Expectations
Book notes: Making money work, by Matt Sekerke and Steve H Hanke
This book provides a critique of the post-crisis monetary and financial system, proposing changes that deserve to be broadly read
The battle for the future of central banks
Inflation-targeting institutions must not simply defend against overt interference, they must also resist a sly erosion of their authority, writes Biagio Bossone
Tobias Adrian on the integrated policy framework amid tariff shocks
The IMF’s financial counsellor speaks about policy reaction functions to supply and demand shocks, scenario-based analyses, Treasury market dynamics and emerging market resilience
Finland’s Välimäki on the ECB’s monetary policy framework review
Bank of Finland board member Tuomas Välimäki discusses the benefits of a ‘hybrid’ balance sheet model to provide dependable structural liquidity without distorting markets
Ex-OCC chief Michael Hsu on the impact of an America-first agenda
The former acting comptroller of the currency speaks with Christopher Jeffery about the future of the US Treasury market, Fed independence, financial de-regulation, the Genius Act and international co-operation
Central banks must rethink how they speak
Communication is critical for effective policy and social media is not merely a channel of communication, it is a space for dialogue, a feedback loop and a reputational battleground, writes Biagio Bossone
Paraguay’s Carvallo Spalding on resilience and cutting its inflation target
The Central Bank of Paraguay (BCP) governor speaks about lowering the inflation target to 3.5%, opening up to foreign investors and promoting inclusion through digital payments
A fractured monetary system
US policy is encouraging a transition away from a dollar-led, rules-based order
Book notes: The political economy of central banking, by Alessandro Roselli
Roselli’s book offers a comprehensive history of the relationship between governments and central banks
Maurice Obstfeld on the trade war’s damage to the monetary system
The former IMF chief economist speaks about Trump’s chaotic economic policies, the erosion of Fed independence and dollar stability, difficult policy trade-offs for central banks, and the threat to the Bretton Woods institutions
Rate expectations influence BoJ’s yield control – paper
Bond purchasing programme less effective when market unsure of future monetary policy path
Ukraine’s Andriy Pyshnyy on the US minerals deal, ongoing reforms and post-war plans
The National Bank of Ukraine’s governor speaks about managing inflation, financial sector reform, FX reserves, international aid and actions in the event of a peace deal
Inflation expectations survey flashes warning signs in US
University of Michigan report, cited by Fed officials, says outlook had dropped in tandem with tariffs
Inflation uncertainty reaching historic high in US – research
Richmond Fed economist says inflation expectations and uncertainty are rising dramatically
Policy should respond to long-run expectations – Fed study
Such a framework would enhance price stability, paper argues
Inflation expectations rising due to tariffs – BoC’s Macklem
Governor says Canada’s central bank will pursue policy that works in multiple scenarios
Iceland and Switzerland cut rates, while Sweden holds
Central banks highlight global developments and high levels of uncertainty
Risk of inflation de-anchoring is higher in US than Canada – study
Authors say risk has also risen for both countries post-Covid
The interest rate dilemma in an uncertain world: a balancing act
Biagio Bossone makes the case for a holistic policy approach that includes extending IT tolerance bands, smart fiscal policies, supply-side reform and financial safeguards
Trust in Fed leads to lower inflation expectations – study
Political alignment shapes perceptions of central bank and views on economic outlook, NBER paper finds
BoJ governor: food inflation in Japan may not be temporary
Ueda’s comments mark slight change from previous statements that supply factors would dissipate
Brazil again raises rates by 100bp
BCB signals further rises amid persistently high inflation and lingering concerns over public finances
Madagascar’s governor on targeting M3 over inflation
Central Bank of Madagascar head Aivo Andrianarivelo speaks about introducing an interest rate corridor, diversifying from dollars to gold, using instant payments to bolster inclusion and drawing on IMF sustainability funding
Distributions allow better state-level forecasts – RBI paper
Authors find new method incorporating inflation and expectations can cut forecast errors