Central Banks on the Offensive?

是 否 +2 论坛币

k人 参与回答

经管之家送您一份

应届毕业生专属福利!

求职就业群

赵安豆老师微信：zhaoandou666

经管之家联合CDA

送您一个全额奖学金名额~ !

立即领取

感谢您参与论坛问题回答

经管之家送您两个论坛币！

+2 论坛币

It looks like a coordinated offensive: on September 6, the EuropeanCentral Bank outlined a new bond-buyingprogram, letting markets know that there were no pre-set limits to itspurchases. On September 13, the United States Federal Reserve announced that inthe coming months it would purchase some $85 billion of long-term securitiesper month, with the aim of putting downward pressure on long-term interestrates and supporting growth. Finally, on September 19, the Bank of Japandeclared that it was adding another ¥10 trillion ($128 billion) to itsgovernment securities purchase program, and that it expected its total holdingsof such paper to reach about $1 trillion by end-2013.

There is, indeed, room for such concertedaction, as the outlook for all three economies has deteriorated significantly.In the eurozone, GDP will certainly decline in 2012, and forecasts for nextyear are mediocre at best. In the US, outputcontinues to expand, but at a moderate 2%pace; and, even leaving aside the fiscalcliff looming at the end of the year, when Congress will be forced to imposespending cuts and allow tax cuts enacted in 2001 to expire, recovery remains at risk. In Japan,the global slowdown and a stronger yen are hitting the export sector, growth isflagging, and inflation is close to zeroagain.

The reality, however, is that there is no common stance,let alone a common plan. In the strongest of the three economies, the Fed iswillingly risking inflation by pre-announcing its intention to keep the federalfunds rate at exceptionally low levels “at least through mid-2015.” In theweakest of the three, by contrast, the ECB has no intention of boosting growththrough quantitative easing or interest-rate pre-commitments. On the contrary,the ECB is adamant that the only aim of its“outright monetary transactions” (OMT)program, which will buy distressed eurozone members’ government paper,conditional on agreed reforms, is to contain the currency-redenomination risk that contributes to elevatedinterest rates in southern European economies. The goal is to restore a degreeof homogeneity within the euro area in termsof the transmission of monetary policy. All of its asset purchases will be sterilized, meaning that their monetary-policyeffects will be offset.

Furthermore, given the controversy that its announcement of the OMTprogram has incited in Germany – not least with the Bundesbank – the ECB would certainly bediscouraged from pursuing any Fed-like effort to push for lower interest ratesalong the yield curve. To ward off anoffensive by German (and other) monetary hawks, who maintain that the ECB hasopened the door to debt monetization, theBank is bound to err on the side of orthodoxy in the coming months. The more itsunconventional initiatives to repair the euro are contested, the more orthodoxthe ECB will be in its conduct of monetary policy.

This discrepancy between the US and Europeis not good news. For the eurozone, it implies a strong exchange rate vis-à-visthe dollar (and, by implication, the yen, as the Bank of Japan closely monitorsthe yen-dollar exchange rate). But countries in southern Europe, especially Spain, need thesupport of a weak currency to rebalance externally and return tocurrent-account surpluses. Absent thishelping hand from the exchange rate, all southern European rebalancing willneed to take place internally through domesticdeflation, which in turn risks jeopardizing their return to public-debtsustainability. So the way out of the European conundrum– currency depreciation – risks being blocked by the market’s perception thatthe ECB and the Fed are at odds overmonetary policy.

True, crises in problem countries and doubts about the euro’s viabilitycould weigh on the common currency’s value. But it is worrying that thesolution to Europe’s internal imbalances hinges on the continued unfavorable perception ofthe eurozone’s ability to address its problems.

Seen from the rest of the world, things are not much better. GuidoMantega, the Brazilian finance minister, was quick to dismiss the Fed’s stance,again warning of “currency wars.” This reading overlooksthe fact that currencies throughout the emerging world oughtto appreciate vis-à-vis those of the advanced economies, simply becausethe emerging countries do not face the same economic challenges. The US,Europe, and Japan are all burdened by high levels of public and private debt,and are caught in long, painful, and hazardousdeleveraging cycles that render recoveries feebleand vulnerable. By contrast, emerging economies suffer from a downturn, buttheir situation is fundamentally sounder, which should be reflected in thevalue of their currencies.

Unfortunately, the combination of aggressive easing in the US and a much more guardedattitude in Europe obfuscatesthe message. It suggests that the issue for the global economy is that the US is trying tofind a way to inflate its problems away. That may be true, but it should not bepermitted to obscure the underlying structural problem that the world economyis facing.

The recent moves by the ECB, the Fed, and the BoJ look like concertedaction. Sadly, just the opposite is true.

扫码加我 拉你入群

请注明：姓名-公司-职位

以便审核进群资格，未注明则拒绝

分享0 收藏0 回帖

关键词：offensive central Banks cent Offe supporting purchase putting growth limits

It looks like a coordinated offensive.on September 6, the European Central Bank outlined a new bond-buying program. On September13, the United States Federal Reserve announced that in the coming months itwould purchase some $85 billion of long-term securities per month.on September 19, the Bank of Japan declared that itwas adding another ¥10 trillion ($128 billion) to its government securitiespurchase program.(seemingly coordinated.)
The reality, however, is that there is no common stance, let alone a common plan.In the strongest of the three economies, the Fed iswillingly risking inflation by pre-announcing its intention to keep the federalfunds rate at exceptionally low levels “at least through mid-2015.” In theweakest of the three, by contrast, the ECB has no intention of boosting growththrough quantitative easing or interest-rate pre-commitments.On the contrary, the ECB is adamantthat the only aim of its “outright monetarytransactions” (OMT) program is to contain the currency-redenomination risk that contributes to elevatedinterest rates in southern European economies.
This discrepancybetween the US and Europe is not good news. For the eurozone, it implies astrong exchange rate vis-à-vis the dollar.True, crises in problem countries and doubts about the euro’s viabilitycould weigh on the common currency’s value.But it is worrying that the solution to Europe’sinternal imbalances hinges on the continuedunfavorable perception of the eurozone’s ability to address its problems.(acctually opposite)
Unfortunately, the combination of aggressive easing inthe US and a much more guarded attitude in Europeobfuscates the message. It suggests that theissue for the global economy is that the US is trying to find a way toinflate its problems away. That may be true, but it should not be permitted toobscure the underlying structural problem that the world economy is facing