NEW$ & VIEW$ (25 JUNE 2013)


Bernanke Walk-Back Wished on Too Much Information

“The central-bank brand, this notion that the markets had that they were wise, they were powerful and were effective is under assault,” El-Erian said. “The Fed has to be very careful what it does with its reputation here.”

Fed Officials Try to Set Market at Ease Federal Reserve officials are pushing back against market perceptions that the U.S. central bank is taking a turn toward tighter monetary policy.

The Fed has had trouble communicating its complicated message.


A wave of Fed officials will be speaking this week, giving them an opportunity to offer their thoughts on policy and the market’s reaction.

Confused smile


[image]Markets Have Little Faith for the Fed

Heard on the Street: Last week, Fed Chairman Ben Bernanke pronounced himself “a little puzzled” by how much Treasury yields had risen in the past month. He must be positively flummoxed by now.

Hungary to Cut Rate as Fed Plan Raises Risk

Hungary’s central bank will probably cut its main interest rate to a record to boost growth as policy makers look past a market selloff after the U.S. Federal Reserve said it may phase out stimulus.

The Magyar Nemzeti Bank will lower the benchmark two-week deposit rate to 4.25 percent from 4.5 percent with an 11th consecutive quarter-point cut, according to all 25 economists in a Bloomberg survey, (…)

Emerging-market central bankers are divided on how to respond to the volatility triggered by the Fed’s plans to taper its stimulus. Global investors pulled $6.9 billion from emerging-market debt funds in the four weeks through June 19, the most since 2011, EPFR Global data show. The MSCI All-Country World Index sank the most in more than a year last week.

Pakistan last week unexpectedly cut interest rates for the first time this year to boost economic growth. The move contrasted with decisions to hold or raise rates in nations from India to Indonesia and Brazil, which are seeking to steady their currencies as the prospect of decreased U.S. monetary stimulus hurts emerging-market assets.

Poland should avoid cutting rates next month as the risk of weakening the currency and triggering capital outflows outweighs any benefit to the economy, central bank policy maker Andrzej Kazmierczak said in a June 21 interview. The country’s next rate decision should be unaffected by the zloty’s deepest weekly plunge in almost two years, Jerzy Hausner, another rate setter, said the same day. (…)

(Bespoke Investment)

Coeure Says No Doubt ECB Loose Monetary Policy Exit Distant

European Central Bank Executive Board member Benoit Coeure said loose monetary policy and non-standard measures will remain as long as needed, as the euro area struggles to emerge from its longest-ever recession.

“Economic growth is projected to remain weak this year and inflation is expected to remain clearly below 2 percent for the euro area as a whole,” Coeure said in a speech in London today. “There should be no doubts that our ‘exit’ is distant and our monetary policy is and will remain accommodative.”

The ECB is “technically ready” to introduce a negative deposit rate, Coeure said in response to a question at the conference hosted by Euromoney.

PBOC Seeks To Address Cash Crunch

A People’s Bank of China official said the central bank will guide interest rates to a “reasonable range,” suggesting a potential end to a cash crunch that has gripped China’s financial system.

Chicago Fed: Economic Activity Slightly Improved in May

According to the Chicago Fed’s National Activity Index, May economic activity slightly improved from April, now at -0.30, up from April’s -0.52 (an upward revision from -0.53). This index has been negative (meaning below-trend growth) for twelve of the past fifteen months. Here are the opening paragraphs from the report:

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to -0.30 in May from -0.52 in April. Two of the four broad categories of indicators that make up the index increased from April, but only one of the four categories made a positive contribution to the index in May.
The index’s three-month moving average, CFNAI-MA3, decreased to -0.43 in May from -0.13 in April, marking its third consecutive reading below zero and its lowest level since October 2012. May’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.
The CFNAI Diffusion Index decreased to -0.35 in May from -0.08 in April. Thirty-three of the 85 individual indicators made positive contributions to the CFNAI in May, while 52 made negative contributions. Forty-nine indicators improved from April to May, while 35 indicators deteriorated. Of the indicators that improved, 25 made negative contributions.

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