Thursday, June 14, 2007

Monetary policy "Closing the valve" / Economist

thanks in large part to the action that was not taken in the past the world and the financial markets are now in better shape than ever............sracasm off......

dank der zögerlichen haltung in der vergangenheit gibt es momentan weltweit sicher erheblich mehr ungleichgewichte als nötig und die verschuldung liegt auf nie dagewesenen höhen......

Central banks around the world still have some tightening to do

TO THE surprise of no one who was watching, on June 14th the Swiss National Bank raised interest rates by a quarter point. Next week Sweden's central bank will probably do the same. Central banks almost everywhere are in a similar mood. Last week the European Central Bank (ECB) put rates up for the eighth time in 18 months. The Bank of England refrained but will probably continue tightening policy this summer. And the Reserve Bank of New Zealand (RBNZ) lifted its official rate to no less than 8%.

>of course Japan refuses to raise......
>selbstverständlich hat sich Japan diesem trend widersetzt....

BOJ Keeps Rate at 0.5%

America, where the federal funds rate has stood at 5.25% for almost a year, is an exception. But even there markets have gradually accepted that the Federal Reserve is not about to ease policy. The plummeting bond market is one obvious sign.

The path of Fed futures is a more explicit one. In March the market was pricing in a quarter-point cut by September and another by December. Now it says rates will be flat all year.

Despite all the rate increases, monetary policy globally is still on the loose side.
The chart above, supplied by Julian Callow of Barclays Capital, shows the gap between nominal GDP growth and official interest rates, a common gauge of policy, for a group of big economies: America, Britain, Canada, China, the euro area, India and Japan.

In the past few years interest rates have been lower than the nominal growth rate—ie, policy has been loose, by this measure—for the longest period for 30 years. The slack is being reduced but there is still some to be taken up. In America and Canada rates are roughly equal to nominal GDP growth; elsewhere, they are below. The gap is widest in China and India. ......

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Anonymous Anonymous said...

If I'm not mistaken, an increase in the interest rate spread between Japan and most other (western) developed nations, and the ready availability of yen to borrow, should make the so-called 'yen carry trade' even sweeter. Something seems really fishy here -- es stinkt irgendwie...

2:09 AM  
Blogger jmf said...


that´s unfortunately true. just look at the yen last week.

a bloodbath!

on the other side there is maybe a reversal when the fed has to lower rates.... in theory the carry trade would be less profitable...

but i think in reality the incentive is still too tempting :-(

here is a good one on this issue from the economist

2:44 AM  
Anonymous Anonymous said...

Danke für das Link.

But it appears to be truncated, and doesn't work.

Perhaps this is the story you meant?

3:25 AM  
Blogger jmf said...


here is the correct one

3:43 AM  

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