Gold and silver prices were able to hold above unchanged on the China monetary policy tightening moves, while other commodity markets fell, due to their safe-haven investment status.
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The latest statement from the Federal Open Market Committee of the U.S. Federal Reserve, was just a bit more hawkish on U.S. monetary policy, hinting that some pre-emptive monetary policy tightening could occur, or at least reduced accommodative Fed actions, in the next year and-a-half.
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With commodity and energy prices stabilized, together with effective monetary tightening policy, the CPI could drop by 1-1.5% to 5-5.5% in early 2012.
It has also been beset by rising inflation in China, which is forcing the government to continue its monetary tightening policy which is impacting the auto-sales growth.
On the other risk, a real tightening of monetary policy, Winmill explained that the end of QE2 acted like a tightening of 300 basis points along the middle of the curve.
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If we survive until 2015 or 2016, then the trigger will be tightening monetary policy.
My suggestion is that the FOMC allow interest rates to rise a bit without tightening monetary policy.
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The Fed is also determined not to repeat Japan's mistake in the 1990s, by tightening monetary policy too soon.
The Fed did not reverse and begin tightening monetary policy until June, 1999, and by then it was too late.
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So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time.
But the prospect of Chinese economic officials tightening monetary policy has negative demand implications for raw commodities, including the precious metals.
Their usual prescriptions, aimed at containing fiscal spending and tightening monetary policy, were discredited long ago, yet they are still being used.
At some point, the Fed will feel compelled to stop the inflation by tightening monetary policy, thus producing higher interest rates and a liquidity crunch.
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Each of these policies would help to raise short-term interest rates and limit the growth of broad measures of money and credit, thereby tightening monetary policy.
If the markets start to believe a country's deficit is out of control they will force its bond yields sharply higher, in effect tightening monetary policy.
If that gap persists, the problem can be addressed by supplementing payment of interest on reserves with steps to reduce reserves and drain excess liquidity from markets the second means of tightening monetary policy.
Even if our balance sheet stays large for a while, we have two broad means of tightening monetary policy at the appropriate time: paying interest on reserve balances and taking various actions that reduce the stock of reserves.
In an effort to obtain loans to service its debt, Seychelles in November 2008 signed a standby arrangement with the IMF that mandated floating the exchange rate, removing foreign exchange controls, cutting government spending, and tightening monetary policy.
He warned that a "premature tightening of monetary policy" would risk "slowing or ending the economic recovery".
Barclays said investors should expect neutral monetary policy with a bias toward tightening liquidity through open market operations.
The government of China has been tightening its monetary policy to cool real estate prices within a larger objective to control inflation.
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If this continues it will represent a massive tightening of monetary policy at a time when the recovery is weakening and fragile.
The inflation (actually, the tightening of monetary policy to counteract it) is combining with other capital-flow dynamics to create acute concern about currencies.
China has been tightening its monetary policy to reign in rampant inflation, which reached a 25-month high of 4.4% for the month of October.
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To do so would represent a sharp tightening of monetary policy.
But he warned that low commodity prices and unusually low wage growth may have "artificially suppressed" inflationary pressures "in which case a more dramatic tightening of monetary policy may be called for".
Given banker fears and uncertainty, particularly over the adequacy of their capital, bankers would likely regard the loss of those reserves as a significant tightening of monetary policy rather than a mere technical adjustment.
The European Central Bank said European banks are repaying long-term refinancing loans from the ECB at a slower rate than expected, which led to ideas the ECB will not be tightening its monetary policy any time soon.
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While a global tightening of monetary policy should in the long term help to check inflation and so be beneficial for bonds, in the short term it would knock the stuffing out of both bonds and equities.
That might, though, complicate domestic policy, by tightening monetary conditions further.
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