Economy Forward

On 25 January 2024, the Fed, the US Central Bank, announced the termination of its Bank Term Funding Programme with effect from 11 March 2024 (see press release) . This is an emergency loan programme implemented on 12 March 2023 to address liquidity pressures that suddenly started hitting banks and financial system unexpectedly.  The immediate cause of such liquidity pressures was the sudden failure of three banks, i.e., Silicon Valley Bank, Signature Bank and Silvergate Bank, in the second week of March 2023.  In few weeks, pressures spread across First Republic Bank and a large number of regional and community banks due to the diversion of deposits from banks to money markets.  However, the real cause of this banking turmoil was the sugar high interest rate policy of the Fed that elevated the interest rate risk and liquidity stress across the banking and financial system. Therefore, the Fed opted to continue with high interest policy while printing money to pr...

I read the CB Annual Policy Statement 2024 - Monetary and Financial Sector Policies for 2024 and Beyond dated 10 January 2024. As usual, it was presented presented by the CB Governor at an official forum plus media presence and released in the CB Website  (Read CB policy Statement here) . (PDF English Copy) . This short article sheds lights on meaninglessness of this policy statement and resulting public deceit committed by the CB Governor in presenting it. Therefore, it is observed that the policy statement 2024 is another bureaucratic act of the CB management continuing on prevailing institutional files which serves no purpose to the objectives of the CB or economic welfare of the general public. Instead, it may provide the pleasure to those who boast it as a professional task performed by them. Why central banks cannot make such long-term policy statements? Unlike business corporates, Central Banks operate on public mandates provided under specific legislations approved by ...

This article is an update of the article series on CB's monetary policy operations to cover the year 2023. The article  provides highlights on money printing operations and resulting money market outcomes favourable to wholesale money dealers, covers only domestic monetary operations as CB's foreign currency operations also are captured in domestic monetary operations which are designed to neutralize the impact of foreign currency operations on the domestic currency liquidity at levels desirable to the CB, and raises serious concerns over the appropriateness and governance of the present monetary policy model to recover the economy from the bankruptcy caused by the monetary policy itself. However, the policy story of inflation control by the monetary policy operations was not covered in the article as it is only a fictitious and tribal economic concept not proved by real world data in any country. If central banks were capable of controlling inflation as enumerated, the world ...