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October 2015 The Bulletin Vol. 6 Ed. 9 Official monetary and financial institutions▪ Asset management ▪ Global money and credit Fed falters Yellen’s wavering Meghnad Desai on US interest rate nerves Mojmir Hampl on why Europe needs Britain Kingsley Chiedu Moghalu on Buhari’s challenges Rakesh Mohan on US and Brics IMF roles David Owen on restructuring Europe David Smith on Pope Francis’ economic voice Global Louis de Montpellier [email protected] +44 20 3395 6189 ConneCt Into aPaC Hon Cheung [email protected] +65 6826 7505 amerICas Carl Riedy the network [email protected] +1 202 429 8427 Connect into State Street Global Advisors’ network of expertise, tailored training and investment excellence. emea Benefit from our Official Institutions Group’s decades-deep experience. Our service Kristina Sowah [email protected] is honed to the specific needs of sovereign clients such as central banks, sovereign +44 20 3395 6842 wealth funds, government agencies and supranational institutions. From Passive to Active, Alternatives to the latest Advanced Beta strategies, the Official Institutions Group can provide the customised client solutions you need. To learn more about how we can help you, please visit our website ssga.com/oig or contact your local representative. FOR INSTITUTIONAL USE ONLY, Not for Use with the Public. Investing involves risk including the risk of loss of principal. State Street Global Advisors is the investment management business of State Street Corporation (NYSE: STT), one of the world’s leading providers of financial services to institutional investors. © 2015 State Street Corporation – All rights reserved. INST-5417. Exp. 31.03.2016. EUMKT-3892_Connect Into The Network Ad.indd 1 25/03/2015 10:41 Contents International monetary policy Fed falters The Federal Reserve’s reluctance Change is overdue for IMF governance Rakesh Mohan 7 to raise interest rates – a result of fears about an emerging markets Why international coordination matters Rakesh Mohan 9 slowdown, especially in China – has considerable systemic Fed sets the stage for lift-off later this year Darrell Delamaide 10 implications. America’s monetary policy-makers are taking Risk aversion is risky Meghnad Desai 11 seriously the world outside the US . The same attention needs Europe to be paid to global economic governance. Not only the ECB shifts towards transparency Frank Westermann 5 developing countries but also the US need a higher IMF quota. Restructuring Europe in interests of all David Owen & David Marsh 12 Europe would be the loser. ▪ Overshadowing Greece and refugees Mojmir Hampl 13 Greece starts debtor v. creditor campaign David Marsh 13 Emerging markets Now Buhari’s hard work really begins Kingsley Chiedu Moghalu 14 Papal voice on economic stage David Smith 17 Book review An unholy mixture William Keegan 18 Eichel spells out ECB options n unusual Anglo-German alliance Book review on new policies for the European William Keegan finds Capitalism: A Central Bank has been forged with an Money, Morals and Markets by FT intervention at an OMFIF meeting in journalist and OMFIF Chairman London by Hans Eichel, German finance John Plender a ‘beautifully written’ and rigorous examination minister 1999-2005. of capitalism. Eichel, who was in government in the Plender lines early years of the euro under Chancellor up former Gerhard Schröder, was responsible for Fed Reserve economic restructuring under the Agenda Chair Alan 2010 programme. Lending proposal: Hans Eichel and OMFIF’s Greenspan for At a workshop on ‘New ways forward European Central Bank report serious criticism, for the European Central Bank’ on 29 and reaches a September Eichel urged the ECB to focus and small businesses have been voiced damning verdict its €60bn-a-month QE programme on by Adam Posen, a former independent on his faith in the efficiency of supporting infrastructure projects and member of the Bank of England monetary markets. Politicians, particularly small and medium-sized businesses. policy committee, and Paul Marshall, a those who repealed the Glass- Eichel’s plan, which he has advocated hedge fund owner in London. Steagall Act, attract only slightly privately for several months, is similar Eichel proposed that the ECB should less censure. Unlike some critics, to the ‘People’s QE’ proposals by Jeremy lend to public sector and regional he does not lay all the blame at the Corbyn, the new UK Labour Opposition banks, targeting areas of the economy doors of the banks – at least not party leader, for the Bank of England that can accelerate growth, possibly the commercial banks. Keegan’s directly to fund government-directed using infrastructure assets and other verdict: ‘A delight to read’. ▪ investment in infrastructure. similar securities as collateral, as a way Similar ideas for targeted central bank of increasing the effectiveness of its efforts to spur lending for infrastructure quantitative easing efforts. ▪ Vol. 6 Ed. 9 October 2015 3 Official Monetary and Financial OMFIF Advertising & subscriptions Institutions Forum Promoting dialogue for world finance For advertising and subscription 30 Crown Place details, contact: London The Official Monetary and Financial Institutions EC2A 4EB Forum is an independent platform for dialogue and [email protected] United Kingdom Diary dates and meetings research. It serves as a non-lobbying network for T: +44 (0)20 3008 5262 worldwide public-private sector interaction in finance A full list of past and forthcoming F: +44 (0)20 7965 4489 and economics. Members are private and public meetings is available on sector institutions worldwide. The aim is to promote www.omfif.org @OMFIF exchanges of information and best practice in an atmosphere of mutual trust. Forwww.omfif.org/meetings more information on meetings, OMFIF focuses on global policy and investment themes – particularly in asset management, capital contact: [email protected] Board markets and financial supervision/regulation – General information John Plender (Chairman), Jai Arya, Jean-Claude Bastos relating to central banks, sovereign funds, pension See for access to de Morais, Pooma Kimis, Edward Longhurst-Pierce, funds, regulators and treasuries. more OMFIF analysis, including David Marsh, John Nugée, Peter Wilkin commentary,www.omfif.org reports, summaries of discussions and bulletin archives Advisory Board Advisory Board Membership OMFIF’s 171-strong Meghnad Desai, Chairman Membership, open at an annual Advisory Board, chaired by Phil Middleton, Deputy Chairman fee to institutions (from both the Meghnad Desai, provides Frank Scheidig, Deputy Chairman public and private sector) and Louis de Montpellier, Deputy Chairman contributions to the individuals, offers services through Songzuo Xiang, Deputy Chairman monthly Bulletin, regular two complementary channels Commentaries, seminars and Mario Blejer, Senior Adviser other OMFIF activities. Aslihan Gedik, Senior Adviser For more information about Norman Lamont, Senior Adviser OMFIF membership, contact John Nugée, Senior Adviser & Director Fabrizio Saccomanni, Senior Adviser Ted Truman, Senior Adviser [email protected] Analysis Submissions OMFIF Analysis includes research and commentary. Contributors include in-house experts, Advisory Contact the editorial team for Management Board members, and representatives of member details on article submissions at David Marsh, Managing Director institutions and academic and official bodies. Edward Longhurst-Pierce, Director of Strategy and Planning Pooma Kimis, Director of Markets and Institutions [email protected] Website Meetings For queries on the website, OMFIF Meetings take place within central banks and other official institutions and are held under Editorial Team the Chatham House Rule, where the source of contact [email protected] David Marsh, Editor-in-Chief information shared is not reported. Peter Barker, Production Editor Jane Cahane, Editorial and Publishing Manager Darrell Delamaide, US Editor Ben Robinson, Economist Strictly no photocopying is permitted. It is illegal to reproduce, store in a central retrieval system or transmit, electronically or otherwise, any of the content of this publication without the prior consent of the publisher. While every care is taken to provide accurate information, the publisher cannot accept liability for any errors or omissions. No responsibility will be accepted for any loss occurred by any individual due to acting or not acting as a result of any content in this publication. On any specific matter reference should be made to an appropriate adviser. Company Number: 7032533 EDITORIAL Governance and growth on Lima agenda here is plenty to occupy minds at the October annual by the rest of the FOMC rate-deciding committee) does not bind her Tmeetings of the International Monetary Fund and World hands for the rest of the year. Meghnad Desai, co-author with David Bank in Lima. China has implanted itself in the top echelons of Marsh of a blunt 31 August commentary listing 10 points why the the world economy and finance, yet has been at the centre of perturbation over what appears to be a larger-than-expected over ‘lift-off’ was a mistake that heightens the danger of another economic slowdown. 2008-styleFed should crash.lift rates He now, calls writeson readers flatly to that prepare the Fed’s for anervousness coming storm. Showing a degree of sensitivity to global economic We list the protagonists in the forthcoming debtor versus developments that many critics (wrongly) claim it never hitherto creditor skirmish in Europe
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