An important part of the Fed’s outlook when it made its forecast of low interest rates through to mid-2013 in August, and launched Operation Twist in September, was that it expected inflation to fall back as the temporary effects of an oil shock and the tsunami disaster in Japan faded away.
But the FOMC’s November projections show a wide dispersion of views on whether that will actually happen. The central tendency for headline inflation in 2012 is from 1.4-2 per cent and the central tendency for core is from 1.5-2 per cent. Three FOMC members must be higher and three members must be lower than even that range. Read more
No longer content with setting the world’s capital and liquidity standards, the Basel Committee now wants to take on the mantle of global regulatory policeman.
This from the FT’s chief regulation correspondent Brooke Masters:
Teams of global regulators will fan out across the world from next year to ensure that new tougher capital and liquidity standards are enforced correctly, the chairman of the Basel Committee on Banking Supervision said on Wednesday.
Stefan Ingves, the chairman, notes that this new role “represents a significant practical and cultural shift” for a committee that has in the past relied more on persuasion than policing.
However, the very fact that the chairman believes Basel cops are needed to ensure Basel III is properly enforced highlights a similarly significant shift in attitudes towards its regulations over recent years. Read more
The governor of the Bank of England has often been critical of eurozone leaders, frequently condemning their failure to accept that the region’s sovereign debt crisis is one of solvency, not liquidity.
But, at the Bank’s Inflation Report presser on Wednesday, Sir Mervyn was a little more supportive of the region’s central bank.
Forget calling for the ECB to become lender of last resort for the more troubled of the eurozone’s governments, he said. It was simply not the responsibility of it, or any other central bank, to take on such a role. Read more
The Bank of England has downgraded its view of the sustainable level of UK output at almost every inflation report since November 2007.
Today, the Bank’s latest forecast expects the output lost in the recession since the start of 2008 will be recovered only in the third quarter of 2013. If true, that means when Sir Mervyn King leaves office in June 2013, output will still not have recovered from the recession. The governor’s second term will be one of no growth at all. Read more