It appears that the ECB’s top brass are divided over whether or not the recent rise in Spanish bond yields is warranted.
Bloomberg on Wednesday attributed the following comments to ECB executive board member Benoît Coeuré:
European Central Bank Executive Board member Benoit Coeure suggested that the bank could revive its bond-purchase program to reduce Spain’s borrowing costs.
“Market conditions are not justified,” Coeuré said at an event in Paris today. “Will the ECB intervene? We have an instrument, the securities markets program, which hasn’t been used recently but it still exists.”…
…”We have a new government in Spain that has taken very strong deficit measures,” Coeuré said. “All this takes time. The political will is enormous.”
Mr Coeuré’s view that Madrid’s political will is “enormous” contrasts somewhat with comments made by his boss, ECB president Mario Draghi at last Wednesday’s presser, which suggested that market pressure was justified both by economic fundamentals and the Spanish government’s inaction. Read more
Narayana Kocherlakota of the Minneapolis Fed gave an interesting speech on Tuesday that sets out a case for thinking that the Fed might need to raise interest rates sooner rather than later, perhaps even before the end of the year.
It reflects an evolution from the labour market “mismatch” that he was talking about a couple of years ago (a lot of research has failed to turn up much geographic or skills mismatch) to a view, espoused by various people in various different ways, that there may have been a one-off downward shift in potential output. That means a smaller output gap and hence an earlier rise in interest rates.
But is Mr Kocherlakota’s argument convincing? Read more
The Bank of England’s forecasting record, both for inflation and growth, has in recent years been woeful.
But would the Bank have done any better if its officials’ pay depended on the forecasts’ accuracy?
According to a paper out today from the Centre for Economic Policy Research, the answer is yes.
Commuters pass the Bank of England. Image by Getty
As expected, the Bank of England today kept interest rates on hold at 0.5% and opted not to print more money.
Analysts’ attention has long focussed on the Monetary Policy Committee’s May meeting; it was always more likely to hold off on plumping for more quantitative easing until then. However, its far from certain whether the MPC will opt for further asset purchases on 10 May.
Here are a few of the factors that are likely to sway the MPC’s decision on whether it adds its the £325bn-worth of asset purchases. Read more
Mario Draghi. Image by Getty.
Hello and welcome to the live blog on the European Central Bank’s press conference.
ECB president Mario Draghi will be taking journalists’ questions following the conclusion of the governing council’s monthly monetary policy vote.
This post should update automatically every few minutes, although it may take longer on mobile devices.
14.35 This live blog is now closed.
14.34 Press conference ends.
14.34 Mr Draghi notes the recent falls in M3 (the ECB’s measure of broad money, which is signal of how much banks are lending as well as inflationary pressures) are the first in history.
14.32 The ECB president on the four reasons why banks don’t lend.
“The first is that they don’t have money, they don’t have funding. We took care of that. The second: they don’t have capital, and we cannot take care of that. The third is risk aversion, and to the extent that this depends on counterparties not having enough capital, we can’t take care of that. The fourth is demand. We cannot take care of demand, other than through short-term interest rates.”
14.28 A rare moment of praise from the ECB president for the eurozone’s beleaguered governments. Progress in deficit countries since last autumn has been “extraordinary”, both on the fiscal and structural side, he says.
14.25 Has Mr Draghi adopted a more hawkish tone at today’s meeting? Marc Ostwald of Monument Securities thinks so. Read more
The European Central Bank’s governing council has, as expected, left rates on hold for the fourth month in a row.
The benchmark main refinancing rate remains at 1%. The lending and deposit rates stay at 1.75% and 0.25% respectively. Read more
The March FOMC minutes mark a step back from further Fed easing along multiple dimensions. The signal is pretty clear and becomes even more so once you think behind the words. In January:
“A few members observed that, in their judgment, current and prospective economic conditions – including elevated unemployment and inflation at or below the Committee’s objective – could warrant the initiation of additional securities purchases before long. Other members indicated that such policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run.”
The Basel Committee on Banking Supervision on Tuesday issued the latest round of its reports on how implementation of the Basel standards was going among each the 27 countries that make up the committee’s members.
There were some signs of improvement since October, when the last set of scorecards was released.
Seventeen countries have now published draft regulation on Basel III – up from 11 out of 27 last autumn – though nine of them are covered by the European Union’s draft bill. But Saudi Arabia remains the only one of the 27 countries to have published a final rule. Read more
If imitation is indeed the sincerest form of flattery, then there has been a lot of cooing by Europe’s central bankers over the ECB’s three-year longer term refinancing operation of late.
Both the Hungarian and Danish central banks have launched auctions of central bank cash in recent weeks which bear a striking resemblance to the Ltro.
Will others follow suit? Read more
As Robin Harding writes here, Bank of Japan governor Masaaki Shirakawa’s speech on the problems of aggressive monetary easing may not have been totally comfortable for his hosts at the Federal Reserve.
Mr Shirakawa was not alone. In comments released today from the same Fed event, Jaime Caruana, head of the influential Bank for International Settlements, also warns on the dangers of keeping monetary policy too loose for too long.
More uncomfortably for the Fed, the BIS general manager signals that he thinks the major central banks have strayed far beyond the bounds of monetary policy and into the domain of fiscal policy. Read more
Just because big announcements are unlikely does not mean this week’s interest rate setting meeting will be comfortable for the European Central Bank. As a service to Money Supply readers, here is a guide to what will be worrying the ECB’s 23 governing council members when they gather in Frankfurt on Wednesday.
Eurozone stability is not quite as secure as it seemed a month ago, just after the second of the ECB’s three year longer-term refinancing operations, which brought the total amount injected into the eurozone financial system to more than €1trn. Spain has challenged the effectiveness of the region’s new “fiscal compact” — seen by Mario Draghi, ECB president, as essential to restoring the eurozone’s credibility. Read more