monetary policy

Federal Reserve: QE3, exit strategy and the fiscal crisis

February 22, 2013 3:13 pm by Robin Harding

The paper at this year’s US Monetary Policy Forum – where market economists get to present to central bankers – is called “Crunch Time: Fiscal Crisis and the Role of Monetary Policy“. It shows a new wrinkle on US fiscal problems: if there is any kind of debt sustainability crisis it could make the Fed’s exit from easy monetary policy a whole lot more painful.

This is the money chart. Black is the baseline for Fed profit and loss in the coming years. Red is what happens if a fiscal crunch pushes up long-term bond yields (and hence causes losses for the Fed on its portfolio). Read more

Tags: exit strategy, federal reserve, fiscal policy, monetary policy, QE3
Posted in Federal Reserve | Permalink

Central bankers centre-stage

February 7, 2013 9:35 am by Tom Burgis

This is a Live Blog transcript. Read more

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.

Tags: bail-outs, Bank of England, banking, Carney, Draghi, Europe, eurozone, GDP, Global, inflation, interest rates, monetary policy, quantitative easing, UK
Posted in Bank of England, European Central Bank | Permalink

From FT.com November 2, 2012

Bank of England’s culture attacked

©Getty

Excessive deference and hierarchy are damaging the Bank of England’s effectiveness, according to three independent reviews that criticise the central bank’s culture.

The reviews into operations during the financial crisis found that officials in Threadneedle Street had learnt “rapidly” and handled the crisis “effectively”, but were also critical of the cental bank’s governance culture.

Tags: monetary policy, Sir Mervyn King
Posted in Bank of England | Permalink

Monetary policy defeatism reigns at the Bank of England

November 1, 2012 11:38 am by Claire Jones

Charlie Bean’s speech on Wednesday evening was grim, even by central bankers’ standards.

Mr Bean is the Bank’s deputy governor with responsibility for monetary policy. But he doesn’t seem to think that particular policy strand can do much good. Either now, or in preventing the next bubble.

Not only did Mr Bean echo the governor’s warnings over the effectiveness (or lack thereof) of more quantitative easing in the current climate, he is also sceptical that monetary policy can curb the build-up of credit bubbles. Read more

Tags: charlie bean, monetary policy
Posted in Bank of England | Permalink

ECB’s bond buying is a game of two halves

October 17, 2012 5:22 pm by Michael Steen

According to the Maradona theory of monetary policy, as outlined by Sir Mervyn King, governor of the Bank of England, a central bank can let expectations that it will act – rather than actual action – do the work for it.

The theory is being tested right now by Mario Draghi, president of the European Central Bank, as his controversial “outright monetary transactions” bond-buying programme is forced to sit on the benches until the prime candidate for help, Spain, applies to the EU’s bailout fund.

As a quick reminder, the Maradona theory refers to the 1986 World Cup quarter final between England and Argentina. Diego Maradona scored a celebrated goal with a run from near the halfway line in which he beat five England players by, er, running in a straight line. Read more

Tags: mario draghi, mervyn king, monetary policy
Posted in Central banks, European Central Bank | Permalink

Monetary policy’s Catch 22

December 6, 2011 5:14 pm by Claire Jones

Because monetary policy acts with a lag, it has to rely on forecasts.

However, as the Bank of England’s attempts at prediction have illustrated, central banks’ forecasts, and indeed those of most economists, tend to be pretty dire.

This is what Svante Öberg, first deputy governor of Sweden’s Riksbank, refers to in a speech out today as the “Catch-22 of monetary policy.” So what’s a central banker to do? Read more

Tags: inflation, monetary policy, Svante Öberg
Posted in Bank of England, Central banks, Riksbank | Permalink

Live blog: Sir Mervyn King at the Treasury committee

November 28, 2011 2:45 pm by Claire Jones

Sir Mervyn King. Image by Getty.

Welcome to our live blog on Sir Mervyn King’s appearance at the Treasury select committee.

The governor has been called before the committee to field questions on the Monetary Policy Committee’s latest inflation report, which came out earlier this month.

Reporting by Claire Jones. All times are GMT.

17.16 This live blog is now closed.

17.14 Given that the hearing was supposed to be about the MPC’s inflation report, it was ironic that the governor ended up revealing more about what the FPC is likely to recommend in the financial stability report later this week. Read more

Tags: eurozone, mervyn king, monetary policy, Treasury
Posted in Bank of England, Central banks, European Union (EU) | Permalink

What today’s Nobel prizewinners tell us about monetary policy

October 10, 2011 3:41 pm by Claire Jones

Monetary policy is no longer shrouded in mystery; the curtain has been pulled back on the great and powerful Federal Reserve to reveal Ben Bernanke.

That central bankers now bother to tell us what interest rate they are targeting owes much to a belief that more transparency affords them greater influence on markets’ and the public’s expectations, which in turn makes monetary policy more effective in affecting demand.

But how much of an impact do expectations about policy actually have on the economy? Today’s Nobel Prize has been awarded to two economists – Thomas Sargent and Christopher Sims – that have done much to answer this question. Read more

Tags: monetary policy
Posted in Uncategorized | Permalink

Weale shows his dovish side

August 25, 2011 2:06 pm by Chris Giles

Martin Weale’s speech today shows how far the policy debate has shifted at the Bank of England. As recently as early July, this external member of the monetary policy committee was voting for higher interest rates. Now he is openly talking about restarting quantitative easing.

Mr Weale should certainly be praised for being as good as his words. In March he said he was perfectly happy to change his mind if the facts changed and he has done so. No longer voting for a rate rise does not indicate a previous error of judgment, only that circumstances have changed.

From his speech today, Mr Weale, one of the more hawkish MPC members, now clearly thinks that UK QE2 might be necessary and he believes it would work. Read more

Tags: interest rates, martin weale, monetary policy, QE2, quantitative easing, UK
Posted in Bank of England | Permalink

Has the King got new clothes?

January 25, 2011 7:45 pm by Chris Giles

Mervyn King has just delivered an important speech in Newcastle. As ever with the Bank of England governor, it is extremely well-written and his argument is tight. The speech is, however, infused with overwhelming self-belief and even arrogance in the face of difficult economic circumstances. Those, in a nutshell, are Mr King’s great strengths and weaknesses.

This is far from an attack on the governor. I think his “big picture” view is correct, but his unwillingness to concede mistakes undermines policy and damages the Bank’s credibility, making the Bank’s job of getting its message across rather harder than it need be.

The big picture should come from him.

“We must not lose sight of the big picture. Large – very large – shocks to relative prices are an inevitable part of the real adjustment vital to the rebalancing of the UK economy.

Tags: mervyn king, monetary policy, UK, UK economy
Posted in Bank of England | Permalink