What the FOMC rate forecasts will look like
I got this one wrong last week by over-interpreting some comments by St Louis Fed president James Bullard. Mea culpa.
Today, the FRB has released two templates to show what its interest rate forecasts will look like when they are actually released next Wednesday. It will take the form of two charts, one showing the actual rate forecasts and one expectations for the year of the first rise, although it should be fairly easy to extract the numerical forecasts quickly from both of them. Read more
The week ahead in central banking
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FOMC meeting
The Federal Open Market Committee meets on Tuesday and Wednesday to set monetary policy for the coming month and a half.
The meeting – to be followed by one of chairman Ben Bernanke’s press conferences – could see the FOMC announce an inflation target. This from the FT’s US economics editor Robin Harding: Read more
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In 1951, an epic struggle between a US president who stood on the verge of a nuclear war, and a central bank that was seeking to establish its right to set an independent monetary policy, resulted in an improbable victory for the central bank. President Harry Truman, at war in Korea, failed in a brutal attempt to force the Federal Reserve to maintain a 2.5 per cent limit on treasury yields, thus implicitly financing the war effort through monetisation. This victory over fiscal dominance is often seen as the moment when the modern, independent Fed came into existence.
The idea that the central bank should place a cap on the level of bond yields is firmly back on the agenda, at least in the eurozone. This week, Italian prime minister Mario Monti said that he was increasingly optimistic that his country’s bond yields might soon be capped. Although he stopped short of saying that this would be done by the European Central Bank, there really are no other viable candidates to achieve this. Furthermore, many economists are arguing that this is the right policy, since Italy is now following a sustainable budgetary policy which deserves to be rewarded by ECB action in the bond market.
Luxembourg challenges Spain over ECB seat
The battle hots up. Luxembourg has challenged Spain’s self-proclaimed right to a place in the European Central Bank’s top management team. The Grand Duchy on Friday announced it would nominate Yves Mersch, the country’s central bank governor, for the upcoming vacancy on the ECB’s six-man executive board.
As Money Supply reported earlier this week, Madrid has already nominated Antonio Sáinz de Vicuña, a Spanish ECB veteran who heads its legal department, to replace José Manuel González-Páramo, his compatriot , whose eight-year term on the executive board ends in May.
The contest may prove an unwelcome distraction as eurozone leaders seek to combat the region’s debt crisis. But this could be a battle fought at the highest level. Read more
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Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
