Rate Hikes on the Horizon

Published July 25th, 2006 - 01:24 GMT

ECB: Strong Vigilance

25 basis points appear to be in the cards on August 3rd

From <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />France to Germany to Portugal?

 Dominique de Villepin, French Prime Minister

"Economic growth is firmly in place in France. We have relaunched public investment and made the lives of businesses easier." July 20, 2006

 Joaquin Almunia, EU Commissioner for Economic and Monetary Affairs

"After four years in breaching the stability and growth pact, Germany is finally on track to correct its excessive budget deficit." July 19, 2006

 Vitor Constancio, ECB Board Member

Said that borrowing costs in the region are still low and the European economy is growing more than some time ago. July 17, 2006

With all of the upside risks, it seems the ECB has little choice...

 Nicholas Garganas, ECB Board Member

It is absolutely essential to act without delay, if the data warrant ? [growth] has been quite buoyant. Everything goes pretty much as we had expected, and I expect real GDP around potential for the remainder of the year and perhaps a little above potential with the output gap narrowing somewhat. July 21, 2006

I would say the recent jump in oil prices, and the geo-political situation have worsened. We have seen, of course, rapid money and credit growth, the highest for a number of years, so I would have thought these are the main risks that have increased recently." July 21, 2006

 Lorenzo Bini Smaghi, ECB Executive Board Member

"The case for a policy adjustment becomes more and more relevant as it is increasingly risky to assume that market forces alone can foster the necessary adjustment without a significant cost to the world economy." July 19, 2006

Oil: Dangerous Times<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Rising oil prices inflict pain not only on the US, but also globally, and the situation appears to be getting worse?

 Ben Bernanke, Federal Reserve Chairman

"The increase in energy prices is clearly making the economy worse off both in terms of real activity and in terms of inflation. There is no question about it." July 21, 2006

 Richard Lugar, Chairman of the US Senate Foreign Relations Committee

"Venezuela's leverage over global oil prices and its direct supply lines and refining capacity in the US give Venezuela undue ability to impact US security and our economy. July 21, 2006

 Ali Naimi, Saudi Arabia's Oil Minister

"The Organization of Petroleum Exporting Countries wanted to avoid raising prices in a way that might affect the global economy. OPEC is concerned about the stability in the international market." July 24, 2006

 Christian Noyer, Governor at the Bank of France

"The increase in the price of oil is bad for the world economy. July 24, 2006

 Jim Rogers, Co-founder of George Soros's Quantum hedge fund

Unless somebody discovers something very quickly and very accessibly, we're all going to be dumbfounded at how high the price of oil will go, including me, and goes on to say oil prices will reach $100 a barrel, possibly this year. July 24, 2006

PBoC: Coming From All Sides

The Central Bank is being encouraged to increase flexibility by just about everyone.

From MPC Members?

 Yu Yongding, PBoC MPC member

"China should implement measures to address its surging current and capital account surpluses." July 24, 2006

To Academics?

 Xia Bin, Director of the DevelopmentResearchCenter of the ChineseState Council

"I think exchange rate flexibility should be increased, and widening the trading band should be the first consideration." July 21, 2006

 Xie Fuzhan, Deputy Director of the DevelopmentResearchCenter of the ChineseState Council

"I think the yuan trading band should be expanded at an appropriate level in a bid to increase the exchange rate's flexibility." July 24, 2006

 Liu Lida, Director of Monetary Policy Research for the PBoC

"The central bank will wait and see whether the signs of a slowing trend evident in the June economic indicators continues or not. If not, the central bank will take stronger measures." July 24, 2006

Theres Even Foreign Persuasion?

 Timothy Adams, US Treasury Undersecretary for International Affairs

If we're going to give China or any other country?greater weight in the IMF, then they need to take their responsibilities in that institution seriously, and they need to play by the rules as they're laid out. July 24, 2006

Membership has its rewards; it also has its responsibilities?The Chinese have been very good about not asking for a quota increase for the very reason that they know we'll ask for more movement on the currency. July 24, 2006

BOJ: The First Step

Following the Banks decision to end ZIRP, the hawks and doves became more clearly defined?

The Hawks

 Toshihiko Fukui, Governor at the Bank of Japan

"Today, we took the first but important step in the process of normalizing interest rate levels, which will also be good for the Japanese economy." July 14, 2006

 Kaoru Yosano, Japanese Economic and Fiscal Policy Minister

"Ending zero rates is the first step towards normalizing the financial system, with lenders to gain interest for their money and borrowers to pay a cost for it. July 18, 2006

The Doves

 Heizo Takenaka, Japanese Internal Affairs Minister

"The BOJ must explain its monetary policies, and it must take responsibility for the results, July 16, 2006

 Toshiro Muto, Deputy Governor at the Bank of Japan

"The market's focus now seems to be the timing of the next rate hike, but I can only say that we will conduct monetary policy by carefully examining economic and price moves.  July 21, 2006

"The Bank of Japan will take its time with future increases in interest rates, and current accommodative credit conditions are likely to stay for now." July 21, 2006


You may also like