08 November 2010

Fed lending standards, Fed Bullard speech, OECD leading indicator

Here are links to this morning's key global releases:

Fed: The October 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices. Key quote (bold face is mine):
The October survey indicated that, on net, banks eased standards and terms over the previous three months on some categories of loans to households and businesses.2 Both large and other domestic banks reported having eased some standards and terms; large banks were primarily responsible for the easing reported in July.3 However, substantial fractions of banks reported in response to a set of special questions that standards for many categories of loans would not return to their longer-run averages for the foreseeable future.
SF Fed Bullard's speech. Highlight:
Bullard said the FOMC must defend its implicit inflation target from the low side as it would from the high side. Since U.S. short-term interest rates are already approximately zero, further disinflation would mean rising real interest rates in the face of a slowing pace of recovery.
Remember that we economists believe that people make saving and investment decisions based on the real interest rate: the nominal rate minus the rate of inflation expected over the investment decision time horizon.

When nominal rates are at zero, as they are today, the Fed needs to persuade the public that in the future inflation will accelerate and stay rather high. (Which is not to say that hyperinflation will set in. Hyperinflation is of cours undesirable, but more importantly, it's in no way an inevitable consequence of QE, in my view. I don't even see it as a threat.)

OECD Composite Leading Indicators. Key content:

OECD composite leading indicators (CLIs) for September 2010 point to diverging patterns of economic growth across major economies.

The CLIs show signs of continuing expansion in Germany, Japan, the United States and Russia, while pointing to a moderate downturn in Canada, France, India, Italy and the United Kingdom.

The CLIs for Brazil and China continue to point strongly downwards, edging below the long term trend and implying that the level of industrial production will fall below its longer-term trend in these two economies.
There's no time to get this into Spanish, now, as I'm heading out the door on a business trip.

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