The week ahead in central banking
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
More QE from the Bank?
The Bank of England‘s Monetary Policy Committee meets on Wednesday and Thursday, when the decision is due out at noon UK time (11am GMT).
The Fed’s rate forecast mess
There’s probably nothing that would annoy Ben Bernanke more than being caught in a logical inconsistency over some aspect of monetary policy. At the Fed’s press conference today, he vigorously defended himself against Paul Krugman’s charge that the Fed’s recent actions are inconsistent with his academic views on Japan fifteen years ago.
The Fed’s interest rate forecasts, however, are getting the bank into a real bind:
Bernanke & GDI
The strength of the gross domestic income in the fourth quarter of 2011 – it was up by an annualised 4.4 per cent – has been widely remarked upon. The contrast with the weaker 3 per cent growth in gross domestic product is striking.
The rise in GDI invalidates part of what Ben Bernanke said in his labour markets speech only three days ago. Mr Bernanke said (my emphasis):
The week ahead in central banking
Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe
ECB’s big bazooka
Next week’s main event is, of course, the European Central Bank’s second offer of cheap three-year loans.
Attention is fixed on whether the take-up will be greater or less than in December, when the central bank loaned €489bn.
The week ahead in central banking
Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe
Bernanke testimony
Fed chairman Ben Bernanke is due to speak on the economic outlook and federal budget situation on Thursday. He’s up in front of the House Committee on the Budget at 10.00 local time (15.00 GMT) on Thursday.
Ben Bernanke has been very focused on the Fed’s “communications strategy” for several years now, and has patiently pushed the FOMC in his desired direction during a series of detailed discussions. Now it seems that he has reached his destination, and will reveal all (or almost all) in his press conference after the FOMC meeting which begins on Tuesday. Always a fan of explicit inflation targets, the chairman seems finally to have won agreement from colleagues on establishing a formal objective for core inflation of about 2 per cent, though the FOMC will also need to keep Congress happy by talking about its long term unemployment objectives as well. More unconventionally, each member of the FOMC will also publish for the first time their projections for the Fed funds rate extending to 2016.
What is the motivation behind these changes? Mr Bernanke has normally justified such steps in terms of stabilising expectations about the Fed’s genuine intentions, especially on inflation and the forward path for interest rates. At a time when the extension of the balance sheet is causing political difficulties for the Fed, and when inflation expectations could become unhinged by the rapid expansion of the monetary base, the chairman is looking for alternative ways of easing monetary conditions without printing more money. Modern macro-economics suggests that operating on expectations is one of the most powerful tools available to him, though he is using it much more cautiously than many economists would like to see.
The week ahead in central banking
Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe
FOMC meeting
The Federal Open Market Committee meets on Tuesday and Wednesday to set monetary policy for the coming month and a half.
The meeting – to be followed by one of chairman Ben Bernanke’s press conferences – could see the FOMC announce an inflation target. This from the FT’s US economics editor Robin Harding:
The week ahead in central banking
Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe
Live blog: Ben Bernanke’s testimony
Ben Bernanke. Image by Getty.
Ben Bernanke, US Federal Reserve chairman, is testifying before Congress. All times are London time; Washington, DC is five hours behind.
Mr Bernanke is expected to field questions on Operation Twist, the FOMC’s other policy options and the state of the US economy.
17.43 This live blog is now closed. Follow FT.com for more on the testimony.
17.39 The key takeaways.
Markets have focussed on the Fed chairman’s comments that the FOMC is “prepared to take further action”.
But, while the testimony was undoubtedly downbeat on the prospects for growth, there was little on the US economy or monetary policy that Mr Bernanke had not already said, either in his Jackson Hole address or in his speech in Minnesota last month. He also signalled that, while QE3 was not “off the table”, neither was it imminent: “We have no immediate plans to do anything on that.”
The week ahead in central banking
Our week ahead email will help you to track the most important events in the central banking world. To see all of our emails and alerts visit www.ft.com/nbe
Both the European Central Bank and the Bank of England will vote on monetary policy on Thursday.
The Monetary Policy Committee decision is out at noon local time (11.00 GMT). According to a Reuters poll, most expect the Bank to hold rates and maintain the stock of asset purchases at £200bn. However, a significant minority predict more QE, with most of these believing that £50bn is the amount that the MPC is most likely to plump for.
Though those expecting more QE in October are in the minority, the bulk of analysts do believe the Bank will expand its asset purchases at some point in the near future, with November considered the most likely option. The Bank also publishes the minutes of its FPC meeting on Monday at 09.30 local time (08.30 GMT), which may shed some light on the rather ambiguous statement that came out this week.
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Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Ralph Atkins, Frankfurt bureau chief, has been writing about European economics and politics for the Financial Times for more than 20 years following an economics degree from Cambridge. He has been watching the European Central Bank and eurozone economies since 2004. He has previously worked in London, Bonn, Berlin, Jerusalem and Brussels. RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
James Politi is US economics and trade correspondent for the Financial Times, based in Washington DC. He joined the Washington bureau in January 2008 following four and a half years as US deals correspondent covering M&A and private equity. James Politi joined the FT in London in 2000 with an MSc at the London School of Economics, and undergraduate degrees from Georgetown University and the University of Florence. RSS
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