Welcome to our live coverage of ECB president Mario Draghi monthly press conference. Earlier, to the surprise of some, the ECB kept its rates on hold. Follow the questions and reaction live here with capital markets editor Ralph Atkins and Emily Cadman
After the Reserve Bank of India’s Raghuram Rajan took the Fed and other developed country central banks to task this week for ignoring turmoil in emerging markets, Richard Fisher, president of the Dallas Fed, gave the standard retort on Friday. He said the US central bank must make policy according to what is best for America.
Doing so means the only reason the Fed would change its monetary policy is if trouble in emerging markets had a direct effect on the US. There are two main channels – exports and financial markets – but neither looks likely to hurt the US unless the EM turmoil gets a lot more severe. Thus while the Fed may make a greater show of consultation, and soak up some flak at the G20, its actions this year are unlikely to change. Read more
At the World Economic Forum in Davos, Mark Carney got to speak briefly at the main debate on the global economy. Asked about the news on forward guidance he talked about it coming to the end of its “first phase”. He said:
In terms of exit, I am not signalling an exit on UK monetary policy, just to be clear. Our first phase of forward guidance with a 7 per cent threshold of unemployment rate is approaching – we don’t know exactly when – the achievement of that threshold. We will assess the overall conditions in the labour market; more broadly the supply capacity of the economy, just as we’ve said all along that we would do at that point and set policy appropriately. Read more
By Hugh Carnegy in Paris
Update: Since we published this post, Chris Williamson, chief economist at Markit, has been in touch to say there is no significant divergence with Insee. There has been a lot of comment on this among economists in recent months so his take is important. Thanks to him for the contribution added at the bottom of the post.
Trying to work out exactly what is going on in France’s economy? Recently there has been a marked divergence between indicators from Markit and those from Insee, France’s statistics institute, with the former a good deal more gloomy than the latter.
This continues to be the case – but at least this month there is a bit of convergence, with Insee indicators level-pegging compared with December, while Markit’s figures show a three-month high.
Headlines are headlines. British unemployment plummeted from 7.4 per cent between August and October to 7.1 per cent between September and November. This puts it 0.1 percentage points away from the point the Bank of England said it would start considering raising interest rates. It is a big story but there has to be a question whether the unemployment rate is a false friend to the BoE. Could it be suggesting strength in the labour market and a drop in slack that other labour market measures do not show.
Luckily, when the BoE introduced guidance, it published a pentagon diagram of other labour market indicators. It is inserted below and each point shows the same degree of slack, pretty much, (1 standard deviation from normal levels). I call it the BoE’s presumptive pentagon. It was presumptive because it was suspiciously regular (rarely things show such a consistent message in economic data) and it presumed unemployment would behave similarly to other indicators. The time has come to find out. Read more
So, China’s gross domestic product grew by 7.7 per cent in 2013. Much media comment has focused on how this performance, by Chinese standards, is relatively lacklustre. It is, together with last year’s 7.7 per cent expansion, the lowest growth rate since 1999.
However, there is another perspective. A quick look at the International Monetary Fund’s list of countries’ GDP numbers shows that China grew last year by an amount somewhat smaller than the size of the entire Indonesian economy but larger than Turkey. Read more
How will sovereign bonds will be handled in the euro area’s forthcoming banking health checks? This is a vexed question and markets seize ravenously upon any clues.
Mario Draghi, the European Central Bank’s president, offered a flicker of information on Tuesday in a letter to Sharon Bowles, the chair of the European Parliament’s Economic and Monetary Affairs committee. Sovereign exposures will indeed bit included in the stress test, he said – confirming previous declarations from the ECB.
However, it is “not foreseen” that bonds in the held-to-maturity category of banks’ books will be adjusted to reflect market valuations – otherwise known as marked to market. That will come as a relief to banks that are holding portfolios that have slumped in value, but analysts caution that it is far too soon for lenders to relax. Read more
ECB president Mario Draghi started his monthly press conference shortly after 1.30 GMT. Earlier, as expected, the ECB left rates on hold. Follow the questions and reaction live here with capital markets editor Ralph Atkins and Emily Cadman
On Wednesday, the Office for National Statistics for the first time published regional growth figures for the UK. The obvious question that popped into my mind was to compare the Scottish growth with that published by the Scottish government.
I produced the following chart and wrote what looked like a cracking story because the ONS measure showed little over half the growth of the Scottish Government data, raising questions over the strength of Scotland’s economy. Read more
A quick update as the hoopla builds ahead of today’s Fed decision.
Will they taper?
Based on reporting ahead of the blackout period I put the odds of a taper at roughly 50 per cent for December and 50 per cent for January. We’ve been reporting since October that a December taper was still on the agenda so this shouldn’t be regarded as a sudden or unconsidered development.
Since the blackout started there has been a succession of strong data on retail sales, industrial production and homebuilder confidence. We have also had a budget deal. Therefore, I think the chances of a taper today are more than 50 per cent.
It is hard to call this too confidently, however, because the case for waiting is so easy. Read more