Eurozone price rises sound alarms at ECB – FT
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Q: What do jitters over European debt, stubbornly high unemployment and earthquakes have in common?
A: They have all been cited as reasons for central banks to delay interest rate hikes.
It’s not just economic crises that cause central banks to postpone tightening monetary policy. Since the beginning of the year, a number of political and natural disasters have pressured banks to keep rates low. Here is Money Supply’s list of the top three non-financial events that kept rates low. Are we missing any? Comments welcomed below. Read more
Alistair Darling’s task in the pre-Budget report was to improve the credibility of Britain’s deficit reduction plans for the public, the markets and for those running monetary policy. I am convinced this report will fail on all counts.
With a couple of hours digging through the numbers, the report strikes me as deeply political and its presentation extremely unhelpful. This is not the way to gain credibility. Why? Read more
The Office for National Statistics has today published a paper defending its early estimates of Gross Domestic Product against criticisms that the figures are not worth the paper they are written on. But its case rests entirely on trust, writes Chris Giles of the Financial Times, and does not address the external concerns about its data. Read more
In the great Japanese debate on how to balance the contradictory demands of reining in the deficit and continuing stimulative spending, chalk up another political point for Shizuka Kamei, Japan’s minister for financial services. Read more
German exporters remain confident despite the rising euro, writes Ralph Atkins of the Financial Times Read more
Daniel Pimlott of the Financial Times reviews the day’s economic news Read more
I have a good deal of sympathy for Sheila Bair’s idea that secured creditors should take a hit when a financial institution fails. But there are two problems with her proposal. First, it would kill the triparty repo market, where lenders assume secured really means secured. Second, it is not clear to me why we should want a standardised 20 per cent haircut. Better to estimate the haircut in normal bankruptcy and apply that to any special resolution process.
Moreover, it looks to me like the most promising way of getting some effective discipline from bank creditors is to focus on the more junior categories of debt – sub-debt and potentially reverse convertibles (I like the idea of requiring banks to hold debt that converts into equity when certain thresholds are breached).
German resistance to IMF expansion plans is growing, writes Ralph Atkins in a blog Read more
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