Manualillos for a crisis (1)
least create many problems .... Monetary policy
"They endanger the economy the policy differences of the ECB and the Fed? And the divergence
can also disappear if the U.S. economy and the United Kingdom continue to improve in the coming months
05/05/2011 - 08:11 "They endanger the economy the policy differences of the ECB and the Fed?
"The dichotomy between monetary policy in the Eurozone and the United States may undermine the stability monetary? This question is asked by analysts at Franklin Templeton. And while the European Central Bank (ECB) was the first to move interest rates do not appear to have negative effects, especially considering that the lead agency Jean Claude Trichet continues to maintain the quantitative easing policy.
central banks joined together to pursue a similar monetary policy, where the fiscal front was sacrificed. However, experts now advocate a gradual normalization of interest rates. For
Emerging nations like China and India have been tightening monetary policy for some time, like Australia and Norway and other European countries such as Sweden and Poland.
The trend towards tightening interest rates opened in the euro area, when the ECB raised interest rates a quarter point to 1.25% on 7 April, separating itself from the Bank of England and Fed
Franklin Templeton analysts point out that interestingly, the Fed seems to have the same concerns about inflation and the Europeans. The Fed Chairman, Ben Bernanke, recently showed that the rise in CPI in the U.S. is due to rising energy prices and raw materials and time is largely a reflection of events in the Middle East continued growth in emerging markets, and should not lead to a general inflation problem.
However, the minutes of the March 15 Open Market Committee (FOMC) could not reach unanimity on this point, some members expressed their belief that economic development could justify a shift to less accommodative monetary policy.
In this sense, analysts remain concerned at the apparent divergence in monetary stance, and that could have a destabilizing effect on world economic prospects if it continues. However, according to Franklin Templeton, the divergence may not be as pronounced as it seems at first sight. While the ECB has been the first of the three major central banks to raise interest rates has continued to participate in a quantitative easing
by providing short-term liquidity to banks in the euro area according to their needs.
and the divergence can also disappear if the economies U.S. and the United Kingdom continue to improve in the coming months. In this sense, the end of quantitative easing program of the Fed in June 2011 could be an interesting turning point.
So any attempt by the Fed to reduce its balance-something that could be done in several ways by draining reserves through money market operations, the decision not to reinvest the proceeds of the bonds to maturity, or
even by selling the stock of Treasury bonds purchased as part of the quantitative easing program, could pass an increase in interest rates.