Monthly Archives: June 2012

Claire Jones

Adam Posen’s brief flirtation with the Monetary Policy Committee majority is well and truly over.

At the MPC’s April and May votes, Mr Posen left David Miles as the only member voting for more quantitative easing.

That is unlikely to be the case at next month’s vote, however. In a speech delivered this afternoon, Mr Posen not only calls for more money printing, but also for the Bank to spend the cash on assets other than gilts  – an idea that the governor and other Bank staffers have fiercely objected to on the grounds that it would hinder Threadneedle Street’s independence.

Elements of the argument are not new — Mr Posen in September called for the Bank to branch out from buying gilts and do more to spur lending to smaller businesses. Again, he is dismissive of the view that doing more impacts a central bank’s credibility.

But there are also significant differences in today’s speech from what Mr Posen had to say in the autumn. Read more

Ralph Atkins

Is a fresh dispute about to erupt between the European Central Bank and Spain — this time over the new Spanish central bank governor?

With global attention fixed on Spain’s bank recapitalisation plans, little was made last week of the appointment of Luis Maria Linde, a central bank veteran, to the top job at the Banco de España. But it did not go unnoticed by ECB lawyers.

The reason? Read more

Claire Jones

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SNB decision

The Swiss National Bank will make its quarterly monetary policy assessment on Thursday at 9.30am in Zurich (7.30am GMT).

The assessment comes after it emerged this week that the SNB had spent tens of billions of francs defending its euro peg over the course of May.

Expect a raft of questions on the political ramifications of the currency interventions Read more

Claire Jones

The events of the past years have shown that economic and financial systems are prone to so-called “tail risks”, which are the sorts of events which the standard suite of models predict will happen very rarely indeed.

However, these tail-risk events, many of which have proven catastrophic for the global economy, have been uncannily common in recent years. Remember this famous line from David Viniar, Goldman’s CFO, in 2008:

“We were seeing things that were 25-standard-deviation events, several days in a row.”

25-standard-deviation events are exceptionally, exceptionally rare. And if you’re seeing them day after day, then chances are that your model might not correspond to reality — or even be a fair approximation of it.

In a fascinating paper out today, the Bank of England’s executive director Andy Haldane and Bank economist Benjamin Nelson argue that the models that banks and economists — among them the world’s monetary authorities were using — were indeed deeply flawed. Read more

Ralph Atkins

The European Central Bank is easily portrayed as stubborn and inflexible.

But Wednesday’s governing council meeting produced a significant change: a cut in its main interest rate below 1 per cent — more-or-less ruled out during the 2009 recession — was put firmly on the agenda for July’s meeting. Like other central banks, the ECB appears headed towards the “zero bound”, the floor at which policy rates can move no lower.

Does that mean the ECB is moving closer to US or UK style “quantitative easing” to boost the economy when rates cannot be cut any further? Possibly, but not necessarily. Read more

Claire Jones

Mario Draghi. Image by Getty.

Mario Draghi. Image by Getty.

Hello and welcome to today’s live blog on ECB president Mario Draghi’s press conference.

All times are U.K time.

This post should update automatically every few minutes, although it may take longer on mobile devices.


15.08 This live blog is now closed.

15.07 KEY TAKEAWAYS. Those hoping for more action from the ECB no doubt will have been disappointed by Mr Draghi’s comments.

There was a glimmer of hope in the form of news that some of the governing council backed a rate cut. But most at the ECB remain of the view that the ball remains in the court of politicians.

14.38 The questions end.

The ECB president refuses to take the blame for a slowdown in growth in emerging markets. Read more

Ralph Atkins

Spain is at the centre of the eurozone crisis so everyone heads for…Latvia. Jörg Asmussen, European Central Bank executive board member, and Christine Lagarde, the International Monetary Fund’s managing director, were among those attending a conference in Riga on Tuesday.

In fact, using Latvia’s rebound from deep recession (a near 25 per cent fall in output starting in 2008) as an example, turned out to be a good way for Mr Asmussen to send a pretty uncompromising message to crisis-hit eurozone countries. Read more

Ralph Atkins

The European Central Bank has rejected a call by a top watchdog for a “chief risk officer” to monitor the vast expansion of its financial exposures resulting from the eurozone debt crisis.

In a report released on Monday, the European Court of Auditors argued a risk officer could help prevent demarcation lines within the ECB obscuring a complete picture of possible problems and ensure a “comprehensive view” was taken.

Its conclusions were eye-catching because of the risks involved in the ECB’s massive support for the eurozone’s banking system, which have seen its balance sheet balloon to around €3 trillion. 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

More money printing from the Bank?

Some economists have changed their call on the Bank of England’s Monetary Policy Committee vote next week following Friday’s awful figures on manufacturing activity. Read more