The IMF has wound up its latest inspection of the US economy - the so-called Article IV consultation - and has messages for the Fed and the government. The International Monetary Fund's executive board says deficit reduction has been "excessively rapid" and at the same time stresses that in order to minimise financial market volatility, the Federal Reserve must be clear about when and how it will exit its loose monetary policy stance. The assessment is available here. Highlights (with our own bolding up of key phrases, not the IMF's) from the Executive Board Assessment: Executive Directors welcomed the improvement in the underlying conditions of the U.S. economy, which bodes well for a gradual acceleration of growth, while noting that the balance of risks to the outlook remains tilted to the downside. Directors generally concurred that the fiscal deficit reduction in 2013 is excessively rapid, and that the automatic spending cuts (“the sequester”) not only reduce growth in the short term but could also lower medium-term potential growth. They stressed the importance of adopting a comprehensive and back-loaded medium-term plan entailing lower growth in entitlement spending and higher revenues. Together with a slower pace of deficit reduction in the short run, this fiscal strategy would help sustain global growth, place the U.S. fiscal position on a sustainable path over the medium term, and support the reduction of global imbalances... Directors broadly agreed that accommodative monetary policy continues to provide essential support to the recovery, but cautioned that its financial stability implications should be carefully assessed... Directors noted that the Federal Reserve has a range of tools to manage the normalization of monetary policy, but that there are significant challenges involved in unwinding accommodation, including risks of market reactions leading to excessive interest rate volatility that could have adverse global implications. They stressed that effective communication on the exit strategy and a careful calibration of its timing will be critical for reducing these risks.
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Wednesday, July 31, 2013
The IMF has wound up its latest inspection of the US economy - the so-called Article IV consultation - and has messages for the Fed and the government. The International Monetary Fund's executive board says deficit reduction has been "excessively rapid" and at the same time stresses that in order to minimise financial market volatility, the Federal Reserve must be clear about when and how it will exit its loose monetary policy stance. The assessment is available here. Highlights (with our own bolding up of key phrases, not the IMF's) from the Executive Board Assessment: Executive Directors welcomed the improvement in the underlying conditions of the U.S. economy, which bodes well for a gradual acceleration of growth, while noting that the balance of risks to the outlook remains tilted to the downside. Directors generally concurred that the fiscal deficit reduction in 2013 is excessively rapid, and that the automatic spending cuts (“the sequester”) not only reduce growth in the short term but could also lower medium-term potential growth. They stressed the importance of adopting a comprehensive and back-loaded medium-term plan entailing lower growth in entitlement spending and higher revenues. Together with a slower pace of deficit reduction in the short run, this fiscal strategy would help sustain global growth, place the U.S. fiscal position on a sustainable path over the medium term, and support the reduction of global imbalances... Directors broadly agreed that accommodative monetary policy continues to provide essential support to the recovery, but cautioned that its financial stability implications should be carefully assessed... Directors noted that the Federal Reserve has a range of tools to manage the normalization of monetary policy, but that there are significant challenges involved in unwinding accommodation, including risks of market reactions leading to excessive interest rate volatility that could have adverse global implications. They stressed that effective communication on the exit strategy and a careful calibration of its timing will be critical for reducing these risks.
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In the history, the Bank of England insists its role in an episode that "still rankled for some time" after 1940 but was "widely misunderstood".
The Nazis invaded Czechoslovakia in September 1938. In March the following year, the Bank of International Settlements (BIS) asked the Bank of England to switch £5.6m-worth of gold from an account for the Czech national bank to one belonging to the Reichsbank.
Much of the gold - nearly 2,000 gold bars - was then "disposed" of in Belgium, Holland and London. The BIS was chaired at the time by Bank of England director, German Otto Niemeyer.
A survey by the British Chambers of Commerce (BCC) found that almost two-thirds of companies want to remain in the European Union but for “specific powers” to be transferred back to Westminster.
In a boost for the Prime Minister, 77pc of those polled also backed a referendum on EU membership.
David Cameron has pledged to hold a referendum in 2017 if the Conservatives win the next election. Although the majority of businesses supported the plan for a vote, they were fairly evenly split over whether to hold it sooner or wait.
Some 43pc said the referendum should be held only after negotiations within Brussels on the future structure of the EU have run their course, while 34pc called for an earlier vote.
John Longworth, director general of the BCC, said: “The status quo is not an option. Ministers must pursue reform and renegotiation as a priority
“These results show that British businesses remain determined to see a recalibrated relationship between the UK and the rest of the European Union, with more powers exercised from Westminster rather than Brussels.”
The BCC surveyed nearly 4,000 businesses and found that 61.4pc wanted to remain in the EU but to take back powers. Some 53.6pc warned that a full withdrawal from Europe would have a “negative business and economic impact”. However, the figure is slightly lower than in the BCC’s last report three months ago, when 60pc cautioned against full withdrawal.
Companies have previously expressed concerns that the promise of a referendum would create uncertainty and damage investment. Mr Longworth said the findings proved that “there is impatience amongst a significant number of companies for greater clarity on the UK’s position”.
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