Archive for November 25th, 2010

Bank of England MPC members divided as well

November 25, 2010

Though this is old news now. Like we see various Fed members divided over future course of policy, same is the case with Bank of England.

The divide began in June 2010 MPC where Andrew Sentance voted to raise rates by 25 bps and keep the purchase program at GBP 200 bn. Intrestingly, he advocates exiting from conventional policy first. Most econs say though unconventional followed conventional, the exit should be reverse from unconventional to conventional.

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Communicating Fed policies ahead..

November 25, 2010

FOMC minutes of meeting held on 3 Nov were released yesterday. Like previous meeting minutes this one also provides lots of economic and financial markets developments.

What was more interesting was Fed’s concerns over communicating its policies to public. The minutes open with:

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Hungary Central Bank loses independence

November 25, 2010

I had pointed out to the interesting case study of Argentina’s central bank losing its independence. Then Plosser pointed that there are several such cases – Korea, Mexico, Japan etc. Even Fed has been accused by Taylor of conducting mondustrial policy.

Now there is another victim-  Hungary’s Central Bank. The Government has decided to now give teh Prime Minister powers to nominate 4 members of the seven member monetary policy committee. Earlier Prime Minister could nominate 2 members. The idea is current government wants to cut rates and by putting four government nominees. By putting four friendly members government could press its agenda:

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Similarities in ECB and Fed inflation targets?

November 25, 2010

Both ECB and Fed do not call themselves as inflation targeting central banks.

ECB has set itself with a quantitative definition of price stability – maintaining inflation rates below but close to 2% over the medium term. Despite this it does not call itself an inflation targeter. Issing pointed  the reasons for the same. First there was no full economic model of Europe needed for an inflation targeter. Second and more importantly ECB believed in money’s role in inflation and inflation targeters did not.

Fed does not even have a quant target. Though some Fed members have discussed their preferred inflation targets around 1.5% – 2.0%.

Antonio Fatas has a nice post showing how Bernanke’s recent mention of preferred inflation target is similar to ECB’s:

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Ireland vs Iceland

November 25, 2010

Paul Krugman has a superb post comparing the two countries.

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