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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (816)	2/27/2004 1:00:38 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Bernanke says forex shouldn't be Fed policy objective Thu Feb 26, 2004 06:08 PM ET WASHINGTON, Feb 26 (Reuters) - Federal Reserve Governor Ben Bernanke said on Thursday that Federal Reserve policymakers should focus on controlling inflation and fostering economic growth instead of trying to affect currency exchange rates. reuters.com

To: Jim Willie CB who wrote (816)	2/27/2004 1:03:14 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

ECB's Padoa-Schioppa warns Asia over forex peg WASHINGTON, Feb 26 (Reuters) - European Central Bank executive board member Tommaso Padoa-Schioppa said on Thursday the rampant euro proved the bloc was doing its bit to ease global imbalances and chided Asia for fixed currency regimes. "Europe has fully supported the adjustment process over the last two years. It has done so in spite of the fact that Europe is not contributing -- in either way -- to the gravity of present global imbalances," he told a conference in Washington. "As part of this adjustment process, the euro has appreciated against the dollar by 46 percent since March 2002," he added, noting that it was "striking" that the euro had risen by the same amount against Asian currencies. Europe is worried the strong euro could derail its economic recovery and the ECB has recently warned against "brutal" moves in foreign exchange markets, hinting that it might intervene to cap the common currency's ascent. German and French leaders on Thursday called for the ECB to cut interest rates to take the steam out of the currency. He did not comment on the euro's value, although he referred to the bank's recent comments on excessive volatility. Padoa-Schioppa said foreign exchange rates on their own were not enough to resolve the "pressing issue" of the imbalances, code for the huge U.S. current account deficit of around 5 percent of GDP, and said Europe's contribution should be in lifting growth. "The exchange rate alone is not sufficient: growth differentials must also adjust and here is where lies the main challenge for Europe today: the challenge is to increase its potential and actual growth," he said. But some Asian countries, by operating a peg against the dollar or intervening to keep their currencies cheap, were risking a protectionist backlash and not helping their future integration into the world economy. "It will be difficult to secure progress in economic and financial integration - both within Asia and between Asia and the rest of the world - without addressing at some point the monetary dimension of such cooperation," he said. He said that for some years, these unilateral pegs had worked to the benefit of the United States and Asia, funding the U.S. fiscal and current account deficits while boosting Asian growth and building their foreign reserves. "However, one may wonder how long this mutually beneficial outcome will last," he said, noting U.S. calls for greater foreign exchange flexibility and the recent Group of Seven communique issued in Florida earlier this month. "The adjustment of global imbalances is a delicate process ... we should be aware of the fragility and incompleteness of the system of open trade we have constructed over the years. I know of no country where the constituency of protectionism takes long vacations," he said. reuters.com

To: Jim Willie CB who wrote (816)	2/27/2004 1:16:04 PM
From: mishedlo	Respond to of 116555

ECB Should Raise Inflation Limit to Boost Confidence, CEPR Says Feb. 27 (Bloomberg) -- The European Central Bank should raise its inflation ceiling to bolster confidence among investors and consumers in its monetary policy, according to the CEPR research organization. ``An eventual upward adjustment of the ECB inflation ceiling would imply a better match between its rhetoric and the actual choice of its policies,'' the group said in a report. The ECB has cut its benchmark lending rate seven times since April 2001 even as inflation exceeded its 2 percent ceiling in all but four of the months since then. The ECB, which reviewed its monetary policy last year, has so far resisted calls from some economists to raise its limit. The ECB's willingness to ignore its own inflation limit and cut rates may bolster investors' inflation expectations for the dozen nations sharing the euro, the CEPR said. ``If inflation `temporarily' above 2 percent is always acceptable, it will in fact be above 2 percent permanently,'' said the CEPR report, which was written by economists including Jordi Gali of the CREI research organization and Stefan Gerlach of the Hong Kong Institute for Monetary Research. The CEPR report said the ECB should consider adopting an inflation range of between 1 percent and 3 percent. A revised monetary policy would also make it easier for the U.K. and the 10 countries joining the European Union in May to adopt the euro, according to the CEPR. Economists surveyed by Bloomberg News forecast that inflation in February probably slowed below 2 percent for the first time since July. Consumer prices climbed 1.9 percent this month, the median of 31 forecasts showed before a European Commission report scheduled for release later today. quote.bloomberg.com