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Yet just another day in the year of crisis monetary policy. And of course, yet another acronym to add to the alphabet soup. The acronym of the day is OMT. That stands for Outright Monetary Transaction. It is a unlimited but sterilized bond buying program aimed at keep yield of sovereign bonds down, with some […]

I do not take hard currency idea seriously. Hard currency is a wacky idea. I generally think supporters of hard currency, gold standard advocates being the worst, as non-serious discussants of monetary policy. Hard currency is inflexible and it will exert unnecessary pain in time of crisis. If we had a hard currency all over […]

Anna Schwartz is not a name too familiar with too many Malaysians. That is a shame because her works as an economist wield great influence in this era of economic uncertainty. Read up major financial newspapers, magazines, financial news channels or leading economic blogs and one will come up an idea which she—together with the […]

Those whom keep a close eye on monetary policy will realize that the real interest rate at the moment is positive. My data suggests it is above 1% mark right now given how the Overnight Policy Rate is at 3% and inflation is hovering around 2% with core inflation being slightly lower than headline inflation. […]

Since the Monetary Policy Committee will be meeting next week, it is only natural to talk about the Overnight Policy Rate. It currently stands at 3.00% and it is likely to stay like that after the MPC meet. I personally (and professionally!) am betting a cut only in March as I think while inflationary pressure […]

An argument goes that rate hike will not address inflationary pressure in Malaysia. It is not as effective against cost-push inflation as it is against demand-pull inflation. And right now, the economy is experiencing cost-push inflation. More importantly, the push is coming from abroad. It is practically exogenous, discounting the liberalization exercise (which itself originates from […]

The importance of central bank independence has a lot to do with inflationary concerns. By independence, it typically means independence from political pressure. That entails strict separation between the central bank and the government. The central bank is not answerable to the government in general and the government does not represent the central bank. These […]

Libertarians generally are in favor of commodity-backed currency. This is largely based on typical libertarian attitude towards the state: do not trust them. Others who are not quite libertarian share the same idea about trust. They really have trouble believing that a piece of paper worth something when it is only backed by some promise. […]

Today in The Sydney Morning Herald: THE dollar soared and financial markets began pricing in interest rate rises after the Reserve Bank governor declared that he will soon have to push up rates and that he might do so without waiting for unemployment to stop climbing. The bank is thought to have never before lifted […]

Negative nominal interest rate is typically seen as impractical because nobody with profit as motivation would lend at a discount. The borrowers would hoard money at the expense of the lenders, bringing huge losses to the lenders. In a way, the consequence is like an option with unlimited loss. As a result, a supposed lender […]

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