Global

Tom Burgis

Mark Carney, the incoming governor of the Bank of England, was grilled by MPs and his ECB counterpart Mario Draghi faced awkward questions. By Tom Burgis, Ben Fenton and Lina Saigol in London with contributions from FT correspondents. All times are GMT.  

Emma Saunders leaves the FT on Friday to return to banking.

We thank her for her contributions and wish her all the best in her new role.

Chris Giles

Central bankers like to think of themselves as brothers, doing roughly the same things, with roughly the same tools and communicating in roughly the same way. This is roughly true.

But there are important differences.

On monetary policy, the ECB is clearly an outlier. And the communication techniques of the Federal Reserve and the Bank of England are also interesting.

Robin has written about what we learned from Fed’s first first press conference yesterday, which is online in video form. I will give a few thoughts on how the Fed’s innovation compares with the Bank’s quarterly inflation report press conferences, which I have been attending since 1998.

Dumb traditions. Both banks have their peculiar silly traditions which undermine the credibility of the Fed chairman and BoE governor. 

Greek debt affordability is set to worsen considerably, according to the IMF’s Global Financial Stability Report. But in a series of charts comparing 11 countries, the striking thing is how exposed indebted economies are to rising interest rates or falling GDP.

These charts (a full set toward the end of this post) are a great way to depict several moving parts to get to the nub of the issue. The basic idea is: black line inside the green area – good; black line inside redder areas – bad. Dotted line (forecast) – likewise. (The black line, incidentally, is the historical interest rate on government debt.)

The country profiles, relative to each other, are much as you’d expect. Greece, Ireland and Portugal have less favourable interest burdens (in that order). The US, incidentally, is forecast to edge into the yellow. Japan is not. 

Special coverage: IMF meetings

Chris Giles

Although the IMF is super-orthodox and Anglo Saxon, when it comes to advanced economy monetary policy, even with a French managing director and chief economist, there are some signs of a softer IMF this spring.

Capital controls
Most attention has focused on capital controls, on which the Fund has issued its first ever guidelines on their use. This is seen as the IMF giving ground to countries, such as China, seeking to build foreign exchange reserves for currency management rather than expose itself to volatile capital inflows. This is a misreading of the IMF’s intentions.

The Fund could not have been clearer that capital controls are only a valid part of the macroeconomic toolkit if a country’s currency is not undervalued, it has sufficient foreign exchange reserves and it is unable to use monetary or fiscal policy. Only one  - foreign exchange reserves – of these three criteria apply to China.

In contrast, in the World Economic Outlook, the Fund complains repeatedly about China’s exchange rate 

Chris Giles

If the International Monetary Fund is very hawkish about emerging economy monetary policy, it is super-dovish about the same policies in developed economies. This will please the Fed, many in the Bank of England, but make difficult reading for the European Central Bank.

Fed
The Fund is very relaxed about the recent upturn in inflation and thinks the Fed and its advanced economy counterparts can “accommodate hikes in food and energy prices mainly because the weight of food and energy in the consumer basket is relatively small, people have learned from experience that such hikes do not set off a cycle of inflation, and excess capacity will exert downward pressure on wages”. The Fed will be pleased with its assessment from the Fund.

“With output still significantly below potential, inflation persistently low, and the unemployment rate stubbornly high, continued monetary accommodation is warranted.”

ECB
Jean-Claude Trichet is likely to be irritated by the IMF’s typically Anglo Saxon view that its rise in interest rates when the European economy is still weak was wrong. But the IMF did not try to hide its view 

Chris Giles

Here in Washington, rather low-key International Monetary Fund/World Bank spring meetings are getting underway. The Group of 20 is likely to have another squabble and then paper over the cracks with lots of effort spent in talking about measuring trade imbalances rather than doing anything about them. But the April 2011 Fund World Economic Outlook is rather good. I will bring you some of the more interesting themes here to supplement the news we published yesterday. First out of the traps is the Fund’s real concern about overheating in emerging economies.

The IMF points out that most emerging markets have exceeded the level of output from the pre-crisis peak and have rising levels of headline and core inflation, “suggesting that inflation pressure is broadening”.

“The issue is whether they [emerging economies] are experiencing the kind of credit boom that inevitably ends with a bust. Evidence is not reassuring in this regard”.