Former Federal Reserve chief Alan Greenspan stressed the eurozone is not functioning, saying insufficient balances in the economic stability of EU member countries make the current duty of the single currency a major area of concern.

Greenspan emphasized the great difference among European Union states, with the EU's more wealthier states including Germany regularly financing the shortages of southern countries.

The ex-central bank head, who has been critical about the bloc, said this divergence should not persist. He mentioned the European Central Bank is grappling with greater challenges than the Fed, noting the ECB's balance sheet is bigger than ever.

He also expressed his apprehension regarding the euro's prospect.

China's central bank is planning to change the way it calculates the yuan's daily fixed rate versus the dollar. The People's Bank of China also noted a new factor that may lower the blow of significant market swings, according to sources.

Under the new formula disseminated to lenders by China's monetary authority this week, institutions that give quotes for the daily reference rate will also take into consideration the prior day's official closing level, developments in baskets of currencies, and a new counter-cyclical factor, sources said. Banks are now making changes and are testing their models and will begin giving quotes using the new standard system.

The change in calculation is seen to reduce yuan volatility and lower the role of market forces in setting the exchange rate, according to analyst. China's eyes this year are set on stabilizing the yuan as authorities battle capital outflows and stem financial risks ahead of a crucial leadership shake up by the end of the year.

Analysts said that the central bank's actions reflect an impression that they are more concerned regarding yuan stability than what they indicate in their public remarks.

Tags: Policy

St. Louis Federal Reserve President James Bullard said the current level of U.S. price growth is significantly weaker than it should be if the Federal Federal Reserve had reached its two-percent inflation target and said the current inflation path since 2012 was worrisome.

The U.S. central bank official prices said prices in the economy are now 4.6 percent down from the price level course that was mapped out from 1995 to 2012, when inflation was rising toward the Fed's 2 percent target annually.

While the trend was not as severe as Japan's 1990s experience, he still noted it caused some worry.

Below-the-target inflationary pressures has kept U.S. central bankers from hiking rates by over three times since the Recession. However, since late 2016, majority of policymakers have seen faster rate of monetary policy tightening ahead given the noticeable improvement in the labor market.

Majority of Fed officials penciled in three interest rate hikes this year, including the one they made in March. However, Bullard said that a jump in inflation is still a narrow possibility even if the jobless rate further drops.
Tags: Policy

San Francisco Federal Reserve President John Williams said that upon analyzing the impact of the Trump administration's fiscal policies on the economy, he concluded that he saw limited short-term gains and little effect for the longer term.

The Fed official said that over the next several months, the fiscal policy will not have much impact on monetary policy. He noted that with U.S. jobless rate currently standing at 4.4 percent and job creation almost twofold of what is needed to provide jobs for those venturing into the workforce, economy is on the verge being 'somewhat hot'.

He recommended that the best strategy to sustain the economy's momentum is to temper the economy slightly by increasing rates at a measured pace.

However, given that inflation continues to fall below the U.S. central bank's two-percent target and as further softened lately, Williams said that there is no strong need to do more tightening in monetary policy this year than the two rate hikes penciled in by policymakers.

Williams said that while the Fed is still on its set course, there is bigger uncertainty surrounding the fiscal policy. He expressed his hope that more light would be shed on some fiscal or federal policies. He said that the fiscal stimulus proposed by U.S. President Donald Trump could by contrast weigh on growth, such as the tax cuts being pushed by the administration.

Tags: Policy

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May 28 at 2:54 UTC

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