Hence news at the weekend that the ECB is looking at some kind of facility for eurozone banks in restructuring is not surprising. We have known for some time that the ECB was looking at ways to deal with “addicted banks” – those totally reliant on its liquidity and unable to fund themselves normally in financial markets. Ireland’s banks clearly fall into that category. Read more
Against expectations, Bank Rossii held rates on Friday, though it did raise reserve requirements. Following similar moves for February and March, Russia’s central bank raised reserve requirements by a percentage point for banks’ liabilities to non-residents (charted, right) and half a point for other liabilities. The proportions of deposits banks need to keep with the central bank now stand at 5.5 per cent and 4 per cent, respectively.
While there are signs that inflation is rising less quickly than previously, prices have still risen 3.6 per cent since the start of the year according to weekly data, making the annual 6-7 per cent target tough to achieve. Most view further rate rises as likely. Read more
Rarely do central bankers make pledges like that this morning by Adam Posen, external member of the Bank of England’s Monetary Policy Committee. In an interview with the Guardian, he said if he was wrong to believe inflation would fall backbelow the 2 per cent target by the middle of next year, he would not seek a second term on the Committee.
“If I have made the wrong call, not only will I switch my vote, I would not pursue a second term. They should have somebody who gets it right and not me. I am accountable for my performance. I’m holding my nerve because it is the right thing to do.”