Daily Archives: February 24, 2012

Robin Harding

The afternoon session here in New York is a panel on fiscal policy: a subject that central bankers always say they can’t talk about but nonetheless talk about all the time.

New York Fed president Bill Dudley’s speech makes two broad points: 

Ralph Atkins

How far would the European Central Bank under Mario Draghi go in cutting interest rates?

The ECB president has taken care to rule out little in the way of possible steps were the eurozone crisis to deteriorate again. But Benoît Cœuré, the ECB’s new French executive board member, has hinted at one limit. In a speech delivered in the US a few days ago but just published on the ECB’s website, he warns of the potential costs of reducing interest rates to zero, or even pushing them into negative territory. 

Claire Jones

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ECB’s big bazooka

Next week’s main event is, of course, the European Central Bank’s second offer of cheap three-year loans.

Attention is fixed on whether the take-up will be greater or less than in December, when the central bank loaned €489bn. 

Robin Harding

The main paper at today’s US Monetary Policy Forum in New York, organised by the University of Chicago’s Booth business school, is about housing.

Written by Michael Feroli of JP Morgan, Ethan Harris of BoA Merrill Lynch, Amir Sufi of the Booth school, and Kenneth West of the University of Wisconsin, it’s a comprehensive breakdown of the channels through which the housing bust continues to affect the recovery and well worth a read. Not only for its assessment of the housing market, but also on the implications for policy. 

Sir David Lees, chairman of the Court of the Bank of England since 2009, has been re-appointed to the role, the Treasury announced on Friday.

Sir David’s term expired in May, but he has now indicated he will step down from Court at the end of 2013, once he has overseen the transition of the Bank’s new responsibilities and personnel (Sir Mervyn King, Bank governor, is due to step down mid-way through next year).

However, not everyone has the same level of confidence as the chancellor and the prime minister do in Sir David’s firm stewardship of what is expected to be the central bank with more sweeping monetary and regulatory authority than any other in the world.

The Bank has come under fire in recent years for its poor corporate governance, with parliament’s influential Treasury select committee among those calling for root-and-branch reform. For many critics, that includes the scrapping of the Court, which Treasury committee chairman Andrew Tyrie described as “a 19th-Century structure for a 21st-Century institution”.

It is not difficult to see why. Here is Sir David being questioned by Mr Tyrie as part of it inquiry into standards of corporate governance at the Bank on March 15, 2011:

 

Ralph Atkins

The Frankfurter Allgemeine Zeitung interview with Mario Draghi produced other insights (see earlier post on his comments on the ECB’s Greek bonds).

Positive news about the eurozone outlook had increased since the ECB’s last governing council meeting, he said, “although uncertainty remains high”, which appeared to confirm there are no further cuts in official interest rates in the pipeline.

Mr Draghi also hinted strongly he would not relax further standards applied to the collateral banks can use to obtain the central bank’s liquidity. 

Ralph Atkins

At last! The European Central Bank has said something official about its Greek governments bonds.

As previously noted, the ECB’s communication on the subject has been opaque. The bank has still not publicly announced the swap deal it negotiated that will allow it to escape forced losses. But Mario Draghi, president, could not avoid commenting when quizzed on the subject by the Frankfurter Allgemeine Zeitung in a interview published on Friday.