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Cityam 2013-02-08.pdf

Cityam 2013-02-08.pdf

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Cityam 2013-02-08.pdf
Cityam 2013-02-08.pdf

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Published by: City A.M. on Feb 08, 2013
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02/08/2013

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BUSINESS WITH PERSONALITY
 
BUSINESS WITH PERSONALITY
Ireland dodges debt bullet with repayment deferral scheme
Mark Carney’s appointment took observers by surprise as he had previously ruled himself out of the running for the top job
www.cityam.com
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MEET THE MAN WHO
 WOULDNT BE KING
FOOTBALL ON A DIET
ISSUE 1,815 FRIDAY 8 FEBRUARY 2013
HARD TRUTHS ABOUT THE NHS
See The Forum, Page 22See The Forum, Page 23 and Sport, Page 32
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from 26/11/12 to 30/12/12 is 127,678
IRELAND clinched an historic deal yesterday to ease pressure on itsdebt mountain and defer thelegacy costs of bailing out failed Anglo Irish Bank and IrishNationwide.The deal, which won the backingof the European Central Bank yesterday after 18 fraught monthsof negotiations, will stretch outthe cost of paying back the bailoutto about 40 years instead of ten,cutting the state’s borrowing costs by €20bn (£17bn) over the nextdecade.The deal sent borrowing costsdown below pre-2007 levels lastnight, with 10-year yieldsplummeting to 3.955 per cent.“[This] outcome is an historicstep on the road to economicrecovery. It secures the futurefinancial position of the state,”Prime Minister Enda Kenny said.The terms of the agreement, which involved the formalliquidation of the banks yesterday, will see short term emergency notes issued in 2009 to keep the banks afloat converted into longerdated sovereign debt, which ischeaper to finance.Converting the notes will givemore scope to post collateral tothe ECB. The ECB does not acceptthe notes as collateral, but doesaccept sovereign bonds, allowingthe banks to borrow cash.
BY MICHAEL BOWBY TIM WALLACE
 THE BANK of England could boostgrowth without creating too muchmore inflation, as long as it is pre-pared to be more creative and moreflexible, incoming governor Mark Carney promised MPs yesterday.Marking a sharp change from theera of outgoing head Sir MervynKing, Carney raised the prospect of changing the Banks’ target, increas-ing flexibility around its operations,and shaking up management in amore cordial and open fashion.Policymakers could be given adual mandate to target unemploy-ment and growth as well as infla-tion, he told the parliamentary hearing, drawing on internationalexperience of countries like the USand his native Canada.Carney called for a public debatearound innovations like nominalGDP targeting, despite Sir Mervyn’srejection of the idea. The Bank of Canada governor ulti-mately agrees such a drastic change would be not be beneficial, but justraising the idea is an indication he wants to bring a new era of freshthinking to the Bank.For example, he told MPs he wantsto change the Bank’s policy hori-zons. Currently it only sets interestrates for one month at a time.But Carney believes a pledge tokeep interest rates down for 15months created more stability inthe Canadian economy, givinghouseholds and firms a vital extraincentive to borrow and invest.“It had an immediate effect in themoney markets, a measurable andpersistent effect with direct passthrough to broader financial condi-tions,” he told the Treasury SelectCommittee. “It reached over theheads of central bank watchers anddirectly to Canadians to say borrow-ing was available at unprecedentedrates for a period of time.”Similarly Carney believes a pledgeto keep rates low until unemploy-ment falls below a set target couldgive the economy the boost it needsto get out of its current long slump.Changing the Bank’s mandate to afocus on growth and jobs, as well asinflation would allow it to let pricesrun high more openly than it doesnow, if policymakers fear the toughsocial consequences of sticking tothe inflation target. The session also revealed a changeof style compared with Sir Mervyn –Carney favours consensus in hismanagement, contrasting withsome accusations that Sir Mervynhas a more commanding approach.But there were a few signs of potential discord – Carney said hefavours imposing a much tighterleverage ratio on UK banks than thelimit George Osborne is applying,arguing tighter ratios helpedCanada’s banks through the crisis. This is the first time MPs have been able to grill an incoming Bank governor, reflecting the extraaccountability Carney takes on withthe Bank’s new powers. They approved the appointment.
How Carney moved sterling
18:0012:0006:0000:00
1.5641.5661.5681.5701.5721.5741.576
£/$
New Bank of England bosspoints to a change in style
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