Monthly Archives: June 2012

James Politi

Brian Sack’s decision to stay on at the Federal Reserve Bank of New York as an adviser could stoke speculation that further monetary easing is around the corner at the US central bank.

Mr Sack – who is stepping down as planned as head of the markets group –  played a key role in the previous rounds of “quantitative easing”, managing and executing the expansion of Fed’s balance sheet. So keeping him around would certainly be helpful. Read more

Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

ECB cut likely
Next week’s two key events are the Bank of England’s and the European Central Bank’s monetary policy votes. Expect both central banks to act. Read more

Claire Jones

Bank of England. Image by Getty.

Bank of England. Image by Getty.

Hello and welcome to the Bank of England’s press conference on its Financial Stability Report.

The governor will be joined by Adair Turner, chair of the Financial Services Authority; Paul Tucker, deputy governor for financial stability; Andrew Bailey, soon to become head of the FSA’s  Prudential Business Unit; and Andrew Haldane, executive director for financial stability.

Expect a raft of questions on the Libor scandal and the eurozone crisis

All times are London time. 

11.54 This live blog is now closed.

11.53 Here are the key takeaways. Read more

Claire Jones

Barclays’ $450m fine over misconduct relating to its Libor fixings is a massive deal. The fixings, which span ten currencies and 15 maturities, are used as the reference point for financial contracts worth a staggering $350trn.

Libor is also extremely important for the world’s major central banks, many of which use the fixings to help decide how much liquidity to inject into markets. See, for instance, the minutes of the Bank of England’s June Monetary Policy Committee meeting:

UK banks had continued to access some term funding markets, albeit at an elevated cost.  In the interbank markets, sterling LIBOR-OIS spreads had remained elevated and larger than the corresponding euro spread.

However, the Swiss National Bank, goes a step further: when setting monetary policy, its governing council targets a certain level of three-month Libor for Swiss franc loans. Read more

Chris Giles

I’ve worried for some time about potential clashes, overlaps and underlaps between the Bank of England’s Monetary Policy Committee, which does as its name suggests, and the Financial Policy Committee, which oversees system-wide financial rules, or to use its posh name, macroprudential policy.

The past month has proved the concerns are no longer theoretical. Although Sir Mervyn King, BoE governor, was more expansive on his black mood at the Treasury Select Committee this morning, the tensions between different policy arms were also laid bare. Read more

Claire Jones

The Treasury Committee held its latest hearing with the Bank of England this morning. The governor, Sir Mervyn King, along with three other members of the Monetary Policy Committee — Spencer Dale, David Miles and Ben Broadbent — took questions from lawmakers.

Here are some of the highlights, though lowlights is perhaps more apt.

Black clouds The governor was characteristically gloomy, warning repeatedly about the “black clouds” hanging over the UK, emanating from the eurozone. He warned that businesses “lacked confidence to invest today” because of the sovereign debt crisis, which could result in a “self-fulfilling” downturn in Britain.  No change there then. Read more

Claire Jones

More quantitative easing by the Bank of England appears a dead cert.  It’s also reasonably likely that whatever amount the Monetary Policy Committee plumps for, the money is going to be spent on gilts.

What is more difficult to predict is what sort of gilts the Bank is likely to buy.  Read more

Claire Jones

“Don’t rely too heavily on monetary policy” is the closest thing that the Bank for International Settlements has had to mantra in recent years.

Monetary policy is no cure-all. But that’s not to say that the BIS thinks the US Federal Reserve was wrong to act with unprecedented force following the collapse of Lehman Brothers in the autumn of 2008. Read more

Claire Jones

Unfortunately, the vicious cycle between the economic health of countries and the weakness of their financial systems has been all too evident over the past year.

Think of Spain. Before the crisis, the country’s debt-to-GDP ratios were among the lowest in the eurozone. But the state of its regional banks, the cajas, has pushed the sovereign’s borrowing costs to euro-era highs, far above the levels seen in members of the single currency with far higher levels public indebtedness. In Greece, the government’s fiscal profligacy is at the root of the problems befalling the country’s financial sector, in part because its banks held so much sovereign debt.

In both countries, the economy is stagnant.

So far, central banks have been called upon to stop the cycle turning even more vicious. But central banks’ actions can only buy time; the ECB’s pledge of a whopping €1trn in cheap three-year loans, revolutionary in every respect, only soothed tensions for a few months.

The Bank for International Settlements has long documented the vicious cycle phenomenon (see here, for instance). In its latest annual report, out Sunday, the so-called central bankers’ bank comes up with a prescription on how to cure it. Read more

Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

Inflation report hearing/ financial stability presser Read more