US Fed Steadfast on Inflation
ECB Resolutely Hawkish
BOJ A Matter of Time
US Fed Steadfast on Inflation
The FOMC minutes clarified that inflation is the banks primary concern, but will it be too late by the time growth takes center stage?
From the October FOMC Meeting Minutes:
All members agreed that the risks to achieving the anticipated reduction in inflation remained of greatest concern?Members noted that a significant amount of data would be published before the next committee meeting in December, giving the committee ample scope to refine its assessment of the economic outlook before judging whether any additional firming was needed to address those risks?All participants emphasized that the risks around the desired downward path to inflation remained to the upside. Released November 15, 2006
William Poole, St. Louis Federal Reserve Bank President
Inflation expectations are well controlled ... I believe that the outlook for Fed policy is roughly symmetrical. I can imagine data coming in that would make me want to tighten policy. And I could imagine data coming in that would lead me to believe that we ought to be easing policy. November 15, 2006
I am happy that it came in a 1/10th (of a percent) ... That was good news?I would not say that number means we are out of the woods on inflation ... (It is) another scrap of news that is in the right direction. November 17, 2006
Michael Moskow, Chicago Federal Reserve Bank President
As reflected in the minutes of the October meeting, all Federal Open Market Committee members agreed that inflation risks remained the dominant concern. 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. But that decision will depend on how the incoming data affect the outlook. November 16, 2006
It's a bit premature for anyone to say that we have 'broken the back' of inflation. It's moving in the right direction; they key is whether that can be sustained and how quickly we can move to rates that are in a range that is commensurate with price stability. We're certainly not there now. November 17, 2006
Mr. Rato may believe so:
Rodrigo Rato, International Monetary Fund Managing Director
What we see right now is certainly not a sharp deceleration of the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />US economy although a risk of an abrupt deceleration of the US economy is certainly one of the risks the world economy is facing now. November 20, 2006
ECB Resolutely Hawkish
Despite weakening inflation, central bankers are set to hike rates to 3.50% in December:
Jean-Claude Trichet, European Central Bank President
There are risks that must be taken into account if we want this dynamic growth to continue and be sustainable. We have certainly the risk that inflation could create an environment which would not permit sustainable growth. November 20, 2006
Lucas Papademos, European Central Bank Vice-President
We are now in a situation where strong vigilance is of the essence and where risks to price stability are, overall, on the upside. November 17, 2006
Nicholas Garganas, European Central Bank Council Member
Monetary policy undoubtedly remains expansionary despite the rate increases of the past 12 months?The conclusion of our monetary policy analysis is quite clear: it points to inflation risks. November 20, 2006
Klaus Liebscher, European Central Bank Governing Council Member
When asked if there is still a need for vigilance given the latest inflation readings: There is no reason to change this assessment ... the results (for inflation) are volatile. They (interest rates) are low, by any measurements they are low, and they again are no hindrance for economic growth and non-inflationary growth especially. November 17, 2006
However, European politicians feel they should be a bit more cautious:
Jacques Chirac, French President
I am very respectful of the independence of the European Central Bank but I wish all the same that everyone would be able to give his views on the way in which European monetary policy is conducted. November 16, 2006
BOJ A Matter of Time
Central bankers have been highly evasive regarding the question of rate hike timing, while fiscal officials seem anxious to hold the benchmark steady:
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Toshihiko Fukui, Bank of Japan Governor
I would not eliminate any timing, because we do not pre-set future monetary policy action. If we conclude that a rate hike is necessary after having made a thorough assessment of economic fundamentals and price trends, it would not make any difference if we did it in December, January or even later. Overall, we do not see any need from the recent set of weak economic data to reassess our view shown in the recent economic outlook report. Since a positive correlation of production, income and spending is at work, the possibility is high that Japan will see a long-lasting recovery. As the output gap no longer exists, the year-on-year rate of change in consumer prices is projected to continue to follow a positive trend going forward. November 16, 2006
If such tendency in the domestic economy, gradual and steady growth on stabilized prices, would be maintained with no obstacles, the BoJ will gradually adjust interest rates while cautiously keeping eyes on various risks in the future. I reported (to the G20) so. November 20, 2006
Toshiro Muto, Bank of Japan Deputy Governor
At this point of time, the question tends to be whether it (the rate hike) is going to be in December or not. But we have not specified any timing, including December?It's completely open. November 21, 2006
Koji Omi, Japanese Finance Minister
The economy overall is on a sound-footing. The recovery led by private demand is continuing?We need to keep monitoring how developments in foreign countries will affect Japan?I want the BOJ to continue supporting the economy with policy, though individual policy decisions are up to the central bank. November 14, 2006
Hiroko Ota, Japanese Economics Minister
The lack of rises in wages might be behind this. I'm watching consumption with concern. I don't think the economy will fall into a recession. But we need to be cautious over consumption and also on a possible inventory adjustment in the IT-related sector?I want the BOJ to support the economy through monetary policy. November 14, 2006
