<![CDATA[Hedgehogs.net: Ken Yeadon's connections' blogs]]> http://www.hedgehogs.net/pg/blog/keny/friends/?view=rss http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11451700/pakistan-cuts-rate-100-bps-revises-down-inflation-fcast Sat, 24 Jan 2015 17:03:09 +0000 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11451700/pakistan-cuts-rate-100-bps-revises-down-inflation-fcast <![CDATA[Pakistan cuts rate 100 bps, revises down inflation f'cast]]>     Pakistan's central bank cut is policy rate by a further 100 basis points to 8.50 percent, citing improving macroeconomic conditions, declining inflation, rising foreign exchange reserves and a contained fiscal deficit.
    The State Bank of Pakistan (SBP), which cut its rate by 50 basis points in November, revised down its forecast for average consumer price inflation to 4.5 - 5.5 percent for fiscal 2015, which ends on June 30, well below the bank's target of 8.0 percent.
    Due to lower inflation, economists expected the SBP to cut its rate by at least 50 basis points.
    Inflation is expected to fall further from current levels due to lower oil prices and subdued inflation expectations, according to Governor Ashraf Mahmood Wathra.
    Pakistan's inflation rate rose slightly to 4.3 percent in December from 3.96 percent in November.
    However, the SBP added that the "speed and intensity" of the fall in inflation could lead to expectations of low inflation and thus induce additional consumption. But as long as the additional impact on aggregate demand remains in line with supply, inflation is likely to remain low.
    The SBP said the government's containment of its deficit "thus far is also encouraging and bodes well for the credibility of consistent and coherence policies of the government and for the continuation of official and private capital inflows."

    SBP's reserves are projected to continue to rise on proceeds from privatization and official flows - the International Monetary Fund's (IMF) program remains on track - but the central bank cautioned that a lack of private inflows could pose a risk of a sustainable improvement in the balance of payments position.
    The SBP noted that net private direct and portfolio investments were merely 1.8 percent of Gross Domestic Product at the end of fiscal 2014 compared with exports of 10.2 percent, adding that "policies and reforms to attract foreign direct investment should be the top priority."
 
    The State Bank of Pakistan issued the following statement:


"The State Bank of Pakistan has decided to reduce the policy rate by 100 basis points from 9.5 percent to 8.5 percent effective from 26th January 2015. This was announced by the Governor SBP, Mr. Ashraf Mahmood Wathra while unveiling the Monetary Policy Statement (MPS) for the next two months at a press conference held at SBP head office, Karachi. The decision was taken during a meeting of the Central Board of Directors of SBP held under his chairmanship in Karachi today.

Mr. Wathra said that some of the key macroeconomic indicators had improved further since the last Monetary Policy decision of November 2014. “CPI inflation and its expectations continue to follow a downward trajectory. In the last two months of November and December 2014, trade deficit has declined, though it has increased in H1-FY15 when compared to H1-FY14. Moreover, considerable foreign exchange inflows have contributed in maintaining an upward trajectory in foreign exchange reserves.”

According to Governor SBP, containment of fiscal deficit thus far is also encouraging and bodes well for the credibility of consistent and coherent policies of the government and for the continuation of official and private capital inflows. With these positive developments, first half of the current fiscal year ended on a better macroeconomic outlook for the remaining months of FY15.

Mr. Wathra termed the decline in inflation broad based since both food and non-food inflation were declining. The deceleration in the former is mainly the result of better supply conditions, while the latter is explained by a combination of factors including plummeting international oil price as well as decline in other global commodity prices; lagged impact of earlier conservative monetary policy stance and moderating aggregate demand; and stable exchange rate, he added.

He told the audience that the SBP has revised downwards its forecast range for average CPI inflation to 4.5 – 5.5 percent for FY15, well below the annual target of 8 percent.

Referring to international oil price decrease, Mr. Wathra said that through its expected favorable impact on trade balance, it contributed in improving the external sector outlook in recent months. In addition to this, successful completion of fourth and fifth review under IMF’s EFF and issuance of International Sukuk have also contributed to improvement in overall balance of payment position. “In effect, these developments have been instrumental in improving sentiments in the foreign exchange market and have supported SBP in its reserve building efforts," he added.


With IMF program on track and expected proceeds from privatization and official flows, the net SBP reserves are projected to increase further. “However, non realization of planned privatization proceeds and lack of private inflows could pose risks in achieving a sustainable BoP position.”

Mr. Wathra said that fiscal deficit was contained despite substantial increase in interest payments in Q1-FY15 and government borrowing from SBP remained below the agreed targets. As government managed to contain expenditures related to PSEs, it increased the development spending compared to last year. However, growth in FBR revenue collection moderated due to downward adjustment in petroleum prices and slowdown in large-scale manufacturing. Going forward, overall expenditures could increase due to higher security related expenditures. This along with expected shortfall in FBR revenues may make meeting the fiscal deficit target challenging.

According to Governor SBP, the credit to private sector uptake during H1-FY15 is lower than the level witnessed during the same period last year. “This slowdown in credit growth could be attributed to both demand and supply side issues such as weak corporate profitability of major industries till September 2014, shift in government borrowings away from SBP to commercial banks amid slower deposit growth, challenging security situation, falling commodity prices, and continued energy/gas shortages for the industry. However, the momentum of credit off-take is likely to pick up with the realization of the lagged impact of November 2014 policy rate cut.”

Mr. Wathra informed the audience that the interbank market remained tight almost throughout H1-FY15, despite the cut in policy rate, adding that, in Q2-FY15, while pressures in FX market eased substantially, government shifted its borrowing from SBP to the commercial banks. “The continued decline in inflation retained scheduled banks’ appetite for investment in long-term securities in the Q2-FY15 as the expectation of further cut in interest rate strengthened. Going forward, the realization of expected external inflows is likely to reduce the budgetary borrowing requirements from scheduled banks and improve liquidity conditions in money market.” 

      www.CentralBankNews.info


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11451700
http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11451535/armenia-raises-rate-100-bps-inflation-expectations-high Fri, 23 Jan 2015 19:53:07 +0000 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11451535/armenia-raises-rate-100-bps-inflation-expectations-high <![CDATA[Armenia raises rate 100 bps, inflation expectations high]]>     Armenia's central bank raised its benchmark refinancing rate by a further 100 basis points to 9.50 percent due to continued high inflationary expectations in in financial markets and economic agents despite slower economic growth toward the end of last year.
    The Central Bank of Armenia (CBA), which raised its rate in December 2014 by 175 basis points to head off inflationary pressures from a rapid depreciation of its dram currency after cutting rates earlier in the year, said in a statement from Jan. 22 that the move was decided at an extraordinary board meeting on Jan. 21.
    In addition to raising its refinancing rate, the CBA cut the Lombard rate by 300 basis points to 17 percent, noting that foreign exchange market pressures were easing. In December the CBA had raised the Lombard rate by 175 basis points.
    The board's regular meeting is scheduled for Feb. 10 when it will also publish its first quarter monetary policy report.
    Armenia's inflation rate rose to 4.6 percent in December from 2.59 percent in November. The cBA targets inflation of 4.0 percent, plus/minus 1.5 percentage points.
    Armenia's dram currency started tumbling in November, pulled down by the depreciation of the Russian ruble and the reduced inflow of remittances. Russia is Armenia's main trading partner.
    From Nov. 1 to Dec. 17, the dram fell by 16 percent against the U.S. dollar but since then its has bounced back, trading at 473 to the dollar today, up 0.5 percent since the start of the year but still down 13 percent since Nov. 1, 2014.

    Armenia's Gross Domestic Product expanded by an annual 5.3 percent in the third quarter of last year, up from 2.3 percent in the second quarter.
    The CBA said the "domestic economy eased somewhat by the end of 2014," a more pessimistic assessment that in December when it said economic growth in the fourth quarter was expected to be within the bank's target of 3.1-3.6 percent.
    On Dec. 30 the International Monetary Fund estimated that Armenia's GDP growth would slow to 2.6 percent in 2014 from 3.5 percent in 2013 but then pick up to 3.3 percent in 2015, helped by the central bank's policy easing in 2013/14 and stronger capital budget execution.

    www.CentralBankNews.info

 

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11451535
http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11451529/central-bank-news-link-list-jan-23-2015-denmark-ready-to-dump-kroner-on-market-to-tame-hedge-funds Fri, 23 Jan 2015 18:33:11 +0000 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11451529/central-bank-news-link-list-jan-23-2015-denmark-ready-to-dump-kroner-on-market-to-tame-hedge-funds <![CDATA[Central Bank News Link List - Jan 23, 2015: Denmark ready to dump kroner on market to tame hedge funds]]>
Here's today's Central Bank News' link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don't miss any important news.


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11451529
http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11451520/repeatecb-to-boost-asset-purchases-to-60-billion-euros-a-month Fri, 23 Jan 2015 17:53:15 +0000 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11451520/repeatecb-to-boost-asset-purchases-to-60-billion-euros-a-month <![CDATA[REPEAT-ECB to boost asset purchases to 60 billion euros a month]]>     (Following item is a repeat of a story issued on Jan. 22)
    The European Central Bank (ECB) will expand its asset purchase program to include "euro-denominated investment grade securities issued by euro area governments and agencies and European institutions in the secondary market," boosting its total monthly purchases to 60 billion euros.
    The ECB, which already purchases asset-backed securities and covered bonds in an attempt to boost demand and inflation, said the expanded purchase program will start in March and run through September 2016.
    ECB President Mario Draghi made the following statement at the ECB's press conference:

"Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. Let me wish you all a Happy New Year. I would also like to take this opportunity to welcome Lithuania as the nineteenth country to adopt the euro as its currency. Accordingly, Mr Vasiliauskas, the Chairman of the Board of Lietuvos bankas, became a member of the Governing Council on 1 January 2015. The accession of Lithuania to the euro area on 1 January 2015 triggered a system under which NCB governors take turns holding voting rights on the Governing Council. The details on this rotation system are available on the ECB’s website. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by the Commission Vice-President, Mr Dombrovskis.

Based on our regular economic and monetary analyses, we conducted a thorough reassessment of the outlook for price developments and of the monetary stimulus achieved. As a result, the Governing Council took the following decisions: 
First, it decided to launch an expanded asset purchase programme, encompassing the existing purchase programmes for asset-backed securities and covered bonds. Under this expanded programme, the combined monthly purchases of public and private sector securities will amount to €60 billion. They are intended to be carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term. In March 2015 the Eurosystem will start to purchase euro-denominated investment-grade securities issued by euro area governments and agencies and European institutions in the secondary market. The purchases of securities issued by euro area governments and agencies will be based on the Eurosystem NCBs’ shares in the ECB’s capital key. Some additional eligibility criteria will be applied in the case of countries under an EU/IMF adjustment programme. 
Second, the Governing Council decided to change the pricing of the six remaining targeted longer-term refinancing operations (TLTROs). Accordingly , the interest rate applicable to future TLTRO operations will be equal to the rate on the Eurosystem’s main refinancing operations prevailing at the time when each TLTRO is conducted, thereby removing the 10 basis point spread over the MRO rate that applied to the first two TLTROs. 
Third, in line with our forward guidance, we decided to keep the key ECB interest rates unchanged. 
As regards the additional asset purchases, the Governing Council retains control over all the design features of the programme and the ECB will coordinate the purchases, thereby safeguarding the singleness of the Eurosystem’s monetary policy. The Eurosystem will make use of decentralised implementation to mobilise its resources. With regard to the sharing of hypothetical losses, the Governing Council decided that purchases of securities of European institutions (which will be 12% of the additional asset purchases, and which will be purchased by NCBs) will be subject to loss sharing. The rest of the NCBs’ additional asset purchases will not be subject to loss sharing. The ECB will hold 8% of the additional asset purchases. This implies that 20% of the additional asset purchases will be subject to a regime of risk sharing. 
Separate press releases with more detailed information on the expanded asset purchase programme and the pricing of the TLTROs will be published this afternoon at 3.30 p.m. 
Today’s monetary policy decision on additional asset purchases was taken to counter two unfavourable developments. First, inflation dynamics have continued to be weaker than expected. While the sharp fall in oil prices over recent months remains the dominant factor driving current headline inflation, the potential for second-round effects on wage and price-setting has increased and could adversely affect medium-term price developments. This assessment is underpinned by a further fall in market-based measures of inflation expectations over all horizons and the fact that most indicators of actual or expected inflation stand at, or close to, their historical lows. At the same time, economic slack in the euro area remains sizeable and money and credit developments continue to be subdued. Second, while the monetary policy measures adopted between June and September last year resulted in a material improvement in terms of financial market prices, this was not the case for the quantitative results. As a consequence, the prevailing degree of monetary accommodation was insufficient to adequately address heightened risks of too prolonged a period of low inflation. Thus, today the adoption of further balance sheet measures has become warranted to achieve our price stability objective, given that the key ECB interest rates have reached their lower bound. 
Looking ahead, today’s measures will decisively underpin the firm anchoring of medium to long-term inflation expectations. The sizeable increase in our balance sheet will further ease the monetary policy stance. In particular, financing conditions for firms and households in the euro area will continue to improve. Moreover, today’s decisions will support our forward guidance on the key ECB interest rates and reinforce the fact that there are significant and increasing differences in the monetary policy cycle between major advanced economies. Taken together, these factors should strengthen demand, increase capacity utilisation and support money and credit growth, and thereby contribute to a return of inflation rates towards 2%. 
Let me now explain our assessment in greater detail, starting with the economic analysis. Real GDP in the euro area rose by 0.2%, quarter on quarter, in the third quarter of 2014. The latest data and survey evidence point to continued moderate growth at the turn of the year. Looking ahead, recent declines in oil prices have strengthened the basis for the economic recovery to gain momentum. Lower oil prices should support households’ real disposable income and corporate profitability. Domestic demand should also be further supported by our monetary policy measures, the ongoing improvements in financial conditions and the progress made in fiscal consolidation and structural reforms. Furthermore, demand for exports should benefit from the global recovery. However, the euro area recovery is likely to continue to be dampened by high unemployment, sizeable unutilised capacity, and the necessary balance sheet adjustments in the public and private sectors.
The risks surrounding the economic outlook for the euro area remain on the downside, but should have diminished after today’s monetary policy decisions and the continued fall in oil prices over recent weeks. 
According to Eurostat, euro area annual HICP inflation was -0.2% in December 2014, after 0.3% in November. This decline mainly reflects a sharp fall in energy price inflation and, to a lesser extent, a decline in the annual rate of change in food prices. On the basis of current information and prevailing futures prices for oil, annual HICP inflation is expected to remain very low or negative in the months ahead. Such low inflation rates are unavoidable in the short term, given the recent very sharp fall in oil prices and assuming that no significant correction will take place in the next few months. Supported by our monetary policy measures, the expected recovery in demand and the assumption of a gradual increase in oil prices in the period ahead, inflation rates are expected to increase gradually later in 2015 and in 2016. 
The Governing Council will continue to closely monitor the risks to the outlook for price developments over the medium term. In this context, we will focus in particular on geopolitical developments, exchange rate and energy price developments, and the pass-through of our monetary policy measures. 
Turning to the monetary analysis, recent data indicate a pick-up in underlying growth in broad money (M3), although it remains at low levels. The annual growth rate of M3 increased to 3.1% in November 2014, up from 2.5% in October and a trough of 0.8% in April 2014. Annual growth in M3 continues to be supported by its most liquid components, with the narrow monetary aggregate M1 growing at an annual rate of 6.9% in November.
The annual rate of change of loans to non-financial corporations (adjusted for loan sales and securitisation) remained weak at -1.3% in November 2014, compared with -1.6% in October, while continuing its gradual recovery from a trough of -3.2% in February 2014. On average over recent months, net redemptions have moderated from the historically high levels recorded a year ago and net lending flows turned slightly positive in November. In this respect, the January 2015 bank lending survey indicates a further net easing of credit standards in the fourth quarter of 2014, with cross-country disparities decreasing in parallel with an increase in net demand for loans across all loan categories. Banks expect that these dynamics will continue in early 2015. Despite these improvements, lending to non-financial corporations remains weak and continues to reflect the lagged relationship with the business cycle, credit risk, credit supply factors and the ongoing adjustment of financial and non-financial sector balance sheets. The annual growth rate of loans to households (adjusted for loan sales and securitisation) was 0.7% in November, after 0.6% in October. Our monetary policy measures should support a further improvement in credit flows.
To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need for further monetary policy accommodation. All our monetary policy measures should provide support to the euro area recovery and bring inflation rates closer to levels below, but close to, 2%. 
Monetary policy is focused on maintaining price stability over the medium term and its accommodative stance contributes to supporting economic activity. However, in order to increase investment activity, boost job creation and raise productivity growth, other policy areas need to contribute decisively. In particular, the determined implementation of product and labour market reforms as well as actions to improve the business environment for firms needs to gain momentum in several countries. It is crucial that structural reforms be implemented swiftly, credibly and effectively as this will not only increase the future sustainable growth of the euro area, but will also raise expectations of higher incomes and encourage firms to increase investment today and bring forward the economic recovery. Fiscal policies should support the economic recovery, while ensuring debt sustainability in compliance with the Stability and Growth Pact, which remains the anchor for confidence. All countries should use the available scope for a more growth-friendly composition of fiscal policies."



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11451520
http://www.hedgehogs.net/pg/blog/skinnercm/read/11451504/convincing-management-to-renew-core-systems Fri, 23 Jan 2015 06:34:23 +0000 http://www.hedgehogs.net/pg/blog/skinnercm/read/11451504/convincing-management-to-renew-core-systems <![CDATA[Convincing management to renew core systems]]>

I’m often asked what I mean by a digital core and how to convince management to buy into it.

read more...

]]> 11451504 http://www.hedgehogs.net/pg/blog/skinnercm/read/11451501/things-worth-reading-23rd-january-2015 Fri, 23 Jan 2015 06:04:26 +0000 http://www.hedgehogs.net/pg/blog/skinnercm/read/11451501/things-worth-reading-23rd-january-2015 <![CDATA[Things worth reading: 23rd January 2015]]>

Things we're reading today include ...

read more...

]]> 11451501 http://www.hedgehogs.net/pg/blog/mikeohara/read/11451445/the-future-of-tca-for-the-buyside-the-quest-for-the-holy-grail Thu, 22 Jan 2015 17:43:23 +0000 http://www.hedgehogs.net/pg/blog/mikeohara/read/11451445/the-future-of-tca-for-the-buyside-the-quest-for-the-holy-grail <![CDATA[The future of TCA for the buy-side: The quest for the Holy Grail]]>

Transaction cost analysis (TCA) has become increasingly important to help firms measure performance and cost of execution. What are the ingredients for a good TCA and is there a Holy Grail?

read more...

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11451445
http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11451408/ecb-to-boost-asset-purchases-to-60-bln-euros-monthly Thu, 22 Jan 2015 14:23:29 +0000 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11451408/ecb-to-boost-asset-purchases-to-60-bln-euros-monthly <![CDATA[ECB to boost asset purchases to 60 bln euros monthly]]>     The European Central Bank (ECB) has expanded its asset purchase program, boosting its monthly purchases of public and private securities, including euro-denominated securities issued by euro area governments and agencies, to 60 billion euros.
    The ECB, which will start its new purchases in March, issued the following introductory statement by ECB President Mario Draghi:
"Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. Let me wish you all a Happy New Year. I would also like to take this opportunity to welcome Lithuania as the nineteenth country to adopt the euro as its currency. Accordingly, Mr Vasiliauskas, the Chairman of the Board of Lietuvos bankas, became a member of the Governing Council on 1 January 2015. The accession of Lithuania to the euro area on 1 January 2015 triggered a system under which NCB governors take turns holding voting rights on the Governing Council. The details on this rotation system are available on the ECB’s website. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by the Commission Vice-President, Mr Dombrovskis.

Based on our regular economic and monetary analyses, we conducted a thorough reassessment of the outlook for price developments and of the monetary stimulus achieved. As a result, the Governing Council took the following decisions: 
First, it decided to launch an expanded asset purchase programme, encompassing the existing purchase programmes for asset-backed securities and covered bonds. Under this expanded programme, the combined monthly purchases of public and private sector securities will amount to €60 billion. They are intended to be carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term. In March 2015 the Eurosystem will start to purchase euro-denominated investment-grade securities issued by euro area governments and agencies and European institutions in the secondary market. The purchases of securities issued by euro area governments and agencies will be based on the Eurosystem NCBs’ shares in the ECB’s capital key. Some additional eligibility criteria will be applied in the case of countries under an EU/IMF adjustment programme. 
Second, the Governing Council decided to change the pricing of the six remaining targeted longer-term refinancing operations (TLTROs). Accordingly , the interest rate applicable to future TLTRO operations will be equal to the rate on the Eurosystem’s main refinancing operations prevailing at the time when each TLTRO is conducted, thereby removing the 10 basis point spread over the MRO rate that applied to the first two TLTROs. 
Third, in line with our forward guidance, we decided to keep the key ECB interest rates unchanged. 
As regards the additional asset purchases, the Governing Council retains control over all the design features of the programme and the ECB will coordinate the purchases, thereby safeguarding the singleness of the Eurosystem’s monetary policy. The Eurosystem will make use of decentralised implementation to mobilise its resources. With regard to the sharing of hypothetical losses, the Governing Council decided that purchases of securities of European institutions (which will be 12% of the additional asset purchases, and which will be purchased by NCBs) will be subject to loss sharing. The rest of the NCBs’ additional asset purchases will not be subject to loss sharing. The ECB will hold 8% of the additional asset purchases. This implies that 20% of the additional asset purchases will be subject to a regime of risk sharing. 
Separate press releases with more detailed information on the expanded asset purchase programme and the pricing of the TLTROs will be published this afternoon at 3.30 p.m. 
Today’s monetary policy decision on additional asset purchases was taken to counter two unfavourable developments. First, inflation dynamics have continued to be weaker than expected. While the sharp fall in oil prices over recent months remains the dominant factor driving current headline inflation, the potential for second-round effects on wage and price-setting has increased and could adversely affect medium-term price developments. This assessment is underpinned by a further fall in market-based measures of inflation expectations over all horizons and the fact that most indicators of actual or expected inflation stand at, or close to, their historical lows. At the same time, economic slack in the euro area remains sizeable and money and credit developments continue to be subdued. Second, while the monetary policy measures adopted between June and September last year resulted in a material improvement in terms of financial market prices, this was not the case for the quantitative results. As a consequence, the prevailing degree of monetary accommodation was insufficient to adequately address heightened risks of too prolonged a period of low inflation. Thus, today the adoption of further balance sheet measures has become warranted to achieve our price stability objective, given that the key ECB interest rates have reached their lower bound. 
Looking ahead, today’s measures will decisively underpin the firm anchoring of medium to long-term inflation expectations. The sizeable increase in our balance sheet will further ease the monetary policy stance. In particular, financing conditions for firms and households in the euro area will continue to improve. Moreover, today’s decisions will support our forward guidance on the key ECB interest rates and reinforce the fact that there are significant and increasing differences in the monetary policy cycle between major advanced economies. Taken together, these factors should strengthen demand, increase capacity utilisation and support money and credit growth, and thereby contribute to a return of inflation rates towards 2%. 
Let me now explain our assessment in greater detail, starting with the economic analysis. Real GDP in the euro area rose by 0.2%, quarter on quarter, in the third quarter of 2014. The latest data and survey evidence point to continued moderate growth at the turn of the year. Looking ahead, recent declines in oil prices have strengthened the basis for the economic recovery to gain momentum. Lower oil prices should support households’ real disposable income and corporate profitability. Domestic demand should also be further supported by our monetary policy measures, the ongoing improvements in financial conditions and the progress made in fiscal consolidation and structural reforms. Furthermore, demand for exports should benefit from the global recovery. However, the euro area recovery is likely to continue to be dampened by high unemployment, sizeable unutilised capacity, and the necessary balance sheet adjustments in the public and private sectors.
The risks surrounding the economic outlook for the euro area remain on the downside, but should have diminished after today’s monetary policy decisions and the continued fall in oil prices over recent weeks. 
According to Eurostat, euro area annual HICP inflation was -0.2% in December 2014, after 0.3% in November. This decline mainly reflects a sharp fall in energy price inflation and, to a lesser extent, a decline in the annual rate of change in food prices. On the basis of current information and prevailing futures prices for oil, annual HICP inflation is expected to remain very low or negative in the months ahead. Such low inflation rates are unavoidable in the short term, given the recent very sharp fall in oil prices and assuming that no significant correction will take place in the next few months. Supported by our monetary policy measures, the expected recovery in demand and the assumption of a gradual increase in oil prices in the period ahead, inflation rates are expected to increase gradually later in 2015 and in 2016. 
The Governing Council will continue to closely monitor the risks to the outlook for price developments over the medium term. In this context, we will focus in particular on geopolitical developments, exchange rate and energy price developments, and the pass-through of our monetary policy measures. 
Turning to the monetary analysis, recent data indicate a pick-up in underlying growth in broad money (M3), although it remains at low levels. The annual growth rate of M3 increased to 3.1% in November 2014, up from 2.5% in October and a trough of 0.8% in April 2014. Annual growth in M3 continues to be supported by its most liquid components, with the narrow monetary aggregate M1 growing at an annual rate of 6.9% in November.
The annual rate of change of loans to non-financial corporations (adjusted for loan sales and securitisation) remained weak at -1.3% in November 2014, compared with -1.6% in October, while continuing its gradual recovery from a trough of -3.2% in February 2014. On average over recent months, net redemptions have moderated from the historically high levels recorded a year ago and net lending flows turned slightly positive in November. In this respect, the January 2015 bank lending survey indicates a further net easing of credit standards in the fourth quarter of 2014, with cross-country disparities decreasing in parallel with an increase in net demand for loans across all loan categories. Banks expect that these dynamics will continue in early 2015. Despite these improvements, lending to non-financial corporations remains weak and continues to reflect the lagged relationship with the business cycle, credit risk, credit supply factors and the ongoing adjustment of financial and non-financial sector balance sheets. The annual growth rate of loans to households (adjusted for loan sales and securitisation) was 0.7% in November, after 0.6% in October. Our monetary policy measures should support a further improvement in credit flows.
To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need for further monetary policy accommodation. All our monetary policy measures should provide support to the euro area recovery and bring inflation rates closer to levels below, but close to, 2%. 
Monetary policy is focused on maintaining price stability over the medium term and its accommodative stance contributes to supporting economic activity. However, in order to increase investment activity, boost job creation and raise productivity growth, other policy areas need to contribute decisively. In particular, the determined implementation of product and labour market reforms as well as actions to improve the business environment for firms needs to gain momentum in several countries. It is crucial that structural reforms be implemented swiftly, credibly and effectively as this will not only increase the future sustainable growth of the euro area, but will also raise expectations of higher incomes and encourage firms to increase investment today and bring forward the economic recovery. Fiscal policies should support the economic recovery, while ensuring debt sustainability in compliance with the Stability and Growth Pact, which remains the anchor for confidence. All countries should use the available scope for a more growth-friendly composition of fiscal policies."

    www.CentralBankNews.info




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11451408
http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11451399/ecb-maintains-rates-further-news-at-press-conference Thu, 22 Jan 2015 12:53:06 +0000 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11451399/ecb-maintains-rates-further-news-at-press-conference <![CDATA[ECB maintains rates, further news at press conference]]>     The European Central Bank (ECB) said it was maintaining the rate on its benchmark refinancing rate at 0.05 percent, along with the rate on its marginal lending facility and deposit rate, but made no further announcements about extending its stimulus program.
    In a brief statement, the ECB said further policy measures would be communicated by the President of the ECB at a press conference starting at 2.30 p.m. Central European Time.




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http://www.hedgehogs.net/pg/blog/skinnercm/read/11451384/banks-face-more-change-in-next-10-years-than-in-the-last-200 Thu, 22 Jan 2015 08:34:17 +0000 http://www.hedgehogs.net/pg/blog/skinnercm/read/11451384/banks-face-more-change-in-next-10-years-than-in-the-last-200 <![CDATA[Banks face more change in next 10 years than in the last 200]]>

Sticking with the future predictions, I usually quote the great American baseball player Yogi Berra: “it’s tough to make predictions, especially about the future”.  He had quite a few comments of that ilk: “the future isn’t what it used to be”, and it is certainly true.

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