Deeper Analysis
Looking Back at the Plaza and Louvre Currency Accords
October 21, 2010
A meeting of G20 finance ministers this Friday and Saturday in South Korea has conjured up special interest in the Plaza Accord of September 22, 1985 and the Louvre Accord of February 22, 1987. Both agreements constituted efforts to shift currency market momentum. The dollar became very overvalued in the first half of the 1980s […] More
New Overnight Developments Abroad - Daily Update
Euro Up Despite Geithner Remarks
October 21, 2010
U.S. Treasury Secretary Geithner reiterated that the dollar is fairly valued against the yen and euro. Nonetheless, the euro hit $1.4052 today versus a low of $1.3698 yesterday and on balance is 0.5% stronger than Wednesday’s close. The dollar also eased 0.4% against the Canadian dollar, and 0.1% relative to the yen, Australian dollar, and […] More
Central Bank Watch
Brazilian Key Interest Rate Left Unchanged at 10.75%
October 20, 2010
Brazil’s monetary policy committee, COPOM, retained a 10.75% Selic rate, matching analyst expectations and the result of its prior meeting on August 31. Previously, the Selic rate was lifted by 75 basis points on April 28, another 75 bps on June 9, and 50 bps on July 21. The Central Bank of Brazil targets inflation […] More
Central Bank Watch
Dovish Tones in Bank of England and Fed Reports
October 20, 2010
It has become gospel in central banking circles that important policy changes must be communicated clearly in advance in order to produce desired market reactions. Minutes from the Bank of England’s October 6-7 meeting and the Fed’s report on regional economic conditions, known as the Beige Book, constitute an education of the public to anticipate […] More
Central Bank Watch
Bank of Canada Unveils a More Subdued Inflation Forecast
October 20, 2010
The Bank of Canada’s October Monetary Policy Report elaborates on the assertion in yesterday’s interest rate statement that the global and Canadian recoveries have entered a “new phase” with more gradual rates of growth than envisaged three months ago. The evolution of projected Canadian GDP growth over the past four quarterly policy reports is as […] More
Central Bank Watch
Thailand Monetary Policy Not Changed This Time
October 20, 2010
The program of interest rate normalization, as at some other regional central banks, was paused in Thailand, but a statement accompanying today’s decision to leave the one-day repo rate at 1.75% said more rate hikes would be coming and attributed today’s decision to greater uncertainty surrounding global economic and financial prospects since the previous policy […] More
New Overnight Developments Abroad - Daily Update
Investors Less Uncomfortable about China’s Rate Hike
October 20, 2010
In a catch-up move to yesterday’s blood-letting in other markets, Japan’s Nikkei lost 1.7%, and stocks fell by 0.9% in Hong Kong, 0.7% in Australia, 0.6% in Sri Lanka and India, 0.5% in New Zealand and 0.4% in Singapore and Indonesia. However, a rise of 0.6% in Chinese equities had a calming effect, and stocks […] More
Deeper Analysis
Comment on Price Targeting
October 19, 2010
One idea reportedly being explored at the Federal Reserve would be to target a general price level. Many central banks target inflation, which is the rate of change, or first derivative, in a general price index. The Fed is not one of them, but the desired pace of price change has been informally expressed by […] More
Central Bank Watch
Bank of Canada Keeps 1.0% Target Interest Rate and Releases Dovish Statement
October 19, 2010
Canadian monetary policy tightening was paused as expected after three consecutive 25-basis point increases of the overnight target rate implemented June 1, July 20 and September 8. Projected growth in real GDP was revised down to 3.0% for 2010 from forecasts of 3.5% made in July and 3.7% made six months ago. The growth projection […] More
Central Bank Watch
People’s Bank of China Lifts Key Interest Rates: First Move of Cycle
October 19, 2010
China’s one-year lending rate and one-year deposit rate were raised by 25 basis points each, effective October 20, to 5.56% and 2.5%, respectively. This first rate increase since December 10, 2007 is subject to varying inferences. Enhancing the state of confusion over today’s action, Chinese central bank officials over the past month had been expressing […] More
