Monthly Archives: September 2012

Robin Harding

The favourite counterparty of the US Federal Reserve is everybody’s favourite vampire squid: Goldman Sachs. Today saw the release of transaction level data for the Fed’s Treasury dealings in the third quarter of 2010 – including the names of all of its counterparties. This is who got the business:

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Claire Jones

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ECB vote

The European Central Bank’s governing council decamps to Ljubljana next week for its October policy vote. This from the FT’s Frankfurt bureau chief Michael Steen on what to expect: Read more

Michael Steen

The dust has yet to settle on the Bundesbank’s fight with the ECB over bond-buying, but this has not stopped Germany’s central bank from taking on another heavyweight global financial institution: the International Monetary Fund.

BuBa’s monthly report, published on Monday, includes a whole chapter entitled: “The IMF in a changed global environment.” It becomes clear fairly quickly that eyebrows are being raised in Frankfurt at some elements of the IMF’s stance in the eurozone sovereign debt crisis, where the Fund has taken on its own lending and acted as a member of the “troika” of IMF, ECB and European Commission officials advising on bailouts.

“By taking on excessive risks, the IMF would gradually transform from a liquidity-providing mechanism into a lending institution,” the bank says on the first page of its 15-page discussion. “Such a transformation would neither accord with the legal and institutional provisions of the IMF agreement, nor with the fund’s financing mechanism or its risk control functions.” Read more

Michael Steen

There is, in these troubled days for the eurozone, arguably a hint of Ozymandias-in-reverse about the enormous new €1bn headquarters that the ECB is building for itself on the eastern edge of Frankfurt.

The risk is not so much that a traveller will one day find “two vast and trunkless legs of stone” in a desert, but rather a vast and shiny glass-and-steel tower block near the river Main with no one in it. At least that might be the suspicion of those who think the euro may not last long enough to see the moving vans arrive from the centre of town in 2014, where the ECB now has its offices. Read more

Claire Jones

The Bank of Japan’s announcement today of an additional Y10tn ($126bn) of quantitative easing caught markets off guard. Many had expected action next month, when the central bank will release its latest projections for growth and inflation.

But for seasoned Japan watchers the timing of the decision will come as little surprise. The BoJ may have been in the QE game for far longer than any of the other major central banks. But in recent years it has been a case of where the Fed leads, the BoJ follows. Or, more aptly, when the Fed acts, the BoJ retaliates. Read more

Claire Jones

The Federal Reserve’s decision last week to expand its balance sheet by a potentially unlimited amount until the labour market shows some “substantial” signs of improvement has been described as “stunningly aggressive” and “a dramatic step forward“.

But Charles Evans, president for the Chicago Federal Reserve, is not satisfied. The Federal Open Market Committee’s arch-dove wants more.

Mr Evans on Tuesday again called for the rest of the FOMC to explicitly target an unemployment rate of 7 per cent and medium-term inflation of 3 per cent before ending its easing policy – so long as inflation expectations remain reasonably well anchored.

Will the bulk of the FOMC’s voters back such a so-called ‘Evans rule’? For the time being, no.

But, for the most part, Mr Evans has already got what he wants. 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

BoE minutes

The Bank of England’s latest Monetary Policy Committee meeting minutes are out on Wednesday morning at 9.30am UK time (8.30am GMT).

Now that Adam Posen has stepped down from the committee, the most likely candidate for dissent is David Miles. However, most think Mr Miles will have resisted calling for further easing at this month’s meeting and that all of the MPC will have backed the decision to hold policy firm. This from Nomura’s Philip Rush: Read more

Claire Jones

Robin has got what he asked for. The Federal Reserve today made a dramatic step forward in its attempt to revive the US economy and for the first time announced that further asset purchases will be open-ended, meaning that the central bank won’t stop buying until economic conditions improve.

During previous rounds of QE, the Fed has committed only to buy a fixed amount of assets. Today, it pledged to expand its balance sheet by a potentially unlimited amount until the outlook for the labour market improves “substantially”. Read more

Robin Harding

The FOMC meeting now under way – concluding with a statement at lunchtime tomorrow, Thursday September 13, followed by a Ben Bernanke press conference – could well produce the most important Fed move since the 2008-09 crisis. Here is what I expect.

Will the Fed launch QE3?

There is an excellent chance that the Fed will both extend its forecast of low interest rates into 2015 and launch a new round of asset purchases.

Fed communications point emphatically in that direction. Read more

Claire Jones

Last Friday the FT’s economics editor Chris Giles took issue with the use of “the Niesr chart”, so-called because of its frequent publication by the National Institute of Economic and Social Research, to show what’s happening with the UK economy.

Chris argued that the Niesr chart, which shows that — in GDP terms — the current recession is the longest and the deepest since the 1930s, “may well be showing us irrelevant nonsense”.

Though output is now almost 4 per cent below where it was in 2008, the latest employment figures – out today – show that there are more jobs around today than before the crisis began. And this, Chris argued, meant that neither the Niesr chart nor the employment data should be used alone to illustrate what has happened to the UK economy in recent years.

External Monetary Policy Committee member Ben Broadbent has some sympathy with this view. In a speech today, Mr Broadbent argued that, because of the disparity between what the output figures and the jobs data tell us, policy makers “may be less confident than usual” about whether the origins of a change in the GDP result from a supply shock (which monetary policy can do little about) or weak demand (which monetary policy is supposed to address). Read more