Browsing all articles tagged with policymakers
Jun
1

Record Unemployment Low Inflation Highlight Europe’s Pain

Unemployment has reached a new high in the euro zone and inflation remains well beneath the European Central Bank’s target, pacing pressure on EU leaders and the ECB for action to stimulate the bloc’s sickly economy.

Joblessness in the 17 nation currency area climbed to 12.2 percent in April, EU statistics office Eurostat stated on Friday spoting a new record since the data series began in 1995.

With the euro zone in its greatest recession since its creation in 1999, consumer price inflation was far lower the ECB’s target of just below 2 percent, coming in at 1.4 percent in May slightly higher then April’s 1.2 percent rate.

That augment may quieten concerns regarding deflation, however the deepening unemployment crisis is a threat to the social fabric of the euro zone. Almost two-thirds of young Greeks are not capable to find work exemplifying southern Europe’s lost generation.

Policymakers and economists including Germany’s finance minister Wolfgang Schaeuble have stated the greatest menace to the unity of the euro zone is now social collapse from the crisis, rather than market-driven factors.

In France, Europe’s second biggest economy, the number of jobless rose to a record in April while in Italy the unemployment rate hit its highest level in at least 36 years, with 40 percent of young people out of work.

Thousands of demonstrators from the anti-capitalist Blockupy movement cut off access to the ECB in Frankfurt on Friday to protest against policymakers handling of Europe’s debt crisis.

Some economists suppose the ECB, which meets on June 6 will have to go beyond an additional interest rate cut and consider a US style money printing program to breathe life into the economy.

Nick Matthews, a senior economist at Nomura International in London said we do not expect a strong recovery in the euro zone. It puts pressure on the ECB to deliver even more conventional and non conventional measures.

May
4

ECB Cuts Interest Rates, Open to Further Action

The European Central Bank cut interest rates for the first time in 10 months on Thursday and held out the likelihood of further policy action to hold up the recession hit euro zone economy.

Responding to a fall in euro zone inflation well below its target level and growing unemployment, the ECB lowered its main rate by a quarter percentage point to a record low 0.50 percent.

Mario Draghi, ECB President promising to provide as much liquidity as euro zone banks require well into coming year and to help smaller companies get access to credit, also indicated that some policymakers had pushed for a bigger cut.

He told a news conference after the ECB’s Governing Council met in Bratislava, there was a very, very strong existing consensus towards an interest rate cut. Within that, there was a prevailing consensus for a cut of only 25 basis points.

The ECB was also technically prepared to cut its deposit rate from the current zero percent into negative territory, meaning it would begin charging banks for holding their money overnight.

Such a move could encourage the banks to lend out money rather than hold it at the ECB, although it would also almost certainly have a big impact on banks own operations and major implications for funding and bond markets.

Draghi said the ECB could cope with these, a departure from his prior statements.

There are several unintentional consequences that may stem from this measure, we will address and cope with these consequences if we make a decision to act. And we will again look at this with an open mind and we placed ready to act if needed.

Acknowledging that, the ECB stated it would prime banks with as much liquidity as they need until at least July 2014 and look at ways to enhance lending to smaller companies, which are the lifeblood of Europe’s economies however have been starved of credit in many countries.

Apr
11

President Barack Obama Tax Plan Opening Gambit in Potential Tax Rewrite

Obama on Wednesday revitalized a list of his favorite tax thoughts, hopeful to raise $580 billion in new revenues from the wealthy over a decade in a potential opening strategy to forge a deal with Congress to renovate the tax code.

Although certain not to move forward all together, his 2014 budget proposal has elements likely to spur discussion including a proposal to tax derivatives more strictly, as lawmakers weigh a tax code restore and face a limit on the government’s debt limit this summer.

Chris Krueger, an analyst at Guggenheim Partners stated that these are all opening bids in any possible grand negotiate, so from that perspective they are significant.

Congressional Republicans mostly blasted the Democratic president’s budget proposal, weighing the difficulty policymakers have had forging a long-term deficit cutting plan.

Obama’s budget does not seek to lift individual tax rates as he has proposed in prior budgets. For years, he sought to elevate rates on household income over $250,000.

Republicans and Obama agreed during previous year’s fiscal cliff battle to elevate rates for households earning more than $450,000 a year, to 39.6 percent from 35 percent.

Obama’s budget also recommended a new Buffett tax, a minimum tax rate for the rich named for investor Warren Buffett, that stage in a minimum 30 percent tax rate on household income over $1 million.

The bid renew Obama’s offer previous year to Republican House of Representatives Speaker John Boehner during the discussion to avoid the so-called fiscal cliff of looming tax hikes.

The budget also reprized a proposal to limit tax breaks between wealthier taxpayers, opening at household income of roughly $250,000, limiting the value of deductions and loopholes in determining taxable income. A phased-in limit on deductions is now part of the tax code for more wealthy taxpayers.

The new cap would apply to the same list of breaks proposed in previous years , including the charitable tax break and the exception for municipal bond interest.

One encounter Obama proposed to fight once more is over the estate tax, pitching to lift it to 45 percent for estates worth over $3.5 million, following a deal to cap it in January at 40 percent for estates over $5 million.

Mar
2

Ben Bernanke Said Premature Fed Recoil could short Course recovery

Ben Bernanke, the chairman of the Federal Reserve stated on Friday that pulling back on violent policy measures too rapidly would create a real risk of damaging a still delicate recovery.

There has been some dissimilarity within the Fed of whether the US central bank’s bond buying program, which is planned to push down long term interest rates should be segmented out.

Jeremy Stein, Fed Board Governor argued recently there were symbols of overheating in some financial markets and that the central bank should believed in using monetary policy to address such risks if they continue.

The Fed chief Ben Bernanke was not convinced, saying that even for the reason of financial stability, a persistence of the central bank’s aggressive incentive, conducted through purchases of mortgage securities and Treasury, leftovers the best approach.

Bernanke said in remarks, in light of the reasonable pace of the recovery and the sustained high level of economic loose, dialing back adjustment with the goal of preventing extreme risk taking in some areas poses its own risks to development, financial stability, price stability.

In reaction to the financial crisis and deep recession of 2007-2009, the Fed not only cut official rates to effectively zero, however also bought more than $2.5 trillion in assets in an effort to keep long term rates low. Still economic growth leftovers submissive and is expected to register just 2 percent this year, although the jobless rate remains high at 7.9 percent currently.

Bernanke said premature rate boost would carry a high risk of short circuiting the revival, perhaps leading ironically enough to an even longer time of low long term rates.

He illustrious that a stimulative monetary policy was simply a reaction to economic conditions, rather than any effort to keep rates unnaturally low to inflate asset prices

Policymakers are cognizant of potential risks to financial stability, although indicating a preference for employing authoritarian and supervisory tools to mitigate any potential fallout from the Fed’s low rate policy.

 

 

Mar
1

High jobless, Low inflation rate Demonstrate euro crisis impact

Inflation dropped in the euro zone in February and joblessness climbed to an all time high, stress the impact of the federation debt crisis.

The EU’s statistics office Eurostat said on Friday that the 17 nation’s shared currency annual inflation rate was 1.8 percent in February, approximately the ECB’s target of below however close to 2 percent and by more than expected.

Eurostat said that the January’s unemployment rate temporarily increased to 11.9 percent in the bloc, climbed from 11.8 in December with another 201,000 people out of work.

The somber economic circumstances will possibly consider on the ECB’s Governing Council when it gathered on March 7, as only a alternative of economists see any early move to cut the bank’s standard rate below the current 0.75 percent, consumer prices are no longer an concerned.

Sarah Hewin, head of European research at Standard Chartered said that the inflation is just not a concern, it is not a cause why policymakers would be uncertain to cut interest rates.

They could shift as early as coming week, however there’s an element of the ECB wanting to keep its powder dry as we go into an uncertain Cypriot debt and political situation with Italy the question to be resolved.

Although the sluggish pace of price boost may make it easier for Europeans to buy clothing and food, it is little relieve to the record 19 million people unemployed in the euro zone.

Three years of crisis have determined major euro zone economies such as Spain and Italy, into a crushing recession, with businesses not capable to obtain the financing they need to increasing and citizens unable to earn sufficient to spend with confidence.

Generally joblessness also masks a large divide, with only 5 percent unemployment in Austria compared with 27 percent in Greece.