US Fed - Surprisingly Hawkish
BoJ Where Do They Stand on Deflation?
ECB - 3.50% Before 2007?
Oil Mixed Messages
US Fed - Surprisingly Hawkish<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Some central bankers have been sounding particularly tough on inflation:
Ben Bernanke, US Federal Reserve Bank Chairman
I would estimate that slowing housing construction will probably take about a percentage point off growth in the second half of this year and probably something going into next year as well?The inflation rate is still above what we would consider price stability. We do believe inflation is going to be coming down gradually over time, but it's something we have to watch very carefully to make sure that it doesn't rise or even remain where it is. October 5, 2006
Donald Kohn, US Federal Reserve Vice Chairman
Don't sell the Fed's concern about inflation short. He noted that there are a lot of uncertainties on both sides," of official growth and inflation forecasts, and highlights that he is surprised" at how little market participants seemed to share this sense. October 5, 2006
Charles Plosser, Philadelphia Federal Reserve President
There remains some risk that policy is not yet firm enough to ensure a return to price stability over a reasonable time horizon. We need to remain vigilant and recognize that maintaining the current stance of policy, or even firming further, may be in the best interests of the economy's long-run performance. October 6, 2006
Sandra Pianalto, <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Cleveland Federal Reserve President
The bottom line is that you cannot achieve long-run growth without price stability. In many, if not most, cases this is true in the short run as well. October 6, 2006
However, we also saw surprisingly dovish comments from a typical hawk:
William Poole, St. Louis Federal Reserve President
The decline in long rates is working as a built-in stabilizer for the economy. Mr. Poole also noted that the fall in bond market rates will tend to bring down mortgage rates as well. If we get an upside surprise, the long rate clearly has a lot of room to rise without the FOMC doing anything. October 9, 2006
BoJ Where Do They Stand on Deflation?
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Politicians are sounding more hawkish than central bankers nowadays, however, monetary policy is not up to fiscal authorities:
Toshiro Muto, Bank of Japan Deputy Governor
About the timing of monetary policy changes, we don't have any preset idea. If economic developments move in line with our forecasts in the April (semi-annual) outlook report, there is a high possibility that the current very low interest rates will be maintained for a while. October 5, 2006
Shinzo Abe, Japanese Prime Minister
We are coming out of a long tunnel of stagnation and the end of deflation has come into sight as a result of reforms. Thanks to structural reforms, the current economic recovery is entering its fifth year and its time span is about to match that of the 'Izanagi' boom. October 4, 2006
Koji Omi, Japanese Finance Minister
If you look at things frankly, it's better for us to declare the end of deflation. Many people are hung up on watching each and every economic indicator, but we can say the overall economic condition is getting better?I have doubts about holding off from making a declaration because of specific economic indicators. The economy has improved so much?I think they (the BOJ) will conduct appropriate policy by looking at overall economic and price conditions. October 3, 2006
Hiroko Ota, Japanese Economics Minister
As regards the Tankan, the result confirmed the strength of sentiment, but the forecast numbers showed a decline, so we need to monitor developments in the US economy and IT production ahead of the year-end shopping season. October 3, 2006
The current status of the economy is that good corporate profits are trickling down into household income, boosting domestic demand. I expect the economy to continue to recover on domestic demand?The end to deflation is in sight. But we need to keep watching for the risk of the economy falling back into deflation. October 5, 2006
The yen's effective exchange rate has fallen to its lowest level since the 1980s, and it is true that is supporting the economy. October 6, 2006
ECB - 3.50% Before 2007?
Officials remain highly optimistic regarding Euro-zone growth:
Jean-Claude Trichet, European Central Bank President
If our assumptions and baseline scenario are confirmed, it will remain warranted to further withdraw monetary accommodation. October 5, 2006
The current level seems to me to be appropriate. Given the overall risks that weigh on the economy from the point of view of inflation, we thought it was necessary to go to 3.25%. There are (inflation) risks. We mustn't wait for the risks to materialize because once they have materialized it's a bit like toothpaste -- once it's out of the tube it's difficult to get it back in. So we mustn't wait for the materialization of these risks. October 6, 2006
I replied yesterday, I think in a manner which was clear to everyone at my press conference, when I said that I did not want to change current expectations for rates between now and the end of the year. I think everyone understood and I will not say any more than this. October 6, 2006
Luc Coene, Belgian National Bank Deputy Governor
There are still further rate increases to come. October 9, 2006
Nout Wellink , European Central Bank Governing Council Member
The economy is really coming back on track?The composition of the growth rate is strong ... based on domestic demand and we see a kind of dynamism also on the back of oil prices that are a little bit lower than they were in the past. October 5, 2006
Jean-Claude Juncker, Luxembourg Prime and Finance Minister
I don't think that the VAT increase in Germany (in 2007) will have as huge an impact as people think. October 9, 2006
Oil Mixed Messages
OPEC officials have discussed cutting production of oil, which would effectively create a floor price for the commodity:
Edmund Daukoru, OPEC President
We are toying with the possibility of having an emergency meeting. October 5, 2006
I think there is more or less consensus for 1 million barrels per day (cut in production). October 9, 2006
Sheikh Ali al Jarrah al Sabah, Kuwaiti Energy Minister
We are currently in negotiations with fellow OPEC members. Matters have been left that these voluntary reductions undertaken by some OPEC countries will calm the markets, at least for the current period. October 5, 2006
We accept cutting production depending on market needs, in order to safeguard the stability of the market, and said OPEC ministers are studying a cut of between 700,000 barrels per day and 1 million barrels per day. October 9, 2006
Chakib Khelil, Algerian Energy and Mines Minister
Said that eleven OPEC members have agreed to cut production and that the agreement was in reaction to the fall in oil prices. Mr. Khelil also said there is a possibility of holding an emergency meeting on October 18 and 19, but there is no consensus yet on this proposal and added that the oil market is not really believing that OPEC is serious. October 9, 2006
Comments from the Saudi Ambassador to the US greatly conflict with OPECs view:
Prince Turki al-Faisal, Saudi Ambassador to the US
Saudi Arabia has always had in its mind not just big consumers but more importantly also had in mind poorer countries. It is our concern to bring down prices to reasonable levels. October 4, 2006
