Central Banking
Central clearing boosts welfare but margin matters – RBA paper
Study shows how central counterparties boost welfare by insuring against counterparty credit risk, but gains are sensitive to the level of margin
Netherlands paper looks at market reaction to Fed forecasts
Implied forecasts of inflation affect market expectations, paper finds
East Africa inches closer to monetary union
Progress report indicates some reform but many remaining issues; IMF officials flag problem areas and offer advice on shape of financial stability authorities
Riksbank paper shows importance of modelling bank costs
Models should not assume financial intermediation is free, authors say, showing banks can reduce aggregate welfare in some cases
EBA recommends changing basis of resolution finance
“Crucial” that new measure reflect ability to call on funds in case of resolution crisis, EBA says; new measure should be based on total liabilities
Oil price rises and US GDP growth have ‘complex relationship’ – paper
Paper studies interaction of oil price and economic growth in US from 1875 to 2016
Malaysia has work to do to improve renminbi hub status – assistant governor
Adnan Zaylani Mohamad Zahid says deepening Malaysian renminbi markets is a priority, and the central bank has plans to offer support
Carney to be grilled on exit timing
MPs plan to question Mark Carney on how, for a second time, he has managed to circumvent UK law designed to fix the length of a Bank of England governor’s term
Serbia lowers inflation target for next two years
Inflation has been “close to or below” lower bound of official target rate for over two years; tightening follows decades of major inflation
Egypt PM signals move to unify exchange rates
Sherif Ismail tells parliament central bank will soon unify black-market and official rates; IMF moving closer to agreement on funding
BoJ pushes back forecast of 2% inflation
Central bank admits it will take longer than previously expected to hit 2%, as it keeps monetary policy on hold
Payments changing fast but cash still in demand – Riksbank survey
Telephone survey finds cash use declining and mobile payments on the rise, though demand for paper money not likely to disappear any time soon
Carney will remain at BoE until 2019
BoE governor chooses to extend term at central bank an additional year amid intense speculation as to his future, though he stops short of a full eight years
Brexit may not lead to ‘new dominant location’ for European finance – Irish governor
Regulatory considerations should not drive firms’ location decisions, Lane argues
Carney’s decision is bigger than one man’s career
Politicians in the UK have already harmed perceptions of the Bank of England’s independence through a sustained attack on its governor, Mark Carney. His decision to stay or go will have wide ramifications
Obstacles may worsen for Russian and Turkish financial reformers, Italian paper says
Reforms in both countries left key problems unaddressed, researchers say
Ugandan governor emphasises banking system is sound
Tumusiime-Mutebile steps in to calm investors, dismissing negative reports following the acquisition of Crane Bank; banking system is “stable, sound and profitable”, he says
‘Overoptimism’ a factor in house price bubbles, Danish paper finds
Authors highlight how sentiment can become “decoupled” from economic fundamentals under certain circumstances
Renminbi drops to six-year low
Figures from Safe show a net $44.7 billion worth of payments in the currency left China in November
Dominican Republic central bank hikes despite falling inflation
Central bank action comes as economy grows more than expected, although inflation is well below target; US factors prove a concern
People: Ukraine promotes Smolii to first deputy governor and appoints two new deputies
Banking supervision chief and human resources head join central bank’s board
Draghi and Mersch seek to calm German fears
The ECB’s task will be harder if Germans feel discriminated against, Mersch says; Draghi points to evidence that QE helped German savers
Banks not fully adapted to new prudential environment – BoE deputy
Firms need a “proper chance” to adapt to the “new world”, says Woods, warning that the banking system still looks fragile on some metrics, despite work by his predecessor, Andrew Bailey
Hedging demand can cause covered interest parity violations – BIS paper
US dollar forward hedging demand can cause covered interest parity to fail even when markets are calm, authors say, helping explain this post-2012 anomaly