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Tuesday, March 18

18th Mar - So goes Crimea, Fed tomorrow

Previously on MoreLiver’s:

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Greece, EU/IMF lenders reach initial deal on bailout aid: sourcesReuters
Greece and its international lenders have struck an agreement in principle to unlock the next tranche of rescue loans after six months of negotiations, three sources close to talks said on Tuesday.

A eurozone tax on forex is possible — leaked legal opinionFT
This opinion from the EU Council legal service will cause a stir, at least in Brussels. It contradicts the Commission’s own legal service (they are making a habit of this on the FTT) and says that there is no law in principle preventing a joint levy on foreign exchange. This effectively reopens a debate that makes London very nervous.

German court confirms legality of euro zone bailout schemeReuters
Schaeuble: ESM ruling vindicates German government policies – Reuters
German deputy finmin greets court ruling on ESM bailout fund – Reuters
Germany's Constitutional Court confirmed on Tuesday the legality of the euro zone's bailout fund, upholding a preliminary ruling from the height of the debt crisis in 2012 that gave an initial green light to the ESM.

Jens Weidmann: External imbalances in the euro areaBIS
Speech by Dr Jens Weidmann, President of the Deutsche Bundesbank, at the International Business Cycle Conference, Kiel Institute for the World Economy, Kiel, 17 March 2014.

From firmly to weakly anchored, or the the importance of an adverb!Money Matters
Having weakly rather than firmly anchored inflationary expectations would have justified some action to fortify them on the occasion of the last ECB Governing Council meeting. Instead, if we take exchange rate movements as an indicator of inflationary expectations, the strengthening of the € which followed the press conference in March shows that, instead, the lack of action from the ECB has further weakened the anchoring of inflation.

Squaring the Circle: A QE for the ECBMarc to Market
Perhaps the ECB can learn something from the Swiss National Bank.  Recall that when confronting deflation a few years ago, the SNB's ability to implement quantitative easing was limited by the fact that its domestic bond market is too small.  Forced by circumstances, the SNB opted for buying foreign bonds…While not constrained by size of the local bond market, the way the Swiss National Bank was, the ECB is constrained in a different way.  Buying foreign bonds appears to be a way to square the circle. 

German ZEW Investor Confidence Falls to Lowest Since August – BB

Putin Formally Annexes Crimea, City Of Sevastopol To Russian FederationZH
Putin welcomes Crimea in – Reuters
Putin to annex CrimeaReuters
Putin Backs Russia’s Crimea Annexation, Defying Sanctions – BB
Crimea’s Sudeten Crisis – Project Syndicate
Putin Says Russia Will Retaliate To Sanctions – ZH
Putin's Eurasian Fantasy – BB
Putin Says Russia Not Seeking to Split Up Ukraine After CrimeaBB
Putin calms the markets – Danske Bank
The problem of Ukraine’s Russia bond – Reuters
The cost of escalating sanctions on Russia over Ukraine and CrimeaBruegel
Ukraine Says Conflict With Russia Turned Military From Political – BB
Russian Troop Buildup Seen at Ukraine Border After CrimeaBB

Yellen and the Fed, a WSJ BriefingWSJ
Free downloadable e-book!

Fed Shouldn’t Use Rates to Target Bubbles, Paper SaysWSJ
Fed officials have started warming up to the notion that they might one day need to raise interest rates to prevent dangerous asset bubbles from inflating too much. A new paper has a simple warning: Don’t do it.

The time for tightening by the US Federal Reserve could be nighFT

Grand Central: Handicapping the Fed’s Quarterly Economic ForecastsWSJ

FOMC Meeting BeginsTim Duy’s Fed Watch
The Fed will continue with tapering by cutting another $10 billion from asset purchases.  They will most likely alter the guidance but continue to signal an extended period of low interest rates.  Low rates might simply be part of the "new normal" the economy is settling into, a new normal that the Fed may be unintentionally reinforcing. 

What to Watch From the Fed WednesdayWSJ
Yellen will likely face questions on the continued reduction in bond purchases and the recent deterioration in economic conditions.

Consumer inflation muted despite food price spike – Reuters
Consumer Prices Little Changed as U.S. Inflation Contained – BB
Inflation Misses By Most In 6 Months; Core CPI Drops To 10 Year Low – ZH
Headline Inflation Drops, Core Inflation Essentially Unchanged – dshort
Key Measures Shows Low Inflation in February - Calculated Risk
U.S. housing starts fall, but permits rebound – Reuters
Housing Starts in U.S. Little Changed From Stronger January – BB
Housing Starts Drop For Third Month In A Row – ZH

Monitor: Chinese Credit CrunchDanske Bank

The house that China builtFT

Great Graphic: EU Country Exposures to Russia--The Rise of FranceMarc to Market

EM Bond Snapshot - March 2014Danske Bank

Taper Talk Slammed Strong Emerging Nations MostWSJ
New research argues emerging-market nations hit hardest in the run up to the Federal Reserve’s decision to cut back its bond buying were those whose financial houses were in the best order, relatively speaking—a finding contrary to much recent conventional wisdom.

FX Trends: Central bankers push 'snooze' buttonDanske Bank

FX Board for March 18, 2014: G10 smalls strike backTradingFloor

Danske Bank ennustaa puolen prosentin kasvuaVerkkouutiset

Venäjän valuuttavaranto ei tehokas aseRoger Wessman

EK:n Häkämieheltä tiukka "ei" verojen korotuksille, lisäsopeutus kokonaan säästöillä Verkkouutiset

On surullista, että leipänsä voi ansaita näinkinProfessorin Ajatuksia
Dosentti Johan Bäckman on erikoistunut antamaan poliittisesti värittyneitä ja Venäjää myötäileviä lausuntoja Suomessa ja muualla.

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