Daily Archives: September 16, 2011

Ralph Atkins

European Central Bank policymakers are not shy of setting out their thoughts on the future of the eurozone – but their policy prescriptions differ. As a service to Money Supply readers, here is a summary of their latest contributions:

Lorenzo Bini Smaghi, Italian executive board member, argued in Rome on Thursday that at times of crisis, decision makers had to strike a balance. Europe’s monetary union had been built on the false premise that there would never be crises and that markets would function perfectly, he argued. Neither proved correct.

Now policymakers had to make a balanced judgement. 

Claire Jones

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The key event in next week’s calendar is the Federal Open Market Committee’s policy meeting, which Ben Bernanke announced at Jackson Hole would be a longer-than-usual two-day affair. 

By Gavyn Davies

Mervyn King

Mervyn King. Image by Getty.

A few weeks ago, the big central banks were calmly embarking on their “exit” strategies from unconventional monetary accommodation. Then the global economy slowed but for a while inflation remained too high for the Fed or the ECB to consider further easing. Their hands were tied until inflation peaked. Recognising this, markets collapsed. But now that there are some tentative signs of inflation subsiding, the central banks are rediscovering their ammunition stores.

There are basically three types of action that they are considering. In order of orthodoxy, and stealing some of Mervyn King’s terminology, here is a taxonomy of possible measures:

 

Claire Jones

This from the FT’s beyondbrics blog:

The Reserve Bank of India on Friday raised its repo rate – the rate at which the central bank lends to commercial banks – by 25 basis points to 8.25 per cent. The move was widely expected by economists, though some predicted a pause after weak industrial production figures earlier this week.

India’s is the first big EM central bank to buck the recent trend of monetary loosening among emerging markets in the face of a slowing global economy.

This from the Reserve Bank of India’s statement