Monthly Archives: August 2012

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

ECB vote

The big event on next week’s calendar is the European Central Bank’s governing council vote on Thursday, which is followed by ECB president Mario Draghi’s press conference.

The decision on interest rates is due out at 1.45pm in Frankfurt(11.45am GMT). Most expect no change. The presser begins 45 minutes later, at 2.30pm.

Mr Draghi is widely expected to reveal at least some of the details of the ECB’s new bond-buying programme. But there has been some disagreement among members Read more

Robin Harding

This should be interesting. Michael Woodford – probably the world’s pre-eminent monetary policy theorist – is delivering his paper at Jackson Hole and it amounts to a rebuke of how the Federal Reserve has gone about its work of monetary easing.

Mr Woodford’s 97-page paper is deeply sceptical about the efficacy of quantitative easing and endorses the idea of a central bank target path for nominal GDP. From his conclusion: Read more

Claire Jones

When then-IMF chief economist Raghuram Rajan used his Jackson Hole address in 2005 to warn that there were problems afoot in the global financial system, the reception he got was as frosty as the snow-covered peaks of the mountains that surround the Wyoming resort.

Mr Rajan was accused of being a party pooper at what, to all intents and purposes, was supposed to be Alan Greenspan’s farewell bash after almost two decades as Fed chair.

An icy chill could well be wafting round the symposium right at this moment. Andy Haldane, the Bank of England’s executive director for financial stability is about to call on the world’s top economic officials to cast aside more than 50 years’-worth of thinking on how the global financial system should be regulated.

This from the FT’s chief regulation correspondent Brooke Masters: Read more

Robin Harding

The first paper of Jackson Hole 2012 is a statistical review on cross-border financial contagion by Kristen Forbes of MIT. With the eurozone crisis rumbling on, it is a timely topic for Jackson Hole, although the paper illustrates rather than resolves some frustrations with the post-crisis literature on contagion.

Increasingly, financial assets tend to move in unison across borders, both in normal times and during crises. Prof Forbes describes that phenomenon in detail, especially for times of crisis, and then offers some policy conclusions on how to prevent and mitigate contagion through four main channels. Here is a crude summary: Read more

Claire Jones

News that Mario Draghi has pulled out of the Jackson Hole symposium has stoked expectations that the that European Central Bank president will unveil details of the bank’s  revamped bond buying programme after next week’s governing council vote.

Much uncertainty surrounds the details of the programme ahead of Thursday’s decision. Here’s a guide to some of the details that markets – and some eurozone sovereigns – will look for Mr Draghi to announce at the post-meeting press conference.

Countering convertibility risk 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

Jackson Hole

One of the biggest events on the central banking calendar takes place at the end of next week when top officials will make their annual trip to the wilds of Jackson Hole,Wyoming– the venue for the Kansas City Federal Reserve’s annual symposium.

Following this week’s dovish set of FOMC minutes, markets are eagerly awaiting Fed chairman Ben Bernanke’s remarks for clues on what the committee will do next. Here’s the FT’s US economics editor Robin Harding with some clues on what to expect: Read more

Robin Harding

Ben Bernanke, the Fed chairman, has replied to a series of questions from Congressman Darrell Issa, who chairs the House Oversight and Government Reform Committee.

The answers are mostly pretty unrevealing — a large percentage of them simply cite the Fed’s mandate — but if you share concerns about excess bank reserves, QE as a tax on savers, or exiting from easy monetary policy then Mr Bernanke’s responses are hereRead more

Claire Jones

The rich. That’s according to a Bank of England study, out today, on the distributional effects of quantitative easing.

This from the research: Read more

Claire Jones

It is often said that China will grow old before it gets rich. The argument goes that China’s rapidly-aging population and gender imbalance – a result of its one-child policy  – will stymie growth  before economic living standards have caught up with those in advanced countries.

But could China’s aging problem also result in a spectacular property collapse? The Bank of Japan’s deputy governor Kiyohiko Nishimura thinks so. Doing his bit for Sino-Japanese relations, Mr Nishimura on Tuesday claimed that Chinese property prices are about to go into the “danger zone” because of this demographic trend.

In a fascinating talk at a Bank for International Settlements and Reserve Bank of Australia conference in Sydney on Tuesday, Mr Nishimura argues that so-called “malign” property bubbles, ie those which result in a spectacular collapse, are often a result of demographic transition from a “population dividend”, when the working-age population is at its height, to the “burden of an ageing population”. Read more

Claire Jones

In the early days of the crisis, Ben Bernanke and Jean-Claude Trichet injected liquidity on an unprecedented scale to prevent a financial meltdown. Central bankers elsewhere did little to help their cause.

In fact, their reserve managers – the people responsible for investing monetary authorities’ foreign exchange stockpiles – made matters worse.

Reserve managers often stash a chunk of their stock piles in short-term bank deposits. But at the start of the crisis, research produced by the IMF found they had pulled about $500bn of deposits from the banking sector, contributing to financial instability in the process. This from the research:

IMF: Although clearly not the main cause, this pro-cyclical investment behaviour is likely to have contributed to the funding problems of the banking sector, which required offsetting measures by other central banks, such as the Federal Reserve and the Eurosystem central banks.

There is, as the paper notes, “a potential conflict between the reserve management and financial stability mandates of central banks”. And so news that Norway’s sovereign wealth fund (managed by the central bank, though the asset allocation strategy is decided by the finance ministry) will take on more risk during downturns is to be welcomed. Read more