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(GBP) Bank of England Minutes 4th and 5th February 2009

Reserve Bank of Australia
Minutes of the Monetary Policy Meeting of the Board

Sydney - 3 February 2009

Members Present

Glenn Stevens (Chairman and Governor), Ric Battellino (Deputy Governor), Ken Henry AC (Secretary to the Treasury), John Akehurst, Jillian Broadbent AO, Roger Corbett AO, Graham Kraehe AO, Donald McGauchie AO, Warwick McKibbin

Others Present

Guy Debelle (Assistant Governor, Financial Markets), Malcolm Edey (Assistant Governor, Economic)

David Emanuel (Secretary), Anthony Dickman (Deputy Secretary)

International Economic Conditions

Board members noted that indicators of spending and business activity that had become available in recent weeks had weakened sharply in both developed and emerging economies. The global slowdown was highly synchronised, suggesting a common economic shock. The collapse of Lehman Brothers, with the ensuing financial turmoil, had been associated with a sharp fall in confidence and spending. The IMF had recently again revised down its forecasts for the world economy. The G7 economies were now forecast to contract by 2 per cent in 2009, with the rest of the world forecast to grow well below trend; if realised, the forecast for world growth of 0.5 per cent in 2009 would be the weakest year since World War II. The largest forecast revisions on this occasion had been for some of the smaller Asian economies, which to date had shown relatively good growth. Read the rest of this entry »

European Market Update: European sovereign spreads rise on Eastern European concerns; Russian Industrial Production slumps

tradethenews.com

*** ECONOMIC DATA ***

- (SP) Swedish Dec House Transactions: -26.0 % v -35.6% prior

- (SW) Swedish Jan Avg House Prices: SEK1.924M v SEK1.789M prior

- (NO) Norwegian Jan Trade Balance: NOK v NOK28.9Be

- (TU) Turkey Jan Consumer Confidence: 71.6 v 69.9 prior

- (TU) Turkey Nov Unemployment Rate: 12.3% v 10.9% prior, highest since 2005

- (HU) Hungary Dec Final Industrial Output M/M: -15.1% v -14.6% prior; Y/Y: -23.3% v -23.3% prior

- (RU) Russia Industrial Production M/M: -19.9% v 3.8% prior; Y/Y: -16.0% v 12.0%e Read the rest of this entry »

US Market Update

tradethenews.com

Dow -152 S&P -15 NASDAQ -14

- The surprisingly positive US advanced retail sales data has failed to aid equity trade in the early going, as investors fix on the worsening unemployment numbers and uncertainty over bailout and stimulus plans. Although the 1.0% increase in retail sales was the biggest rise since November 2007, many are dismissing the uptick as a dead cat bounce fueled by panic discounting. And last week’s jobless claims data was revised to 631K, making it the highest reading since October 1982. To top it all off, the large than expected decline in December Business inventory data suggests more downside for the Q4 GDP revision set for Feb 27. Treasury markets are marginally higher on the soft equity action. The Long bond yield is sitting just below 3.5% ahead of this afternoon’s $14B 30-year auction results. Read the rest of this entry »

Minneapolis Federal Reserve President Gary Stern spoke at the Capital City Partnership Annual Meeting in St. Paul, Minnesota on Thursday, offering a sliver of hope that actions by the Federal Reserve could help stabilize the financial markets.

Although the economy is likely to remain in recession for at least two more quarters, Stern predicted that healthy growth would return by the middle of 2010.

`In view of the state of the credit markets and of the housing sector, it seems a fair bet that it will take time for momentum to build,` he said in prepared remarks. `But with the passage of time - as we get into the middle of 2010 and beyond - I would expect to see a resumption of healthy growth.`

While he noted that it `remains unclear` if additional steps will be needed, Stern stated he is `guardedly optimistic` that the correct actions have been taken to boost liquidity in financial markets. Read the rest of this entry »

The Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association released a report to Treasury Secretary Timothy Geithner Wednesday, in which it discussed the need for additional funding.

The report claimed that the latest steepening in the yield curve may be a by-product of the Treasury`s outsized funding needs in 2009-2010.

Those outsized funding needs, the report said, reflect the dismal outlook for economic growth and Congress and the Administration`s efforts to bolster the economy through policy action.

The deterioration in the budget outlook, the report continued, combined with expenditures associated with the TARP, potential FDIC guarantees, and expected additional stimulus spending have increased private forecasts for total funding needs of the government for fiscal year 2009 to approximately $2 trillion. Read the rest of this entry »

The Federal Reserve announced Tuesday that it is extending the term of several lending facilities as well as swap lines with foreign central banks for an additional six months as credit markets remain strained. The extension through October 30th, 2009 adds a half year from the original expiration date of April 30th, 2009, `in light of continuing substantial strains in many financial markets,` the Federal Reserve said in a statement.

The bevy of lending facilities established over the past year plus represents a push from the nation`s policymakers to think outside the box in addressing what many argue is the greatest financial crisis since the Great Depression. The extension of the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), the Commercial Paper Funding Facility (CPFF), the Money Market Investor Funding Facility (MMIFF), the Primary Dealer Credit Facility (PDCF), and the Term Securities Lending Facility (TSLF) through October 30th will help credit markets as they struggle through the financial crisis. Read the rest of this entry »

STATEMENT BY GLENN STEVENS, GOVERNOR
MONETARY POLICY

At its meeting today, the Board decided to reduce the cash rate by a further 100 basis points, to 3.25 per cent, effective 4 February 2009.

There was a significant deterioration in world economic conditions late in 2008. The effects on household and business confidence of the financial turmoil following Lehman’s collapse, and continuing strains on major financial institutions, saw a significant downturn in demand around the world. As a result, the major advanced economies contracted sharply in the December quarter, as did a number of emerging market economies. The Chinese economy, though still growing, has slowed markedly. Global inflation, having reached high rates during the middle of 2008, is now declining. Read the rest of this entry »

Dallas Federal Reserve President Richard Fisher cautioned Monday that protectionist tendencies are dangerous, calling them the `crack cocaine` of economics.

Speaking on C-Span, Fisher addressed a proposed congressional fiscal stimulus law that would offer `Buy America` provisions in an effort to encourage the purchase of domestic goods. However, such provisions are dangerous, Fisher warned.
`Protectionism is the crack cocaine of economics … (it) leads to economic death,` he said.

`We just cannot afford to go down that path,` Fisher added. Read the rest of this entry »

Monday, French Finance Minster Christine Lagarde said that she would be very surprised if the economy grows in the current year.

Lagarde noted that the French economy contracted sharply in the fourth quarter of 2008 and the slowdown is expected to continue in the first quarter of 2009.

The minister also revealed that the government would be revising its outlook for 2009 from the current 0.2%-0.5% growth.

Further, the minister said the number of unemployed in December 2008 would be up by around 45,000. The European Commission had said in its interim forecast that the rate of unemployment is expected to increase to 9.8% in the current year and to 10.6% in the next year. Read the rest of this entry »