Luckily for this blog, monetary policy is no longer as “boring” as Sir Mervyn King would like.
Still, it remains predictable enough that economists are rarely surprised by decisions. Especially for those central banks that target a certain level of inflation. Recently, however, most have been getting it spectacularly wrong on some of the key emerging market votes, notably Turkey’s and Brazil’s rate cuts.
They might have called it right had they read this collection of papers, published by the Bank for International Settlements yesterday. Read more
Jean-Claude Trichet holds his last press conference as European Central Bank president on Thursday. It is a moment in the ECB’s short history; Mr Trichet has been in charge for eight of its 13 years. But the time to dwell on such facts is limited. Instead a range of issues remain on the table. Here is a brief guide to what he might have to announce.
On ECB interest rates After September’s meeting, Mr Trichet deliberately left the door open for an interest rate cut. Since then the debate has swirled. Read more
What if the worst-happened? Allianz, the German insurer, reckons a break-up of the eurozone would cost Germany three percent of its gross domestic product and a million jobs. Its calculations, in a report released on Wednesday, assume a number of highly-indebted eurozone countries exit the monetary union, leaving a “core” union centred on Germany and a few other countries such as France, the Benelux states and Austria.
In such an event, Germany would be hit by a large, Lehman Brothers-style confidence shock, a decline in global trade and a “massive appreciation” of the “core euro” against most other currencies, Allianz says. Read more