| On IMF sidelines, host Japan debt worries lurk beneath Europe Posted: 14 Oct 2012 01:59 AM PDT |
| Bernanke:Fed QE GDP Benefits Offset Lower Dlr Impact on EMs-2 Posted: 13 Oct 2012 09:30 PM PDT Bernanke said research by the IMF and others “does not support the
view that advanced-economy monetary policies are the dominant factor
behind emerging market capital flows.” In fact, he said, “these flows
have diminished in the past couple of years or so, even as monetary
policies in advanced economies have continued to ease and longer-term
interest rates in those economies have continued to decline.” * “Second, the effects of capital inflows, whatever their cause, on
emerging market economies are not predetermined, but instead depend
greatly on the choices made by policymakers in those economies.” “In some emerging markets, policymakers have chosen to
systematically resist currency appreciation as a means of promoting
exports and domestic growth,” he said. “However, the perceived benefits
of currency management inevitably come with costs, including reduced
monetary independence and the consequent susceptibility to imported
inflation.” “In other words, the perceived advantages of undervaluation and the
problem of unwanted capital inflows must be understood as a package,”
Bernanke said. “You can’t have one without the other.” Bernanke suggested “an alternative strategy,” which would be “to
refrain from intervening in foreign exchange markets, thereby allowing
the currency to rise and helping insulate the financial system from
external pressures.” “Under a flexible exchange-rate regime, a fully independent
monetary policy, together with fiscal policy as needed, would be
available to help counteract any adverse effects of currency
appreciation on growth,” he said. “The resultant rebalancing from
external to domestic demand would not only preserve near-term growth in
the emerging market economies while supporting recovery in the advanced
economies, it would redound to everyone’s benefit in the long run by
putting the global economy on a more stable and sustainable path.” * Third, “any costs for emerging market economies of monetary
easing in advanced economies should be set against the very real
benefits of those policies.” “The slowing of growth in the emerging market economies this year
in large part reflects their decelerating exports to the United States,
Europe, and other advanced economies,” Bernanke said. “Therefore,
monetary easing that supports the recovery in the advanced economies
should stimulate trade and boost growth in emerging market economies as
well.” Bernanke said that “in principle, depreciation of the dollar and
other advanced-economy currencies could reduce (although not eliminate)
the positive effect on trade and growth in emerging markets.” But he added that “since mid-2008, in fact, before the
intensification of the financial crisis triggered wide swings in the
dollar, the real multilateral value of the dollar has changed little,
and it has fallen just a bit against the currencies of the emerging
market economies.” Whatever its impact on other countries, Bernanke maintained the
Fed’s latest easing measures should help the U.S. economy. “The open-ended nature of these new asset purchases, together with
their explicit conditioning on improvements in labor market conditions,
will provide the Committee with flexibility in responding to economic
developments and instill greater public confidence that the Federal
Reserve will take the actions necessary to foster a stronger economic
recovery in a context of price stability,” he said. “An easing in financial conditions and greater public confidence
should help promote more rapid economic growth and faster job gains over
coming quarters,” he added. As he has said before, Bernanke conceded “monetary policy is not a
panacea.” But he said “we expect our policies to provide meaningful help
to the economy.” Bernanke said he and his FOMC colleagues “recognize that
unconventional monetary policies come with possible risks and costs;
accordingly, the Federal Reserve has generally employed a high hurdle
for using these tools and carefully weighs the costs and benefits of any
proposed policy action.” Bernanke defended the FOMC actions on the grounds that the data
were “continuing to signal weak labor markets and no signs of
significant inflation pressures.” He said “the U.S. economy has faced significant headwinds, and,
although the economy has been expanding since mid-2009, the pace of our
recovery has been frustratingly slow.” “In this environment, households and businesses have been quite
cautious in increasing spending,” he said. “Accordingly, the pace of
economic growth has been insufficient to support significant improvement
in the job market; indeed, the unemployment rate, at 7.8%, is well above
what we judge to be its long-run normal level. With large and persistent
margins of resource slack, U.S. inflation has generally been subdued
despite periodic fluctuations in commodity prices.” While the Fed is falling short on the “maximum employment” part of
its dual mandate, he said “consumer price inflation is running somewhat
below the Federal Reserve’s 2% longer-run objective, and survey- and
market-based measures of longer-term inflation expectations have
remained well anchored.” What’s more, he said, the FOMC judged that “there were significant
downside risks to this outlook, importantly including the potential for
an intensification of strains in Europe and an associated slowing in
global growth.” Given all those factors, the FOMC decided more stimulus was
warranted, Bernanke said. [TOPICS: M$U$$$,MFU$$$,MGU$$$,M$$CR$,MT$$$$,MMUFE$,M$$BR$] |
| Bernanke:Fed QE GDP Benefits Offset Lower Dlr Impact on EMs-1 Posted: 13 Oct 2012 09:30 PM PDT By Steven K. Beckner TOKYO (MNI) – An often heard complaint at the annual meetings of
the International Monetary Fund and World Bank in recent days was that
the aggressive and unconventional monetary easing of the Federal Reserve
and other major central banks is hurting emerging market nations, but
Federal Reserve Chairman Ben Bernanke was having none of it Sunday. Indeed, Bernanke sought to turn the tables on those nations,
countering that their own rigid exchange rate policies are the source of
their problems. Besides, he contended, the Fed’s monetary stimulus provides a net
benefit, not only to the U.S. economy, but to the whole world, including
its less advanced regions. For the second time in two weeks, Bernanke also defended the Fed’s
two-pronged monetary easing campaign as needed to strengthen the U.S.
economy. Its “flexible” and “open-ended” large-scale asset purchases should
boost public confidence in the Fed’s willingness to keep pumping money
into the economy until the recovery strengthens, ease financial
conditions and spur faster growth, he maintained in a speech at the Bank
of Japan. The Fed chief said the costs and risks of unconventional easing
present a “high hurdle,” even though the Fed’s policymaking Federal Open
Market Committee overwhelmingly approved its latest aggressive stimulus
measures on Sept. 13. To lower long-term interest rates, the FOMC announced then that it
would buy $40 billion per month of mortgage backed securities while
continuing through year-end its $45 billion monthly Treasury security
purchases under “Operation Twist.” It said it would keep buying assets
indefinitely until the labor market improves “substantially” and left
the door open to changing the composition or size of its purchases. The FOMC simultaneously resorted to verbal easing of short-term
rates, saying it was likely to keep the federal funds rate near zero
until at least-mid 2015, and further stating it “expects that a highly
accommodative stance of monetary policy will remain appropriate for a
considerable time after the economic recovery strengthens.” The European Central Bank, the Bank of Japan and the Bank of
England have also launched or have said they stand ready to do
quantitative easing as well. Brazilian Finance Minister Guido Mantega was the most prominent
emerging market policymaker to object to such measures at the annual
meetings, alleging that their chief aim is to boost growth in the U.S.
and other industrial countries by depreciating their currencies to gain
an unfair trade advantage. Brazil is one of the nations which has engaged in foreign exchange
intervention to resist upward pressure on its currency. “If the domestic transmission mechanisms are weak, monetary policy
will operate mainly through its effects on exchange rate depreciation
and the resulting increase in net exports,” said Mantega, adding that
“advanced countries cannot count on exporting their way out of the
crisis at the expense of emerging market economies.” “‘Currency wars’ will only compound the world’s economic
difficulties,” he went on. “Trying to grasp larger shares of global
demand through artificial means has many side effects. It is a selfish
policy that weakens the efforts for concerted action.” Mantega served notice that Brazil and other emerging market
countries “cannot passively endure the spillovers of advanced countries’
policies through large and volatile capital flows and currency
movements. All forms of trade and currency manipulation must be avoided
because they improve international competitiveness in a spurious
manner.” Mantega vowed that his own country “will take whatever measures it
deems necessary to avoid the detrimental effects of these spillovers”
and rejected complaints from its trading partners about its defensive
actions in foreign exchange markets. “We cannot accept the attempt to unfairly label as ‘protectionist’
legitimate measures of defense in the areas of foreign trade, exchange
rate and capital account management,” he said. “Experience has shown
that the free flow of capital is not necessarily the preferable option
in all circumstances.” Bernanke, who has been participating in the annual meetings of the
International Monetary Fund and World Bank with Treasury Secretary
Timothy Geithner in recent days, confronted the charges of Mantega and
others head on and mounted a thoroughgoing defense of Fed policies. “Although the monetary accommodation we are providing is playing a
critical role in supporting the U.S. economy, concerns have been raised
about the spillover effects of our policies on our trading partners,” he
said. “In particular, some critics have argued that the Fed’s asset
purchases, and accommodative monetary policy more generally, encourage
capital flows to emerging market economies.” “These capital flows are said to cause undesirable currency
appreciation, too much liquidity leading to asset bubbles or inflation,
or economic disruptions as capital inflows quickly give way to
outflows,” he said. Bernanke said he is “sympathetic to the challenges faced by many
economies in a world of volatile international capital flows.” And he
acknowledged that “highly accommodative monetary policies in the United
States, as well as in other advanced economies, shift interest rate
differentials in favor of emerging markets and thus probably contribute
to private capital flows to these markets.” Howeer, he said “it is not at all clear that accommodative policies
in advanced economies impose net costs on emerging market economies.” He
gave several reasons: * “First, the linkage between advanced-economy monetary policies
and international capital flows is looser than is sometimes asserted.
Even in normal times, differences in growth prospects among
countries — and the resulting differences in expected returns — are
the most important determinant of capital flows.” “The rebound in emerging market economies from the global financial
crisis, even as the advanced economies remained weak, provided still
greater encouragement to these flows,” he continued. “Another important
determinant of capital flows is the appetite for risk by global
investors.” “Over the past few years, swings in investor sentiment between
‘risk-on’ and ‘risk-off,’ often in response to developments in Europe,
have led to corresponding swings in capital flows.”
–MORE– [TOPICS: M$U$$$,MFU$$$,MGU$$$,M$$CR$,MT$$$$,MMUFE$,M$$BR$] |
| The wrong Europe wins the Nobel Peace Prize Posted: 13 Oct 2012 09:42 AM PDT |
| SNB Jordan: Will enforce minimum FX rate; CHF still overvalued Posted: 13 Oct 2012 09:34 AM PDT |
| Europe on the brink Posted: 13 Oct 2012 09:27 AM PDT |
| Italy’s Monti under fire from allies over budget Posted: 13 Oct 2012 09:18 AM PDT |
| Finance leaders back EU, U.S. to-do list to shield growth Posted: 13 Oct 2012 09:08 AM PDT |
| Euro zone mulls new ways to cut Greek debt mountain Posted: 13 Oct 2012 08:59 AM PDT |
| Spanish aid request from euro zone seen in November Posted: 13 Oct 2012 08:51 AM PDT |
| ECB says euro-area banking supervision may not start until 2014 Posted: 13 Oct 2012 08:44 AM PDT |
| China exports exceed estimates, easing concern over slump risk Posted: 13 Oct 2012 08:38 AM PDT |
| Greece will probably leave euro within six months, Borg says Posted: 13 Oct 2012 08:33 AM PDT |
| Next Wk/US: Retail Sales, CPI, Hsing Strts/Ex Hms, IP, Claims Posted: 13 Oct 2012 07:40 AM PDT By Kasra Kangarloo WASHINGTON (MNI) – The week ahead will feature retail sales and
housing data, both of which are expected to show modest strength, along
with September’s CPI. September retail sales, to be released Monday at 8:30 a.m. ET,
is expected to show modest strength in core figures, which exclude
automobile and gasoline sales. Last months outsized gains in the
headline figure, which were the largest in six months, were entirely due
to higher gasoline prices. Housing data will include September housing starts on Wednesday at
8:30 a.m. ET, the October National Association of Home Builders housing
market index on Tuesday at 10:00 a.m. ET, and September existing home
sales on Friday at 10:00 a.m. ET. Housing data has lately shown signs of genuine improvement in the
sector, with sales on the upswing, prices gaining traction and
construction of new homes showing no signs of a slow-down. All of these
trends are expected to continue with next weeks data. The September Consumer Price Index, to be released Tuesday at 8:30
a.m. ET, will round out the months inflation data. The data is expected
to show the same impact of higher food and gas prices which drove up
headline figures in the months Producer Price Index and import price
index. Initial jobless claims showed an unexpected plunge in last weeks
figure, due to a technicality in state reporting. Next weeks data will
likely show a correction, though the overall trend for claims has still
been pushing modestly downward. Other data to be released over the week include the October
Philadelphia Federal Reserve business outlook survey on Thursday at
10:00 a.m. ET, the October Empire State manufacturing survey on Monday
at 8:30 a.m. ET, September industrial production on Tuesday at 9:15 a.m.
ET, September Treasury international capital flows on Tuesday at 9:00
a.m. ET, September leading economic indicators on Thursday at 10:00 a.m.
ET, and August business inventories on Monday at 10:00 a.m. ET. Federal Reserve Speakers for the week are listed below: New York Federal Reserve president William Dudley will speak at the
National Association for Business Economics on Monday at 8:00 a.m. ET. Richmond Federal Reserve president Jeffery Lacker on the U.S.
economy in Virginia on Monday at 12:45 p.m. ET. St. Louis Federal Reserve president James Bullard will speak on the
economy in St. Louis on Monday at 1:10 p.m. ET. San Francisco Federal Reserve president John Williams will speak on
the economy in San Francisco on Monday at 8:30 p.m. ET. Atlanta Federal Reserve President Dennis Lockhart will introduce
the Argentine ambassador in Atlanta on Tuesday at 12:00 p.m. ET. Federal Reserve Governor Sarah Raskin will speak on financial
regulation in Boston on Tuesday at 12:00 p.m. ET. — Kasra Kangarloo is a reporter for Need to Know News ** MNI Washington Bureau: 202-371-2121 ** [TOPICS: M$$FI$,M$U$$$,MAUDS$] |
| SNB Jordan:Will Enforce Minimum FX Rate; CHF Still Overvalued Posted: 13 Oct 2012 03:50 AM PDT TOKYO (MNI) – The Swiss National Bank will continue to enforce its
minimum exchange rate target with utmost determination as the currency
remains overvalued even at its current level, SNB Chairman Thomas Jordan
said Saturday. The SNB has been intervening in currency markets to prevent the
euro from falling under 1.20 Swiss francs. “The monetary policy with the minimum exchange rate is the right
one at the moment and we will continue to defend this minimum exchange
rate with the utmost determination,” Jordan said during a press briefing
at the annual meetings of the International Monetary Fund and World Bank
here. “The franc continues to be a very strong currency and in that sense
an overvalued currency. It’s right for the central bank to continue this
monetary policy for the foreseeable future,” Jordan asserted. Jordan noted that recent “decisions taken in Europe helped markets
calm down” and that has eased somewhat the SNB’s task. “Financial market
sentiment has improved and reduced pressure on the franc.” –Frankfurt bureau tel.: +49-69-720 142 Email: jtreeck@mni-new.com [TOPICS: MT$$$$,M$X$$$,M$G$$$,M$$EC$,MGX$$$,MFX$$$,MFGBU$] |
| France FinMin: Mkts Know French Govt Resolve To Cut Deficit Posted: 13 Oct 2012 03:50 AM PDT TOKYO (MNI) – Financial markets are aware of the resolve of the
French government to put its fiscal affairs in order, Finance Minister
Pierre Moscovici said Saturday. Briefing the press during the Annual Meetings of the International
Monetary Fund and World Bank, Moscovici said the meetings were
characterized by the awareness that “the world hasn’t exited from the
crisis” but also by a positive recognition of progress made in dealing
with the problems. Moscovici made clear that “we never thought that austerity is the
solution. I don’t think that austerity is the solution.” At the same
time, he called meeting the 3%-of-GDP deficit target “a question of our
credibility. It is a question of honoring the commitments we have made
vis-a-vis our European colleagues.” The “historically weak” interest rates being paid by France are a
“mark of confidence” in the country, he affirmed. The yield on a 10-year French government bond decreased to 2.09% on
in October 10 from 2.19% on September 28. Between 1990 and 2012, France
paid an average of 5.27% on its 10-years, with a maximum of 10.73% in
September 1990 and an all-time low of 2.06% in August 2012. The markets “know that we have made a commitment … that the
government is determined to make this effort,” he said. “France remains
a sure value.” The minister reiterated his preference for Greece to stay in the
Eurozone but added that this depended on the necessary effort being made
by the Greeks. Spain, he said, is not “sensitive to external pressure” to get the
country to request Europe financial rescue funds. Bank of France Governor and European Central Bank Governing Council
member Christian Noyer, also at the briefing, observed that “the general
sentiment” at this IMF meeting “has changed relative to the preceding
meeting.” “Everyone recognized that the European Union has done work that was
expected and hoped for,” he said, adding that participants know that
“the difficulties traversed by the Eurozone are not unique.” He called on emerging markets to make their domestic demand more
dynamic. He also noted that “the euro is very clearly the second global
reference currency,” but beyond that observation, it is “not useful, not
productive to make comments on the evolution of exchange rates.” –Frankfurt bureau tel: +49-69-720-142. Email: dbarwick@mni-news.com [TOPICS: M$X$$$,MT$$$$,M$$EC$,MGX$$$,M$$CR$,M$F$$$] |
| Update:SNB Jordan:CenBanks Only Growth Driver For Global Econ Posted: 13 Oct 2012 03:40 AM PDT – Political Authorities In Europe And U.S. Must Act Now TOKYO (MNI) – Expansive monetary policies are currently the only
growth driver for the ailing global economy, Swiss National Bank Thomas
Jordan said Saturday during a press briefing at The Annual Meetings of
the International Monetary Fund and World Bank. “The global economic outlook over the past 12 months has darkened,”
Jordan warned. “Development of the global economy must be assessed as
being subject to uncertainty and prone to set-backs.” “Central banks are currently the only driving force for global
growth,” Jordan observed and warned that this cannot be sustainable.
“The onus is now on governments.” Structural reforms and fiscal
consolidation must be carried out “with urgency,” he demanded. Risks stem particularly from the Eurozone, where “there is
still uncertainty about the crisis management mechanism,” Jordan said.
Specifically, question marks remain over the conditionalities of
possible new European Central Bank bond market interventions, he noted. Jordan said that the ECB had already made a “great contribution” in
removing uncertainty and easing financial market tension. Nevertheless,
some details of the crisis management path ahead remain unclear, Jordan
said, urging policymakers to use the current “widow of opportunity” to
solve the crisis. Jordan also singled out the “fiscal cliff” in the U.S. as a key
risks for the global economy ahead. Political decision makers in Europe
and the U.S “must act now because time is short,” Jordan said. Swiss Finance Minister Eveline Widmer-Schlumpf, who also attended
the briefing, warned that “the euro area remains the epicenter of risks
and uncertainty, and much more remains to be done to restore market
confidence and reverse capital flight from the periphery.” In this context, the Swiss finance minister welcomed the “recent
announcement by the ECB” aimed at to prevent financial market
fragmentation and to eliminate convertibility risks.” –Frankfurt bureau tel.: +49-69-720 142 Email: jtreeck@mni-new.com [TOPICS: MT$$$$,M$X$$$,M$G$$$,M$$EC$,MGX$$$,MFX$$$,MFGBU$] |
| SNB Jordan: CenBanks Only Growth Driver For Global Economy Posted: 13 Oct 2012 03:20 AM PDT – Political Authorities In Europe And U.S. Must Act Now TOKYO (MNI) – Expansive monetary policies are currently the only
growth driver for the ailing global economy, Swiss National Bank Thomas
Jordan said Saturday during a press briefing at The Annual Meetings of
the International Monetary Fund and World Bank. “The global economic outlook over the past 12 months has darkened,”
Jordan warned. “Development of the global economy must be assessed as
being subject to uncertainty and prone to set-backs.” “Central banks are currently the only driving force for global
growth,” Jordan observed and warned that this cannot be sustainable.
“The onus is now on governments.” Structural reforms and fiscal
consolidation must be carried out “with urgency,” he demanded. Risks stem particularly from the Eurozone, where “there is
still uncertainty about the crisis management mechanism,” Jordan said.
Specifically, question marks remain over the conditionalities of
possible new European Central Bank bond market interventions, he noted. Jordan also singled out the “fiscal cliff” in the U.S. as a key
risks for the global economy ahead. Political decision makers in Europe
and the U.S “must act now because time is short,” Jordan said. Swiss Finance Minister Eveline Widmer-Schlumpf, who also attended
the briefing, warned that “the euro area remains the epicenter of risks
and uncertainty, and much more remains to be done to restore market
confidence and reverse capital flight from the periphery.” In this context, the Swiss finance minister welcomed the “recent
announcement by the ECB” aimed at to prevent financial market
fragmentation and to eliminate convertibility risks.” –Frankfurt bureau tel.: +49-69-720 142 Email: jtreeck@mni-new.com [TOPICS: MT$$$$,M$X$$$,M$G$$$,M$$EC$,MGX$$$,MFX$$$,MFGBU$] |
| World Bank’s Kim: More Unites China, Neighbors Than Divides Posted: 13 Oct 2012 02:50 AM PDT By Steven K. Beckner TOKYO (MNI) – World Bank President Jim Yong Kim expressed
confidence that China, Japan and South Korea will resolve their
territorial disputes because of their common commercial interests. Kim reaffirmed the bank’s commitment to reducing poverty in a
global economic environment which he called “tough and very
disconcerting.” He was speaking at a press conference of the Development Committee,
a joint body of the World Bank and International Monetary Fund at the
close of the annual meetings of the IMF and World Bank. China’s senior policymakers boycotted the meetings because of
disputes over islands off the coast of Japan. Although the territorial issues dividing China, Japan and
South Korea are “very complicated,” he said “they have to be resolved
between these countries.” And he expressed confidence that they will be resolved peacefully. “The forces that unite Japan, Korea and China are more powerful
than the forces that pull them apart,” said Kim, who himself is of
Korean heritage. “Increasing trade and cooperation is critical for the growth of all
three,” Kim said. And so “over time, maybe very soon” a resolution will be reached,
and the three Asian economic powers will “continue to find ways of
cooperating more directly.” Kim said “the economic environment today is tough and very
disconcerting” and said this underlines the need for the World Bank
to be “a solutions bank” in the global war against poverty. He said his mission is to “effectively deliver services to those
who need them the most,” noting that more than one billion people
are “living in absolute poverty.” Kim said the World Bank, which makes concessional loans to the
poorest nations, wants to “make sure that the gains of the last 10
years are not lost.” [TOPICS: M$U$$$,MFU$$$,MGU$$$,M$$CR$,MT$$$$,MMUFE$,M$$BR$] |
| Japan EcoMin: BOJ Foreign Bond Buying An Easing Option Posted: 13 Oct 2012 02:10 AM PDT –Japan’s Maehara: BOJ Should Consider Every Possible Easing Step TOKYO (MNI) – Economic and Fiscal Policy Minister Seiji Maehara on
Saturday said foreign bond buying by the Bank of Japan would be “an
option” that the BOJ could take to boost easing in the name of
increasing the economy’s monetary base. The minister is trying to bypass the issue of whether the
government should rewrite the law and allow the central bank to buy
foreign bonds — an operation tantamount to foreign exchange market
intervention which is orchestrated by the Ministry of Finance. Maehara also told reporters that the BOJ “should consider every
possible step” to enhance monetary easing. He said he told European Central Bank President Mario Draghi in a
bilateral meeting earlier in the day that the Japanese government and
the BOJ will make every possible effort to help overcome deflation. Maehara said they did not discuss whether Japan will buy bonds to
be issued by the European Stability Mechanism. tokyo@mni-news.com
** MNI Tokyo Newsroom: 81-3-6860-4820 ** [TOPICS: M$A$$$,M$J$$$,MGJ$$$,MMJBJ$] |
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