Posts Tagged ‘macro-prudential regulation’

Notes From Underground: Macroprudential Regulation Versus Tapering

September 10, 2013
While I was away…
Friday, the unemployment report was much as expected in terms of nonfarm payrolls, wages and hours worked. The biggest surprise was that the previous two months had downside data revisions, but certainly nothing to dispel the FED‘s upcoming move to taper its large-scale asset purchase program.
Also, on Friday the Mexican Central Bank unexpectedly cut its lending rate by 25 basis points to 3.75%. The surprise was that the Mexicans had the backbone to cut in the face of rising U.S. interest rates. The Mexican peso reacted to the rate cut by RALLYING, proving the point that correlating all emerging markets is a fool’s paradise. The inflation rate in Mexico has dropped below the bank’s desired level of 4% as slowing global growth has led to weaker growth¬† and slowing prices. The PESO rallied has continued during the last two days even as President Nieto’s energy and budget plans have been met with a show of public demonstrations. The peso remains well below the highs it made in May but has held up in relation to the other emerging market currencies. A currency that rises in face of an unexpected cut in interest rates is something to watch. (The reverse, of course, was the Aussie dollar and its reaction to central bank cutting rates. )
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