Daily Archives: September 10, 2013

The last-ditch effort by Moscow to avert a US strike against Syria – proposing Damascus signs up to the global ban on chemical weapons and puts its chemical stockpile under international controls – has merit and is worth pursuing. It also demonstrates that the threat of using even limited force can have real utility, and that a speedy congressional vote backing President Barack Obama on strikes remains necessary.

When the first reports of the deadly poison gas attack emerged from Damascus three weeks ago, the issue of military action took an important turn. Up to that point, the Obama administration had steadfastly – and rightly – resisted calls to intervene militarily in the increasingly bloody civil war. Not only did the president confront a war-weary public that had absolutely no interest in becoming entangled in another Middle Eastern conflict, but he had also long concluded that doing so would make this his war – and ending the conflict his responsibility. He rightly held back. Read more

Some central banks in advanced economies have recently put themselves into an uncomfortable corner. They have started to implement “forward guidance”, which consists of communicating to the markets their views about the appropriate level of interest rates, with the aim of influencing them. Unfortunately, the strategy is not working as expected. In spite of the central bank commitment to keep the level of policy rates unchanged, or even lower, for a prolonged period of time, market rates have risen instead.

The reason why forward guidance is not working is that it is not time consistent. If central banks really want to convince market participants that the prevailing rates over different maturities should be lower, they should explain why. In particular, they should provide arguments to dismiss the assessment made by market participants according to which interest rates are expected to rise over the medium term. In this respect, they could use at least two arguments. Read more