If only central bankers could rely on politicians! More than an element of frustration at the ways of governments was clear when Jean-Claude Trichet, European Central Bank president, gave evidence this morning to the European Parliament for the last time.
He urged European governments to “act together swiftly” to address a crisis that had taken on a “systemic dimension”. He also went further than before in hinting that the €440bn European Financial Stability Facility – Europe’s new bail-out fund – might not be up to the job, even if proposed enhancements to its powers are approved by Slovakia. Read more
Bank Indonesia today became the latest emerging market central bank to confound analysts by cutting rates.
Darmin Nasution. Image by Getty.
Darmin Nasution, Indonesia’s central bank governor, cited fears of the global outlook as the reason for the cut, echoing his counterparts in Brazil, Turkey and Israel.
As this post explains, emerging market central banks are now likely to interpret their inflation-fighting mandates far more loosely than before the crisis so they can adjust policy if financial stability appears threatened.
How can analysts adjust their expectations so that they stop getting it so wrong? Read more
Things go from bad to worse for the UK economy. Perhaps the least reported, but most important aspect of last week’s national accounts revisions is the apparent difference between the pre and post crisis trend growth rate.
Because the Office for National Statistics improved (lowered) its calculation of inflation in the national accounts without changing nominal gross domestic product much, growth rates in most years were significantly revised higher. The average annual rate of growth between 1997 and 2008 rose from 2.9 per cent to 3.2 per cent. But the ONS also said the recession was deeper and sharper than before, revising down post 2008 levels of output even with the more generous inflation measure. Read more