BOE 5.00% in November?
US Fed A Mixed Bag
BOJ Cautiously Optimistic
ECB - Moderating Outlooks
Oil Fear of Falling Prices
BOE 5.00% in November?<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Todays release of higher than expected core CPI and RPI highlight central bank concerns about underlying price pressures:
Mervyn King, Bank of <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />England Governor
The direct impact was seen in the producer price data published yesterday, and will be seen in CPI inflation over the coming months -- making it less likely that I will have to write an explanatory letter to the Chancellor than was the case two months ago -- although the anticipated fall in inflation for September may not persist for long?Given the uncertainties about the supply potential of the economy, we will need to keep our eye on the ball and monitor closely the evolution of wage and cost pressures. It is still not clear that earnings have been sufficiently restrained to accommodate the past rises in energy prices and the fall over the past year in the price of our exports relative to our imports without a squeeze on profits. October 11, 2006
Sir John Gieve, Bank of England Deputy Governor
We are determined to do whatever is necessary to bring [CPI] back to target over the next year or two, [sending a] strong signal to wage-setters. October 11, 2006
Timothy Besley, New Bank of England MPC Member
The commitment to keep inflation close to the 2.0 percent CPI target rate has helped limit second round effects in wages and prices. But it is still important to keep a careful eye on possible second round effects in wages and prices. October 12, 2006
People are now looking at monetary aggregates. That's something I'm thinking hard about. I'm trying to take a view about how this could play out. The recent growth in M4 could ultimately have an impact on the economy. October 12, 2006
The Monetary Policy Committee must be pretty cautious in giving too much weight to the latest statistic (Q2 GDP). We've got to look at the big picture. October 11, 2006
Andrew Sentence, New Bank of England MPC Member
The chances of inflation rising above 3% has fallen slightly, [receding from] 50-50...Short-term we're probably close to the capacity limits. It's possible that longer term developments could take place that would allow us to get to lower unemployment...[M4 growth] is a risk, an amber light...[The biggest risk to the U.K. economy at the moment] is the risk that if we have continuing inflation above the target it is a factor in wage increases...On the downside, the U.S. economy is the major worry at the moment [but] it doesn't seem a massive risk. October 12, 2006
US Fed A Mixed Bag
Hawks sounding off:
Jeffrey Lacker, Richmond Federal Reserve Bank President
Inflation is likely to moderate over the near-term, but there is some uncertainty as to how long that will take. Should inflation persist around the current elevated level, firmer monetary policy would be required to restore price stability. As a result, I believe policy-makers will need to remain quite vigilant in the period ahead to ensure that inflation moderates at a sufficient pace. October 12, 2006
Michael Moskow, Federal Reserve Bank of Chicago President
Taking all of the factors into account, my current assessment is that the risk of inflation remaining too high is greater than the risk of growth being too low. Thus, some additional firming of policy may yet be necessary to bring inflation back to a range consistent with price stability in a reasonable period of time. October 13, 2006
Over the next year or so I expect the economy to expand, on average, somewhat below its long-run sustainable growth rate -- which many economists estimate as roughly 3% per year. October 13, 2006
While some remain on the fence:
Richard Fisher, Dallas Federal Reserve Bank President
I'm very comfortable with the policy of where we are today?If it appears that we haven't done enough to quell inflation, then obviously I would be in favor of additional measures. October 11, 2006
But the usually hawkish Mr. Poole retreats into dove territory with Dr. Bies:
William Poole, St. Louis Federal Reserve President
If we came to the conclusion that the economy was really running in the direction that the bond market is currently predicting, then it seems to me that considering rate cuts is going to be highly appropriate?If all the news breaks on the downside ... then I would be an advocate of at some point, and I don't know when it is going to happen, at some point, reducing rates. October 12, 2006
Susan Schmidt Bies, Federal Reserve Governor
Now that many investors perceive that (house) prices have peaked... they are trying to sell, so excess demand is becoming excess supply. But at this point we still think it's fairly orderly. We feel very good because banks' earnings are very strong and capital is very strong, so it provides a good foundation to absorb any changes in the housing market. October 11, 2006
BOJ Cautiously Optimistic
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Governor Fukui remains hawkish while Mr. Omi continues to tout the apparent end of deflation:
Toshihiko Fukui, Bank of Japan Governor
If I am asked whether or not there is any chance for another rate hike before the end of this year, I would say I do not rule this out. But we do not manage the (monetary) policy by presetting a specific timing (for any future policy action), and we are completely open to any possibility. October 13, 2006
Since the economy has just moved out of difficulties, we will make adjustments to interest rates cautiously and slowly while checking on economic growth from every angle. October 12, 2006
Koji Omi, Japanese Finance Minister
I don't mean to intervene in each step of the BOJ's policy actions. All I want is for the bank to continue to support the economy with the proper policy?The economy is recovering steadily at the moment. I can't say for sure whether it will remain so, but I'm not much concerned about the future?My view is that we cannot really describe the current price conditions as deflation in the traditional sense. If you look at the price moves and economy as they stand now, they don't really fit with that definition. October 13, 2006
Yen weakness seems to be a concern, but fiscal authorities could find relief via the diversification of central bank reserves in Russia:
Hiroko Ota, Japanese Economics Minister
The yen is pretty weak in real terms at the moment, but as long as the reasons are temporary, the effect shouldn't be large. October 10, 2006
Alexei Ulyukayev, Bank of Russia First Deputy Chairman
We are thinking about diversification (of our FX reserves) and want to broaden the number of currencies in which we are allowed to invest assets. Recently we have included the yen. He adds that the amount currently invested in the yen is close to zero but the bank will try to increase it to several percent. October 16, 2006
ECB - Moderating Outlooks
Jean-Claude Trichet, European Central Bank President
Since 1996 the annual growth rate in the euro area has averaged 2.1 percent per year compared with 3.4 percent in the US, reflecting a particularly mediocre euro area growth potential. The lack of sufficient structural reform in Europe is, in my view, a major cause of the difference in the rate of economic growth in Europe compared with the US and with some other advanced industrialized economies, and of the fall in potential output growth in Europe. October 16, 2006
Joaquin Almunia, EU Monetary Affairs Commissioner
As I have communicated to the finance ministers in Luxembourg this week I think that the European economy is in a clear recovery this year. And even if there are some downside risks for next year, I think that we will continue to be in an economic recovery next year. October 12, 2006
There is a general consensus ... that in the course of 2007 we will have a slight slowdown in the European economy as the global economy is supposed to slow down in 2007 and it is up to the monetary authority to draw all kinds of conclusions?I don't think the European Central Bank has made up its mind as regards the profile of monetary policy in 2007. October 12, 2006
Jean-Claude Juncker, Euro Group Chairman
The euro zone is growing at a satisfactory pace, which is close to potential. October 12, 2006
Guy Quaden, European Central Bank Council Member
For next year, I think that any speculation about our monetary policy stance is absolutely premature?there is currently a high level of uncertainty and volatility for many economic variables, for instance the oil prices. October 11, 2006
Oil Fear of Falling Prices
The last time OPEC reduced output was in December 2004, when oil traded just above $40/bbl:
OPEC Forecast
Uncertainties about global economic prospects particularly in the USA, slowing demand growth, rebounding non-OPEC supply and high stock levels have triggered a strong bearish sentiment in the market?This has led to some concern that the downward momentum might persist, causing prices to overshoot and fall below levels justified by fundamentals. October 16, 2006
Edmund Daukoru, OPEC President
The time to do something is... now because we don't know where the floor of this drop will end. It would be foolish to wait till it gets to $10 before we do anything because that would really kill the capacity initiatives. October 16, 2006
Chakib Khelil, Algerian Energy and Mines Minister
All the countries are in agreement to contribute to reduce OPEC production by 1 million barrels and we will make our official announcement at our next meeting in Doha, from Oct 18-21. October 16, 2006
Those outside of OPEC are thinking quite differently:
Claude Mandil, International Energy Agency Executive Director
I am surprised OPEC is worried about the level of prices. Of course, (prices) have fallen significantly over the past month, but they had reached completely absurd levels. October 16, 2006
