Monthly Archives: May 2012

Claire Jones

Half price.

Buried in the footnotes of a statement on the latest appointments to the Bank of England’s Court, was this tidbit: Read more

Claire Jones

Astonishingly, it has been more than six years in coming. But the Federal Reserve Board finally got its full complement of seven governors on Wednesday after Jeremy Stein was sworn in.

Mr Stein’s appointment comes shortly after that of Jerome Powell last Friday and follows years of wrangling among senators over who should fill the board’s vacant seats.

Both Mr Stein and Mr Powell will now be able to vote in the Federal Open Market Committee’s policy meetings, the next of which falls on June 19 and 20. That means the Fed board, which tends to back the chairman, will hold the seven of the FOMC’s 12 votes.

The delay in returning the Fed board to its full complement owes much to the nomination process becoming far more partisan in recent years.

It speaks volumes about the degree of partisanship that the two most recent appointees come from different ends of the political spectrum; Mr Stein is a Democrat, Mr Powell a Republican.

Unfortunately for the Fed board, it also means that the central bank could soon find itself short of its full complement for another extended period. Read more

Claire Jones

Mario Draghi says the European Central Bank’s “strong preference” is for Greece to stay in the eurozone. No doubt that’s because of all the Greek bonds on its balance sheet, right?

The value of those bonds is probably the least of the ECB’s worries if Greece exits. The biggie would be handling the contagion.

The ECB does, however, have substantial holdings of Greek government bonds, along with other Greek assets, which in all likelihood would become worthless if Greece does leave.

How big are the holdings? Read more

Claire Jones

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Claire Jones

Fascinated by the Target2 debate, but your obsession hasn’t quite reached the levels where you’re willing to keep a beady eye fixed on all of the seventeen national central banks’ balance sheets?

Help is at hand in the form of this handy graphic and Excel file (last updated yesterday) pulled together by a team at Institute of Empirical Economic Research at the University of Osnabrück in Germany (hat tip to David Marsh at OMFIF for the link): Read more

Ralph Atkins

Mario Draghi flew direct from Wednesday night’s Brussels summit to Rome, where he gave a lecture in honour of Federico Caffè, a celebrated Keynesian economist under whom he studied.

His main message was the need for eurozone politicians to come up with a vision for the union’s future. But he also admitted that his university thesis was sceptical about the idea of a single currency area. Read more

Claire Jones

David Miles, the only one of the Monetary Policy Committee’s nine members to call for more money printing at the past two votes, has given an interesting speech today.

The speech presents the case for doing more based in part on the view that, if the MPC continues to do nothing, or — worse still — tightens policy, then this could destroy the UK economy’s productive capacity and, hence, its ability to grow at the pace seen before the financial crisis.  Read more

Claire Jones

Were the minutes of May’s Monetary Policy Committee meeting, out today, dovish or hawkish?

The vote, which left David Miles as the sole member voting in favour of more money printing for the second month in a row, was more hawkish than most had expected. Read more

Claire Jones

Now that inflation is at a two-year low and the governor can put his best letter-writing pen to one side, should the Bank of England consider doing more to boost the UK economy?

The IMF certainly thinks so.

Today the Fund said the Monetary Policy Committee should print more money and cut the policy rate below 0.5 per cent. This, they argued, would lower yields further out on the curve, which in turn would lower businesses’ borrowing costs.

The Fund also said the Bank should consider buying assets other than government bonds in order to revive the UK’s beleaguered mortgage market and counter tough conditions for businesses. An LTRO-style operation was another option.

Will the Bank follow the IMF’s advice? The MPC might well plump for more QE in the coming months. But, in the short term at least, it is very unlikely to pursue the other measures. Read more

Ralph Atkins

Did the Bundesbank last week try to stop life-saving emergency liquidity assistance for Greece’s banks? That would be a reasonable interpretation of noises from Germany’s central bank — and suggests a dangerous game is being played out in Frankfurt.

The Financial Times reported on Tuesday how at least some Greece banks are being kept alive by about €100bn in “emergency liquidity assistance”, a facility meant to be used only by banks in the direst of need. The massive demand followed the ECB’s decision to exclude four Greek banks from its regular liquidity providing operations because of uncertainty over their future financial strength. Read more