Dates and Locations

04-05 Dec	London, UK	London Chamber of Commerce >>

Please visit our Course Diary to see dates and locations for all of our UK and European courses.

Course Outline:

This two day course covers in detail all areas of monetary policy in relation to financial market asset prices. By examining how policy is set by the Federal Reserve, ECB and the Bank of England, delegates will gain a thorough understanding of the economic and market factors that affect interest rate decisions and the transmission mechanism where interest rates impact on the FX, equity and bond markets. The course will also discuss the role that central banks and monetary policy has played in dealing with the recent credit crunch.

Day 1 - Central Banks and the Implementation of Monetary Policy
Monetary Policy
Money and inflation - the limits of monetary policy
Case for central bank independence
Is there a stable relationship between money supply and economic activity?
Brief history of monetary policy in the major economies
Targets and instruments of monetary policy
Application of the Taylor Rule
Should central banks pay attention to asset prices?
Communication strategy and the role of expectations

The Federal Reserve
Structure of the FOMC - the current voting members
FOMC meetings and minutes - how to monitor the Fed
Implementation of policy - the Open Market Desk
Fed response to the 'credit crunch' - lender of last resort
Interpreting Fed speak: Bernanke versus Greenspan

The ECB and Bank of England
Structure of ECB - members of the Governing Council
How to monitor the ECB - is the ECB transparent?
Bank of England - members of the MPC
Voting patterns of the MPC - hawks versus doves
Inflation and Financial Stability Reports

Day 2 - Interest Rates and Asset Prices
Interest Rates
Real and nominal interest rates
Real short-term interest rates and the economic cycle
Reading interest rate policy expectations priced into the markets
Bond yields as the expected path of short rates plus a term premium
Theories of the term structure
Shape of the yield curve through the business cycle: a leading indicator?
Credit spreads, default risk and the business cycle
Monetary Policy Models

Monetary Policy and the Markets
The transmission of monetary policy to the economy and asset prices
Expectations of rate moves and the STIR futures markets
Should central banks target asset prices?
Returns on real versus financial assets - are interest rates too low?
How does monetary policy impact the equity market?
Equity risk premium - equity versus bond returns
Commodity prices and inflation - the role of China
The role of housing in the economic cycle: wealth effects on consumption

Central Banks and Financial Crisis
Credit cycle - leverage and risk taking
Common features of the build-up to crisis
Market behaviour: volatility, contagion, and 'flight to quality'
Path to recovery: asset prices and the economic cycle
Case study: LTCM and the Russian default
Case study: the Asian currency crisis

The US Credit Crunch
Structure of the US mortgage market
Primer on securitisation and structured credit
Sub-prime defaults and credit contagion
Is the securitisation model redundant?
Cash hoarding and the LIBOR-OIS spread
Response of the major central banks: lessons for monetary policy and regulation
Outlook for asset prices - is the 'credit crunch' now fully priced?