Despite holding rates steady on August 31st, central bankers have been extremely hawkish in their commentary...
Jean-Claude Trichet, ECB President
Commented that it was essential to anchor inflation expectations and that the central bank would adopt a posture of strong vigilance on prices. August 31, 2006
Said dangers to the economy include the possibility of second-round effects on wages and prices of past oil price increases and the improving labor markets. September 1, 2006
Lorenzo Bini-Smaghi, ECB Executive Board Member
Said that if the forecasts for growth and inflation are realized, it will be necessary to make further upward adjustments to avoid building up too much liquidity. He also added, that only by keeping inflation low can long-term interest rates be kept at current levels. September 5, 2006
Other officials seem to agree that European growth remains strong?
Thierry Breton, French Finance Minister
French economic growth should come in at the top of the government's 2-2.5% target this year. September 4, 2006
Frank-Juergen Weise, President of the German Labor Office
Labor market conditions remain favorable in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Germany. Unemployment is declining, employment and those jobs liable to social welfare contributions are rising, and the number of vacancies is high. August 31, 2006
However, the Euro-zones largest economy may face roadblocks with a tax increase set to take effect in 2007?
Peer Steinbrueck, German Finance Minister
Explained that while his country's VAT increase from 16% to 19% will of course have an impact on growth, possibly also on inflation, the effect won't be as dramatic as some people think because the economy has a lot of tailwind. August 31, 2006
While comparing monetary policy to a soccer game, he said: "The economy is gaining momentum...Now the referee is decisive - if he makes a mistake [acts too restrictively] and shows an unnecessary red card, he risks de-motivating the players, bringing down the level of the game?In the end, a central bank is doing its job well when no-one notices that it is there, upholding stability and allowing the players, economic agents, to play out their capabilities. September 4, 2006
US Fed: Dissent in the Committee
The Fed Chairman has remained quiet on monetary policy?
Ben Bernanke, Federal Reserve Bank Chairman
A reasonable estimate is that productivity growth should continue at something like the level we saw between '95 and 2000 - that is at a healthy level - and that will promote increased potential output. September 1, 2006
However, the sole dissenter on August 8th finally commented on his decision?
Jeffrey Lacker, President of the Richmond Federal Reserve
I dissented because I thought we needed to bring inflation down more rapidly than would otherwise be the case without a move at that meeting. The risk of raising rates at that meeting for lower real growth was not appreciable and?I didn't think real growth moderating, as it's likely to over the next couple of quarters, was going, by itself, to bring inflation. August 31, 2006
Other members sound placated for the time being?
William Poole, President of the St. Louis Federal Reserve
Most recent readings suggest inflation may be tapering off?If, putting all the information together, it looks like the inflation risks are not receding as we all want them to, then I think you should anticipate?a policy position that says we're going to have to maintain rates at a higher level than would otherwise be the case?whether that means we stay where we are or whether it means we have further increases, I can't tell you. September 1, 2006
But some recognize housing market risk?
Richard Fisher, President of the Dallas Federal Reserve
On the national level, recent data indicate that housing markets weakened further in mid-summer? We are monitoring the effect this will have on the economy with due respect for its gravity. August 30, 2006
PBoC: Pressure Continues to Mount for Yuan Appreciation
After the IMF announced an increase in voting power for China, the foundation joined officials worldwide by pressing the country to accelerate currency reform and let the markets determine the yuans value?
Rodrigo Rato, IMF Managing Director
It is in China's interests to implement more forcefully the exchange regime it gave itself last year and let market forces determine things in China in a more clear way, certainly the value of the currency?it is clear right now what we see is not the need for a new system but the implementation of the system that was agreed." September 1, 2006
Sadakazu Tanigaki, Japanese Finance Minister
Commenting on the IMF announcement, he said: Japan has been at the forefront in calling for this kind of move so it's noteworthy that the talks have progressed to a point where the IMF came up with such a detailed plan ahead of the Singapore meeting. September 1, 2006
Zeng Qinghong, Chinese Vice-President
"The build-up in foreign exchange reserves has on the one hand boosted China's ability to fend off risks but on the other hand, it has intensified pressure for a CNY appreciation. September 4, 2006
Ben Bernanke, US Federal Reserve Bank Chairman
We believe that the chance of a Chinese economic crisis is very low for the foreseeable future?However, we do not entirely discount the possibility of a 'hard landing,' in the form of significantly slower growth, as authorities attempt to reduce investment growth from its current rapid pace?They have taken some steps to try to encourage consumption. However, they still have not allowed a substantial appreciation of the CNY, a step that many analysts argue would be the most effective way to address the imbalances in the economy. August 30, 2006
Zhang Liqun, Economist with the ChinaStateCouncilDevelopmentResearchCenter
We need to realize gradual changes in the exchange rate as well as gradual adjustments in policies towards trade and the use of foreign investment. September 4, 2006
Jean-Claude Trichet, ECB President
Commented that it was essential to anchor inflation expectations and that the central bank would adopt a posture of strong vigilance on prices. August 31, 2006
Said dangers to the economy include the possibility of second-round effects on wages and prices of past oil price increases and the improving labor markets. September 1, 2006
Lorenzo Bini-Smaghi, ECB Executive Board Member
Said that if the forecasts for growth and inflation are realized, it will be necessary to make further upward adjustments to avoid building up too much liquidity. He also added, that only by keeping inflation low can long-term interest rates be kept at current levels. September 5, 2006
Other officials seem to agree that European growth remains strong?
Thierry Breton, French Finance Minister
French economic growth should come in at the top of the government's 2-2.5% target this year. September 4, 2006
Frank-Juergen Weise, President of the German Labor Office
Labor market conditions remain favorable in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Germany. Unemployment is declining, employment and those jobs liable to social welfare contributions are rising, and the number of vacancies is high. August 31, 2006
However, the Euro-zones largest economy may face roadblocks with a tax increase set to take effect in 2007?
Peer Steinbrueck, German Finance Minister
Explained that while his country's VAT increase from 16% to 19% will of course have an impact on growth, possibly also on inflation, the effect won't be as dramatic as some people think because the economy has a lot of tailwind. August 31, 2006
While comparing monetary policy to a soccer game, he said: "The economy is gaining momentum...Now the referee is decisive - if he makes a mistake [acts too restrictively] and shows an unnecessary red card, he risks de-motivating the players, bringing down the level of the game?In the end, a central bank is doing its job well when no-one notices that it is there, upholding stability and allowing the players, economic agents, to play out their capabilities. September 4, 2006
US Fed: Dissent in the Committee
The Fed Chairman has remained quiet on monetary policy?
Ben Bernanke, Federal Reserve Bank Chairman
A reasonable estimate is that productivity growth should continue at something like the level we saw between '95 and 2000 - that is at a healthy level - and that will promote increased potential output. September 1, 2006
However, the sole dissenter on August 8th finally commented on his decision?
Jeffrey Lacker, President of the Richmond Federal Reserve
I dissented because I thought we needed to bring inflation down more rapidly than would otherwise be the case without a move at that meeting. The risk of raising rates at that meeting for lower real growth was not appreciable and?I didn't think real growth moderating, as it's likely to over the next couple of quarters, was going, by itself, to bring inflation. August 31, 2006
Other members sound placated for the time being?
William Poole, President of the St. Louis Federal Reserve
Most recent readings suggest inflation may be tapering off?If, putting all the information together, it looks like the inflation risks are not receding as we all want them to, then I think you should anticipate?a policy position that says we're going to have to maintain rates at a higher level than would otherwise be the case?whether that means we stay where we are or whether it means we have further increases, I can't tell you. September 1, 2006
But some recognize housing market risk?
Richard Fisher, President of the Dallas Federal Reserve
On the national level, recent data indicate that housing markets weakened further in mid-summer? We are monitoring the effect this will have on the economy with due respect for its gravity. August 30, 2006
PBoC: Pressure Continues to Mount for Yuan Appreciation
After the IMF announced an increase in voting power for China, the foundation joined officials worldwide by pressing the country to accelerate currency reform and let the markets determine the yuans value?
Rodrigo Rato, IMF Managing Director
It is in China's interests to implement more forcefully the exchange regime it gave itself last year and let market forces determine things in China in a more clear way, certainly the value of the currency?it is clear right now what we see is not the need for a new system but the implementation of the system that was agreed." September 1, 2006
Sadakazu Tanigaki, Japanese Finance Minister
Commenting on the IMF announcement, he said: Japan has been at the forefront in calling for this kind of move so it's noteworthy that the talks have progressed to a point where the IMF came up with such a detailed plan ahead of the Singapore meeting. September 1, 2006
Zeng Qinghong, Chinese Vice-President
"The build-up in foreign exchange reserves has on the one hand boosted China's ability to fend off risks but on the other hand, it has intensified pressure for a CNY appreciation. September 4, 2006
Ben Bernanke, US Federal Reserve Bank Chairman
We believe that the chance of a Chinese economic crisis is very low for the foreseeable future?However, we do not entirely discount the possibility of a 'hard landing,' in the form of significantly slower growth, as authorities attempt to reduce investment growth from its current rapid pace?They have taken some steps to try to encourage consumption. However, they still have not allowed a substantial appreciation of the CNY, a step that many analysts argue would be the most effective way to address the imbalances in the economy. August 30, 2006
Zhang Liqun, Economist with the ChinaStateCouncilDevelopmentResearchCenter
We need to realize gradual changes in the exchange rate as well as gradual adjustments in policies towards trade and the use of foreign investment. September 4, 2006
