Claire Jones The week ahead in central banking

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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:

Robin Harding: The FOMC meeting is likely to involve preparation for big decisions rather than the decisions themselves. One topic on the agenda will be a “broad discussion” of making a consensus FOMC forecast – although agreement on how to do that remains some way off.

A consensus forecast is closely related to another matter: whether the FOMC can set numerical thresholds, such as a 7 per cent unemployment rate, that would induce it to raise interest rates. There is a chance of agreement on that next week, but there are a lot of technical issues to discuss, and a future meeting is more probable.

The Bank of Canada’s rate-setters vote on Tuesday and release their latest Monetary Policy Report the following day. The policy rate is expected to remain at 1 per cent. Some have interpreted comments made by governor Mark Carney this week as a sign that the central bank could shift its tone on future policy moves. This from RBC Capital Markets:

RBC Capital Markets: It looks as if, for the second time in the past two years, the BoC may be forced to abandon a tightening bias in favour of a neutral stance…

…While certainly not promising a drop in the current tightening bias or a prolonged period of rate stability, [Carney’s] speech was clearly dovish and highlighted two factors that should come out both in next week’s statement and subsequent MPR: i) weaker global growth and more uncertainty surrounding policy developments overseas; and ii) a more direct feed-through from these events to Canadian growth than we have seen in the past. The speech also promised some clarity on how the BoC is viewing the problem of high and still-rising consumer debt loads.

Sweden’s Riksbank sets rates on Wednesday. The decision is out at 9am local time (7am GMT). The Reserve Bank of New Zealand’s monetary policy decision is due out Thursday. The Bank of Mexico’s rate-setters vote on Friday.

Draghi grilling

ECB president Mario Draghi faces a grilling from the Bundestag next week. The Bundestag hearing is an attempt by Mr Draghi to appease German anger over the central bank’s plans to buy bonds of beleaguered sovereigns in potentially unlimited amounts. This from the FT’s Frankfurt bureau chief Michael Steen:

Michael Steen: Arguably the most-anticipated event in ECB-watchers’ diaries since the September monthly press conference, when Mr Draghi revealed details of his bond-buying plans, comes on Wednesday as the Italian president of the central bank appears before German members of the Bundestag in Berlin.

Mr Draghi offered to explain his outright monetary transactions policy to German MPs last month, following fierce criticism from the Bundesbank, most of the German press and members of the Bavarian sister party of chancellor Angela Merkel’s Christian Democratic Union party. To many German eyes, OMT strays too far from monetary policy and threatens to create rampant inflation.

However, there is some disappointment in store for lovers of parliamentary drama, as the German lower house announced on Friday that the members of its financial and European committees, meeting as an ad hoc committee, will quiz Mr Draghi in camera. Mr Draghi is understood to have been prepared to subject himself to a public hearing but closed committee sessions, although unusual in other parts of Europe, are not uncommon in German parliamentary protocol. (Mr Draghi sometimes appears before the European Parliament’s economic committee in closed session, but only when he is within the two-week “purdah” imposed ahead of an interest rate-setting ECB meeting, which is not the case next week.)

The Bundestag gave no reason for its decision to hold the session in private, but Mr Draghi and the parliamentary president are due to answer questions after the meeting, an event that risks being long on platitudes and short on detail. But of course the MPs at the session are also likely to give at least their version of what was discussed afterwards.

The grilling begins at 1.45pm local time (11.45am GMT). Mr Draghi and Norbert Lammert, Bundestag president, will take journalists’ questions at about 4pm.

ECB executive board member Jörg Asmussen talks on Monday in Hamburgat 10.30am local time (8.30am). His fellow board member Peter Praet talks on Friday in Milan at 10am local time.

King on UK economy

Sir Mervyn King, Bank of England governor, travels to Cardiff on Tuesday to talk about the state of the British economy. The speech begins at 8pm (7pm GMT).

Andrew Bailey, the head of the Financial Services Authority’s Prudential Business Unit, speaks at the International Association of Deposit Insurers Annual Conference in London on Wednesday at 2pm local time. Mr Bailey’s talk will cover bank resolution. Paul Tucker, deputy governor for financial stability, talks at the same event the following day. Mr Tucker’s speech will begin at 11.15am on Thursday.

Later on Thursday, Andy Haldane, executive director for financial stability, talks about regulation. His talk, at the Institute of Economic Affairs in London, starts at 7pm.

The Bank’s quarterly report on the Asset Purchase Facility, through which it conducts quantitative easing, is out on Monday at 9.30am. The Bank will also release a paper on QE and the gilt market on Friday at 2pm.