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Is UK quantitative easing working?

“Quantitative easing (QE)” is an important task: the need to make monetary policy effective when interest rates are close to zero. The world’s leading central banks, including the Bank of England, have taken such actions. But is UK policy working? Yes, but not quite enough. The argument about quantitative easing is polarised: some critics wail about [...]

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E-learning interactive graphic: Central banks compared

A central bank, reserve bank, or monetary authority is a country’s primary monetary authority. Central banks usually have responsibility for issuing currency, administering monetary policy, holding member banks’ deposits, facilitating the nation’s banking industry, and acting as a lender of last resort to the banking sector during times of financial crisis (private banks often being [...]

Snippets

• 09 Mar. Federal Deposit Insurance Corp. Chairman Sheila Bair outlined three points which must be part of any financial regulatory overhaul, but said market incentives must also be realigned to make credit markets function properly over the long term: 1) Ending “too big to fail” 2) Plugging gaps in regulation 3) New consumer protections “Fixing regulation can only accomplish so much,” she said. “Rules and regulations can help constrain our ‘animal spirits,’ but unless economic incentives are also appropriately aligned, regulation alone will fail.” (more...) #
• 09 Mar. The European Commission will seek fundamental reform of the management of economic policy in the eurozone, including the co-ordination of fiscal policy, as it draws up details of a future European Monetary Fund. The proposed EMF will go beyond the creation of a pot of money that would bail out errant members of the eurozone, such as Greece. The talks over the launch of such a fund will form part of a wider package of reforms that would enable Brussels to co-ordinate economic and fiscal policy among eurozone states. The Commission will deliver a proposal “over the next two to three months. It wants preventive as well as corrective measures to pre-empt the disastrous accumulation of public debt by a member state, as well as to build an institution that might co-ordinate remedial action, such as a bailout. #
• 09 Mar. Several ranking members of the Senate Banking Committee have reached a tentative consensus on a plan that would strip the Fed of regulatory powers over all but the largest banks, those with more than $100 billion in assets. The plan would remove Fed oversight from all but 23 of the 4,974 bank holding companies, which have a collective $16.7 trillion in assets, and from 874 state-chartered member banks that are members of the Fed system and that have a total of $1.7 trillion in assets. The vast majority of the bank holding companies would be overseen by a regulatory agency formed from a merger of the Office of the Comptroller of the Currency, which oversees national banks, and the Office of Thrift Supervision, which regulates savings and loans, the individuals said. Regulation of the state banks would go to the Federal Deposit Insurance Corporation, which already oversees about 5,000 banks that are not part of the Fed system. #
• 08 Mar. The Fed pumped more than $1 trillion dollars into the economy quickly, but it plans to take it out glacially, said Brian Sack, who runs the markets group at the New York Fed. The Fed is on course to own more than $1.25 trillion worth of mortgage backed securities by the end of March. As the economy improves it wants to reduce those holdings, but officials don’t want to do it in a jarring way. Sack noted that some of these holdings will run off naturally. By the end of 2011, more than $200 billion worth of mortgage securities mature or will be prepaid by borrowers. Sack noted that another $140 billion worth of Treasury securities mature by the end of 2011. Right now the Fed is reinvesting cash it gets as Treasury securities mature, but it could decide to let those securities run off too, shrinking its balance sheet even more. “With this approach, the FOMC would be shrinking its balance sheet in a gradual and passive manner,” he said. “That, in my view, is a crucial message for the markets. #
• 06 Mar. House Financial Services Committee Chairman Barney Frank (D., Mass.) suggested on Bloomberg Television on Friday he might kill the financial regulatory overhaul moving through Congress if efforts to create new consumer financial protection powers aren’t tough enough. Frank passed a bill through the House of Representatives in December that would create a new Consumer Financial Protection Agency to write and enforce new financial product rules. Senate lawmakers are looking to create a new consumer protection “watchdog,” likely within an existing agency. Frank has said he wouldn’t support the creation of such a watchdog within the Federal Reserve, which is what some Senators are leaning towards doing. #