Daily Archives: June 30, 2011

Claire Jones

The Fed has extended its dollar swap lines to the European Central Bank, the Bank of England, the Bank of Canada and the Swiss National Bank for another year (though, as of last Wednesday, no-one was using them).

Bar a three-month hiatus between February and May 2010, the lines have been in place since December 2007. They are now due to expire in August 2012, just a few months’ shy of five years after their introduction. At the height of the crisis, more than 14 central banks had set up arrangements.

The lines, set up to counter a lack of dollar liquidity for foreign banks with no access to Fed support, highlighted the dollar funding gap.  Read more

Financial markets think Bank of England meetings on monetary policy will be a bore for almost another year. The minutes last week persuaded investors that the Monetary Policy Committee was unlikely to raise interest rates until mid 2012.

Economists are now following  in investors’ footsteps with Barclays Capital becoming the latest group of forecasters to push back their forecast of a rate rise from November 2011 to May 2012, arguing that “policy [is] paralysed by domestic double dip” fears.

As I argued in the Financial Times last week, investors have got ahead of themselves a little and the balance on the MPC is rather more delicate. It could easily tip towards a rate increase, particularly if Charlie Bean swung into that camp. Based on their recent words, here is my guide to the MPC members’ views, from the most dovish to the most hawkish.

As you can see, there is quite a delicate balance on the MPC. It could easily tip 5-4 to a rate rise. Getting a majority in favour of QE2 appears much more difficult at present. Read more

Claire Jones

The blueprint for Basel III is more than a year old. And there is consensus on its fundamental tenets – to hold more and better quality capital, for liquidity requirements, leverage ratios, and countercyclical buffers.

Yet the devil is in the detail. There remains disagreement on the calibration of countercyclical buffers, not to mention what form the leverage ratio and liquidity buffers should take.

So Sunday’s appointment of Riksbank governor Stefan Ingves to chair the Basel Committee is significant. Read more