| Central bankers face a new playing field
Days after reaffirming their interest-rate stance against inflation, central bankers may be forced to do an about-face. Traders are abandoning bets on imminent rate increases in Europe and Japan, and some speculate that the Federal Reserve may execute an emergency cut. Behind the changed outlook is concern that the steps central banks have already taken - pumping cash into markets Thursday and Friday to avert a credit collapse - will not be enough to keep global growth from stalling. Earlier last week, Bernanke, the chairman of the Fed, and Trichet, the president of the European Central Bank, were saying that inflation, not financial stability, was the biggest risk. "The dramatic moves by many of the world's central banks could imply that we have a whole new ball game when it comes to monetary policy," said David Brown, chief Europe economist at Bear Stearns in London.
Text of Federal Reserve Statement
Text of Federal Reserve policy statement on interest rates. The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent. Economic growth was moderate during the first half of the year. Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy. .
How do I grab some of this 'excess' liquidity?
WHENEVER I hear the words "excess liquidity", I begin to worry. It usually means that I somehow end up having to pay more interest on my loans, or getting less interest for my deposits - because the economy and the banking system have trouble dealing with all that extra cash sloshing around in the system. That is apparently why the Reserve Bank of India stepped in a couple of days ago and hiked the amount of cash banks will have to keep locked up with it. The banking regulator doesn't want too many rupees being injected into the economy at this point of time, which will have the potential of pushing the inflation rate up. Good on them, I say. As a consumer, I am all for moderate inflation rates. Especially since the private sector has long buried the concept of an inflation index-linked 'dearness allowance', which was supposed to automatically prevent your real disposable income from eroding.
Global strength keeps credit crunch at bay
IF THE poor UK consumer feels put upon as interest rates rise this summer, they should take what comfort they can from the fact that we are part of a drama being played out worldwide. Stock and bond markets globally have suffered turbulence due to worries over rising interest rates and fears of an imminent credit crunch. The era of low interest rates that has carried the world economy forward in recent years is ending. .
SBI: Impressive performance despite the gloss
Chennai, July 28 SBI's performance looks spectacular, although the gloss has much to do with a relatively poorer performance a year ago. At that time (quarter ended June 2006), profits had dipped 35 per cent to Rs 799 crore due in part to a drop in treasury income and the presence of a tax refund in the earlier year). On the average most banks have reported a 35 per cent growth in profits this quarter, riding on the back of a fairly consistent increase in interest income. Four years of 30 per cent growth in loans has provided volume and a certain amount of stability to interest income. Other income too has grown for most banks, without relying excessively on the gains made by selling government securities. Even factoring the effect of extraordinary items, SBI's performance has been impressive.
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