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May 8, 2013

Fed’s credibility tested as inflation drifts below target

WASHINGTON (Reuters) – With the U.S. inflation rate about half of the Federal Reserve’s 2.0 percent target, the central bank is facing a major test and some experts wonder whether it will eventually need to ramp up its already aggressive bond buying program.

The Fed cut official interest rates effectively to zero in late 2008 during the financial crisis. Since then, it has bought more than $2.5 trillion in bonds to bolster an anemic economic recovery and speed up the decline in unemployment.

May 1, 2013

No end in sight for Fed stimulus as inflation sags

WASHINGTON (Reuters) – The Federal Reserve’s debate over U.S. monetary policy could begin to shift away from the prospect of reducing stimulus toward a discussion about doing more, given the signs of economic weakness and slowing inflation.

But policymakers are not there yet.

At a two-day meeting that wraps up on Wednesday, the Fed is widely expected to maintain its monthly purchases of $85 billion in bonds to support an economic recovery that is nearly four years old but still too weak for the job market to truly heal.

Apr 24, 2013

Argentine farmers hoard soy as protection against falling peso

CHACABUCO, Argentina, April 24 (Reuters) – Sales of
Argentine soybeans are lagging this season due to expectations
for higher world prices later and to domestic financial
uncertainty that has prompted farmers to save in beans rather
than pesos.

With world food demand on the rise, growers in the Pampas
grains belt are filling their silos with soy rather than
converting their crops into pesos, a currency that hit a new
all-time low in informal trade this week.

Apr 22, 2013
via MacroScope

Currency peace: G20 gives BOJ a pass for deflation fight

All the talk of currency wars is mostly just that – talk. This week’s meeting of the Group of 20 nations at the International Monetary Fund was living proof. Despite speculation that emerging nations would redouble their criticism of extraordinarily low rates in advanced economies, the G20 ended up largely supporting the Bank of Japan’s new and bold stimulus efforts aimed at combating years of deflation.

Mr. currency wars himself, Brazilian Finance Minister Guido Mantega, told reporters Japan’s monetary drive was understandable given its struggle with falling prices and stagnant wages, even if he called for close monitoring of its potential spillover effects.

Apr 19, 2013
via MacroScope

Baby it’s cold outside: monetary policy as outer wear

Discussions about central banking are often belabored by analogies to moving vehicles, which make some sense given that interest rate policy can act both as accelerator and brake on economic activity. Perhaps tired of being in the driver’s seat, Minnesota Fed President Narayana Kocherlakota decide to switch gears and talk about clothing instead.

In an attempt to illustrate that interest rates are low because of economic conditions, not the whim of policymakers, Kocherlakota compares monetary policy to a protective jacket that needs to be worn when the weather gets rough but can slowly be removed as the summer approaches.

Apr 18, 2013

Euro zone no longer faces existential threat: France’s Moscovici

WASHINGTON, April 18 (Reuters) – Europe’s monetary union is
no longer in question as it was last year, French Finance
Minister Pierre Moscovici said on Thursday, even though the
continent’s economic struggles continue.

“There is still an economic crisis in Europe, it is a crisis
of insufficient growth. There is no longer a crisis of the euro
zone,” Moscovici said, adding that the European Central Bank’s
pledge to do whatever it takes to safeguard the single currency
had been a big help.

Apr 18, 2013
via MacroScope

Central bank independence is a bit like marriage: Israel’s Fischer

For Bank of Israel governor Stanley Fischer, this week’s high-powered macroeconomics conference at the International Monetary Fund was a homecoming of sorts. After all, he was the IMF’s first deputy managing director from 1994 to 2001. The familiar nature of his surroundings may have helped inspire Fischer to use a household analogy to describe the vaunted but often ethereal principle of central bank independence.

Fischer, a vice chairman at Citigroup between 2002 and 2005, sought to answer a question posed by conference organizers: If central banks are in charge of monetary policy, financial supervision and macroprudential policy, should we rethink central bank independence?  His take: “The answer is yes.”

Apr 16, 2013

Yellen says Fed rates guidance helps support recovery

WASHINGTON (Reuters) – The Federal Reserve’s policy of communicating future intentions on interest rates helps support employment and economic growth, Fed Vice Chairwoman Janet Yellen said on Tuesday.

Yellen told an International Monetary Fund conference that she still believes the Fed’s stimulus efforts should be conducted within the context of a flexible inflation target, pushing back against the notion that central banks must rethink their mandates.

Apr 15, 2013
via MacroScope

German ghost of inflations past haunting European stability: Posen

“Reality is sticky.” That was the core of Adam Posen’s message to German policymakers on their home turf, at a recent conference in Berlin.

What did the former UK Monetary Policy Committee member mean? Quite simply, that the types of structural economic changes that Germany has been pushing on the euro zone are not only destructive but also bound to fail, at least if history is any guide.

Apr 10, 2013

Fed’s Lockhart says “premature” to discuss stimulus pullback

, April 10 (Reuters) – It is too soon for
the Federal Reserve to begin considering a tapering or halt of
its bond-buying stimulus program, Atlanta Fed President Dennis
Lockhart said on Wednesday.

“A lot of focus on that at the moment is maybe a bit
premature,” Lockhart told reporters during a press briefing on
the sidelines of an Atlanta Fed conference. “We have to wait and
watch how the data come in and see how the economy evolves.”

    • About Pedro

      "Pedro da Costa has been covering economics and financial markets since 2001. He is currently based in Washington and focuses on the Federal Reserve and macroeconomic policy. Da Costa earned a Master's in international relations at the University of California San Diego and studied sociology and political science as an undergraduate at the University of Chicago and the London School of Economics. He grew up in Rio de Janeiro, Brazil."
      Joined Reuters:
      2001
      Languages:
      English, Portuguese, Spanish, French
      Awards:
      2011 Deadline Club Award from the Society of Professional Journalists' New York Chapter
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