Money Supply

The week ahead in central banking

July 27, 2012 5:33 pm by Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

Three of the world’s major central banks vote on monetary policy next week.

The Federal Open Market Committee votes on Tuesday, the European Central Bank and the Bank of England on Thursday.

ECB action?

After ECB president Mario Draghi’s comments on Thursday morning, the governing council’s vote in Frankfurt is the most eagerly awaited. Continue reading »

Posted in Bank of England, European Central Bank, Federal Reserve | Permalink

Draghi steps up the rhetoric on ECB action

July 26, 2012 11:43 am by Claire Jones

ECB president Mario Draghi this morning made some very interesting remarks. This from Reuters:

”The euro area is much, much stronger than people acknowledge today.”

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough. There are short-term challenges, to say the least.”

“To the extent that these premia have to do not with factors inherent to my counter party, they come into our mandate, they come within our remit. To the extent that the size of the sovereign premia hamper the functioning of the monetary policy transmission channels, they come within our mandate.”

The last of Mr Draghi’s comments in particular is likely to be read as a sign that the ECB will act soon to lower Spain’s borrowing costs.

UPDATE 11.54 The FT’s markets editor Chris Adams tweets that Spanish yields have fallen and the euro is up following Draghi’s comments.

Spanish bond yields now falling on Draghi comments: down 17bp to 7.25 pct

July 26, 2012 12:27 pm via webReply RetweetFavorite

@chrisadamsmkts

Chris Adams

Euro tops $1.22 #draghi

July 26, 2012 12:33 pm via webReply RetweetFavorite

@chrisadamsmkts

Chris Adams

Posted in European Central Bank | Permalink

Should the Bundesbank worry about German house prices?

July 25, 2012 2:39 pm by Claire Jones

House price rises of a little over 5 per cent would barely make the Federal Reserve, or the Bank of England, blush. Not so at the Bundesbank.

This is what Jens Weidmann, Bundesbank president, had to say back in March:

Jens Weidmann: We will see inflationary pressures rise in Germany. We already see that partly in some markets, such as real-estate. House prices increased by 5.5 per cent last year, which is not impressive by London standard, but still for Germany is something that we will need to watch.

The house price boom has gathered pace. The most recent data from the OECD shows that German house prices rose 9.5 per cent in the year to Q1.

Mr Weidmann has signalled that Buba will act if it thinks the boom is getting bubblicious, possibly through macroprudential measures such as limits on loan-to-value ratios, which cap the amount mortgage holders can borrow against the value of their property.

Klaus Baader at Société Générale is more relaxed, however. Continue reading »

Posted in Bundesbank | Permalink

The week ahead in central banking

July 20, 2012 7:24 pm by Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

With the summer break upon us, central bankers are taking it pretty easy next week.

However, Sir Mervyn King, the governor of the Bank of England, will Continue reading »

Posted in Bank of England, Bank of Israel, Federal Reserve | Permalink

Why are banks still depositing funds at the ECB?

July 19, 2012 2:21 pm by Claire Jones

Something odd is happening with the ECB’s deposit facility – banks are still bothering to use it.

Predictably, the amount parked at the facility plunged last week after the governing council’s decision to pay nothing on deposits took effect. The slump in deposits was pretty much matched by a rise in funds held in banks’ ECB current accounts – through which most of their central bank business is conducted. But since then, the amounts transferred to the deposit facility overnight has remained more or less the same.

So why are banks still bothering to lock up funds in the deposit facility overnight now that there’s no monetary advantage to parking them there? And to what extent would their behaviour change if the deposit rate turned negative? Continue reading »

Posted in European Central Bank | Permalink

BoE minutes: Libor and monetary policy

July 18, 2012 12:11 pm by Claire Jones

In the current climate, it might have been expected that the Bank of England would remove any reference to a certain interbank rate from its official documents.

Not so. The minutes of the Monetary Policy Committee’s July meeting, out today, featured the following references to Libor:

Sterling funding market conditions had seemed to improve following the announcement earlier in the month of the creation of a Government and Bank of England Funding for Lending Scheme (FLS) and the activation of the Bank’s Extended Collateral Term Repo Facility (ECTR). Sterling three-month LIBOR had fallen by around 10 basis points since those announcements and market expectations of three-month LIBOR in six months’ time had fallen by around 20 basis points. Although the controversy surrounding the investigation into the manipulation of LIBOR had so far not had a broad effect on market prices or conditions, there was a risk it might do so in future.

It’s not at all obvious why the MPC continues to use Libor as its key gauge of market funding conditions. But what’s really interesting about the text above is that the MPC thinks there is a risk that the Libor scandal could raise borrowing costs, undoing much of the Bank’s good work in the process. Continue reading »

Posted in Bank of England | Permalink

Bernanke testimony: live blog

July 17, 2012 2:50 pm by Claire Jones

Federal Reserve chairman Ben Bernanke. Image by Getty.

Hello and welcome to today’s live blog on Federal Reserve chairman Ben Bernanke’s testimony on monetary policy to the Senate’s Committee on Banking, Housing and Urban Affairs.

The hearing begins at 10am DC time (3pm UK time).

All times are UK time.

17.26 This live blog is now closed.

17.26 That’s the last of the questions. The hearing is adjourned.

17.22 On alternatives to Libor, Bernanke says the general collateral repo rate is a “possibility”. Another possibility would be the overnight index swap rate. Crucially, both a observable market rates, rather than rates reported by banks. “I suspect [the alternatives] will be seriously considered unless measures are taken to restore confidence in Libor,” he says. “The problem is we have so many contracts that are based on Libor.”

17.17 The Fed chair (and scholar of the Great Depression) on European monetary and political union: Continue reading »

Posted in Federal Reserve | Permalink

Those Tucker/ Diamond emails

July 17, 2012 1:08 pm by Claire Jones

Some embarrassment for Paul Tucker today in the form of a chummy email exchange between him and Bob Diamond (see the final paragraph of the letter below). Continue reading »

Posted in Bank of England | Permalink

The week ahead in central banking

July 13, 2012 5:16 pm by Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

Bernanke testimony

Fed chairman Ben Bernanke faces Congress next week for the central bank’s twice-yearly Monetary Policy Report to the Senate and the House of Representatives.

Will Mr Bernanke offer any clues that the launch of QE3 is imminent? This from the FT’s US economics editor Robin Harding: Continue reading »