The one question to earn a wry smile from Fed chairman Ben Bernanke today was on whether the Fed will adopt an explicit inflation target.
His answer was one of his most informative. In essence, he said that: (a) he wants one; (b) it’s not imminent; (c) there’s no need for a change in the law; and (d) there would have to be consultation and communication with both Congress and the public.
By continuing to provide eurozone banks with as much liquidity as they want, the European Central Bank is financing the massive current account deficits of crisis-hit countries such as Greece. Its actions have been akin to issuing “eurobonds” – without politicians having realised. Credit markets in other eurozone countries have been squeezed as a result.
Hans Werner Sinn, president of the Munich-based Ifo economic institute, has become a thorn in the side of the ECB by making such arguments. In Frankfurt today he spent more than two hours explaining his case to journalists – a clear sign that he is not going to give up anytime soon.
All eyes were on the Bank of England minutes of the June Monetary Policy Committee to see whether the replacement of Andrew Sentance with Ben Broadbent would change the balance on the Committee. It did.
Mr Broadbent voted with the majority not to tighten monetary policy, removing one hawkish voice. The Committee is now broadly split 7-2 against tighter monetary policy. Mr Broadbent’s vote was the first dovish tilt apparent in the minutes. Compared with the harsh Mr Sentance, who voted vehemently for rate rises every month most recently seeking a 0.5 percentage point rise, Mr Broadbent is very cuddly indeed.
The second dovish tilt came in paragraph 25.