quantitative easing

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.  

Chris Giles

Officials I have spoken to since venting my anger at the raid on the government’s quantitative easing surplus have struck a decidedly disappointed tone. It was a shame I didn’t understand that there was no trickery involved; it was a pity I could not see that the move was standard practice in public sector liability management; and it was sad I had questioned whether the the Treasury’s move, which itself eased monetary conditions, undermined the Bank of England’s operational independence to set monetary policy.

While I have convinced a sizable majority of readers, I note that some people are swallowing these lines without much challenge. Here I will deal with trickery and liability management. In the next post, I will turn to monetary policy. Simon Ward of Henderson Global Investors is the latest to say that anything other than treating temporary profits from QE as government revenue “would be out-of-line with the treatment of other future government liabilities”. Read more

The three independent reviews of the Bank of England’s performance before and during the financial crisis must have been sobering for the court, its governing body. In polite but pointed language the reviews, published on November 2, confirmed that the BoE was ill prepared to recognise or deal with the crisis in its early days. The BoE’s forecasting was also found to be subject to groupthink.

The reviews provided many detailed recommendations but also made it clear that a full-scale cultural change is needed to address the root causes of the problems. This will be a high priority for the next governor.

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Claire Jones

Mirror, mirror on the wall, who’s the biggest quantitative easer of all? Brazil has long accused governments in the developed world of using loose monetary policy to pump up their economies and get a competitive edge. But it may be time for Brazil to reflect on its own actions over the past five years.

During that time, Brazil has received huge capital inflows, pushing its foreign reserves from about $80bn at the end of 2006 to about $380bn today (see chart below). The central bank says it has “sterilised” those potentially expansionary and inflationary inflows by selling government bonds – standard practice at central banks around the world.

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Claire Jones

After the surprise news today that annual inflation fell to a two-and-a-half year low of 2.8 per cent in May, analysts now increasingly expect the Monetary Policy Committee to announce more quantitative easing on 5 July.

Following Sir Mervyn’s Mansion House address last Thursday, it has largely been a case of when — not if — the MPC would plump for more money printing. But before today’s inflation number, analysts were split on whether more QE would come in July, or in August.

Now, the majority expect further asset purchases to come sooner rather than later. Here’s what economists are saying: Read more

Claire Jones

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Joint action?

Hopes for joint central bank action mounted on Friday ahead of Sunday’s Greek election. Will the central banks deliver?  Read more

Claire Jones

Adam Posen’s brief flirtation with the Monetary Policy Committee majority is well and truly over.

At the MPC’s April and May votes, Mr Posen left David Miles as the only member voting for more quantitative easing.

That is unlikely to be the case at next month’s vote, however. In a speech delivered this afternoon, Mr Posen not only calls for more money printing, but also for the Bank to spend the cash on assets other than gilts  – an idea that the governor and other Bank staffers have fiercely objected to on the grounds that it would hinder Threadneedle Street’s independence.

Elements of the argument are not new — Mr Posen in September called for the Bank to branch out from buying gilts and do more to spur lending to smaller businesses. Again, he is dismissive of the view that doing more impacts a central bank’s credibility.

But there are also significant differences in today’s speech from what Mr Posen had to say in the autumn. Read more

Robin Harding

Vincent Reinhart of Morgan Stanley has a fascinating note out today which reverse engineers US forecasts from the IMF’s World Economic Outlook to answer questions about headwinds to demand, the effectiveness of unconventional Fed policy and the potential growth rate.

His chart on the effectiveness of Fed policy is particularly neat. Essentially, he plots annual long-term real interest rates against short-term real interest rates for the years from 1980 to 2007, draws a regression line, and then adds on dots for 2008 to 2011. Read more

Claire Jones

Commuters pass the Bank of England. Image by Getty

Commuters pass the Bank of England. Image by Getty

As expected, the Bank of England today kept interest rates on hold at 0.5% and opted not to print more money.

Analysts’ attention has long focussed on the Monetary Policy Committee’s May meeting; it was always more likely to hold off on plumping for more quantitative easing until then. However, its far from certain whether the MPC will opt for further asset purchases on 10 May.

Here are a few of the factors that are likely to sway the MPC’s decision on whether it adds its the £325bn-worth of asset purchases. Read more

Claire Jones

As most suspected, the Bank of Japan did little today to step up its fight against deflation.

Bar some tinkering with its special lending facilities, the BoJ kept policy on hold with the size of its asset purchase programme remaining at Y65tn.

However, there are signs that the central bank could do some proper easing in the coming months.

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