Monthly Archives: October 2012

Claire Jones

It’s all looking a little brighter for UK households in need of some credit.

Data out from the Bank of England today showed the average mortgage rate dipped slightly, from 3.84 per cent in August to 3.77 per cent in September. Mortgage approvals edged up, to 94,385 from 90,023 in August. The picture was also a little cheerier for unsecured lending to households.

All of which will delight the Bank of England, keen as it is for any sign that Funding for Lending – its latest flagship scheme to spur lending to businesses and households – is working. However, the Bank should be wary about reading too much into today’s data.

A couple of reasons why. 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

BoJ easing

The Bank of Japan looks set to ease policy next Tuesday, with most expecting a ¥10trn expansion of its quantitative easing programme, which will take the size of the programme to ¥90trn. Read more

Claire Jones

European Central Bank data, out Thursday, showed that the amount of cash that businesses and households are parking in Spanish banks rose in September for the first time since the spring.

Deposits held by Greek and Italian banks also rose last month, while those parked in German banks dipped slightly.

One swallow does not make a summer. But residents of the Eurotower will be cautiously optimistic that the fact that banks in Greece and Spain are no longer haemorrhaging deposits shows that one of the aims of the ECB’s Outright Monetary Transactions programme is being fulfilled with the central bank yet to buy a single bond. Read more

close up of the Bank of England sign©EPA

At ease: the BoE has put £375bn into the UK economy

Two questions arise when the lacklustre performance of the UK economy is discussed: what more should be done? And what more can be done?

Sir Mervyn King, governor of the Bank of England, gave pretty clear answers to both in a speech on Tuesday nightRead more

Robin Harding

Binyamin Applebaum at the New York Times has a good piece today about who Mitt Romney might appoint as Federal Reserve chairman and what that might mean. His analysis is similar to that of Macro Advisers, and I don’t have much to add, save that I think Glenn Hubbard or Greg Mankiw are more likely choices than John Taylor.

It is worth considering, though, how a more hawkish Fed chairman would interact with the rest of the FOMC. The seven Fed governors at present are:

Term expires Age Notes
Elizabeth Duke 2012 60
Jerome Powell 2014 59
Sarah Raskin 2016 51
Jeremy Stein 2018 52
Ben Bernanke 2020 58 Chairman until Jan 2014
Daniel Tarullo 2022 59
Janet Yellen 2024 66 Vice chair until Oct 2014

 Read more

Michael Steen

The waiting game grinds on to see when (and it’s hard to find anyone who thinks it is an “if” rather than a “when”) Spain will apply to the EU’s rescue funds for a credit line that would allow the ECB to make use of its “outright monetary transactions” bond-buying programme. A repeated theme of the Spanish government has been to say it would like to know more details about OMT before tying itself fast to the fiscal conditions attached to a rescue programme.

Now some clarity from Benoît Cœuré, the ECB executive board member who oversees market operations, who spells it out:

We’ve been very clear on the modalities of the OMTs. They are ready and we’re not going to provide any more details.

 Read more

Robin Harding

This month’s FOMC is likely to produce little visible action but there is a lot going on under the surface. The meeting starts tomorrow, Tuesday, October 23, and should conclude with a policy statement around 12.30 ET on Wednesday, the 24th.

What to expect?

Not much new. QE3 has just begun, Operation Twist 2 is ongoing, and for reasons discussed below, it is probably (although not definitely) too early for communication changes.

The FOMC may want to make slight updates to its statement noting some mildly positive economic data. It might strike a more positive tone on housing, but given that QE3 is tied to the labour market, any change to “growth in employment has been slow” is likely to be cosmetic.

Consensus forecasts

The FOMC is set to discuss consensus committee forecasts on day one. This is not as sexy as QE – it won’t move the markets – but is profoundly important to the future of the Fed. It will affect policy down the line. Read more

Claire Jones

Erkki Liikanen, governor of Finland’s central bank and author of the eponymous review into the structure of Europe’s banks, appeared before UK lawmakers on Monday as part of parliament’s commission on banking standards.

There wasn’t much new information on the Liikanen proposals, which require some aspects of trading activity to be separated from banks’ deposit-taking operations.

But there was an interesting spat between a cantankerous Lord Lawson, the former chancellor of the exchequer who sits on the commission, and Mr Liikanen. 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

The Federal Open Market Committee meets on Tuesday to set monetary policy for the coming month and a half. The committee votes on Wednesday afternoon. Here’s the FT’s US economics editor Robin Harding on what to expect: Read more

Michael Steen

According to the Maradona theory of monetary policy, as outlined by Sir Mervyn King, governor of the Bank of England, a central bank can let expectations that it will act – rather than actual action – do the work for it.

The theory is being tested right now by Mario Draghi, president of the European Central Bank, as his controversial “outright monetary transactions” bond-buying programme is forced to sit on the benches until the prime candidate for help, Spain, applies to the EU’s bailout fund.

As a quick reminder, the Maradona theory refers to the 1986 World Cup quarter final between England and Argentina. Diego Maradona scored a celebrated goal with a run from near the halfway line in which he beat five England players by, er, running in a straight line. Read more