European Central Bank Fighting Inflation

By Charles Winget on February 21, 2011, 11:45 am

European Central Bank Executive Board member Lorenzo Bini Smaghi said the bank may need to raise interest rates as global inflation pressures mount. “As the economy gradually recovers and global inflationary pressures arise, the degree of accommodation of monetary policy has to be monitored and, if needed, corrected,” Bini Smaghi said in an interview with daily newsletter Bloomberg Brief: Economics. Commodity-price increases will “have an unavoidable impact” and “it is a key challenge for monetary policy to avoid spillovers and maintain inflation expectations in check,” he said.”This requires the ability to take pre-emptive actions if needed.”

CAD

The PMEAC said that to sustain a growth rate of 9 per cent, steps required are: Containing inflation by focusing both on monetary and fiscal policies and supply side management; stepping up the pace of infrastructure creation with renewed focus on the power sector; continuing efforts to contain Current Account Deficit (CAD) at 2-2.5 per cent of GDP and in parallel encourage flow of external investments into the country; and giving greater attention to agriculture including on seed development, management of water and soil fertility and improving delivery system.

 

Italy

A banking source in Italy, speaking on condition of anonymity, told Reuters that the increase in borrowing was a sign that money markets were still not functioning correctly and remained geographically split in the wake of the global financial crisis. The source added the Italian banking system continued to have good access to money markets, while a high-level Spanish financial source said the jump in borrowing was not down to Spanish banks. To prepare for an expanded systemic regulator role, Tarullo said the Fed is already “incorporating economists and other experts from non-supervisory divisions of the Federal Reserve more completely into the process of supervisory oversight. The insights gained from the macroeconomic analyses associated with the formulation of monetary policy and from the familiarity with financial markets derived from our open market operations and payments systems responsibilities can add enormous value to holding company supervision.”