Central Bank

The alarm over potential bank runs in Greece and Spain this week has highlighted an often-overlooked fact: Europe's debt crisis is also, in many ways, a major banking crisis. In capitals such as Athens, Madrid and Rome, large portions of the sovereign debt racked up by spendthrift governments are owed to the countries' own banks, locking governments and the banks in an embrace so tight that disaster for one would almost certainly spell doom for the other. International bailouts for Greece, Ireland and Portugal have helped to keep not just their governments but also their banks afloat, as well as financial institutions in other parts of Europe with large exposure to those nations' debts.

The Federal Reserve, in a new economic projection, sees the unemployment rate easing to as low as 7.8% in the last three months this year from the current 8.2%, but economic growth this year may rise only to a middling pace of 2.4 to 2.9%. The central bank also said Wednesday that inflation was likely to be slightly higher than previously forecast, reflecting higher oil prices. But most Fed policymakers still expect to hit their inflation target of 2% this year and in the next two years.

In the middle of his country's worst economic crisis in a generation, Mexican President Felipe Calderon on Wednesday nominated a close political ally, Finance Minister Agustin Carstens, to replace the well- respected head of the central bank. Carstens, a University of Chicago-trained economist, has serious creds in the financial world too. But he is also seen as someone willing to be more collaborative with the president than the fiercely independent outgoing Bank of Mexico director.

Federal Reserve Chairman Ben S. Bernanke, worried that recent labor market improvements could fizzle because of weak economic growth, signaled that he was poised to keep interest rates at their super-low levels and stick with the central bank's easy-money policy for some time. Though the labor market and the economy have improved in recent months, he stressed in a speech Monday that labor-market conditions were "far from normal," noting that the number of people working is well below pre-recession levels, as is the total number of hours worked.

The Obama administration said it was "actively" considering sanctioning Iran's central bank in retaliation for an alleged Iranian assassination plot, a move that could severely damage Iran's economy and potentially provoke a strong response from Tehran. David Cohen, the Treasury undersecretary for terrorism and financial intelligence, told the Senate Banking Committee that officials were "looking very actively" at such a step and might carry it out if other nations could be persuaded to follow suit.

Argentina's president, Cristina Fernandez de Kirchner, fired the nation's central bank chief Thursday after he refused to release $6.6 billion in foreign reserves to service the nation's mounting foreign debt. But questions over the legality of Fernandez's action have raised the likelihood of a double-barreled political and economic crisis. Fernandez's dismissal decree followed an emergency meeting with her ministers in the afternoon after bank head Martin Redrado rejected her call to resign.

Helmut Schlesinger, a Bundesbank vice president, has been named to replace Karl Otto Poehl as the central bank's chief, the Finance Ministry said Tuesday. The ministry said in a statement that Schlesinger will take over Poehl's job for two years, after which he is to be replaced by Hans Tietmeyer, a central bank director. Tietmeyer, 59, will be Schlesinger's deputy. According to the statement, Chancellor Helmut Kohl's Cabinet is to formally approve the replacement at a meeting June 12.

Prosecutors detained Indonesia's central bank governor after he refused the president's demands to step down. Bank Indonesia Gov. Sjahril Sabirin was placed in custody for 20 days after proclaiming his innocence and rejecting President Abdurrahman Wahid's repeated calls for his resignation.

India's central bank announced a package of measures to defend the rupee after the Indian currency declined 6.5% this month to its all-time low of 38.60 to the dollar. The measures include delaying a plan to lower reserve requirements of commercial banks, absorbing excess money in the financial system and encouraging exporters to bring their earnings into the country sooner rather than later.

After watching the nation's currency tumble to unprecedented lows for a fourth consecutive day, Mexico's central bank scrambled to bolster the peso in the final hectic hours of trading after a wild speculative ride that underscored the volatility of Mexico's financial markets and its economy as a whole. The Bank of Mexico confirmed that it had intervened to support the peso, the first time it had done so openly since early this year.

Federal Reserve Chairman Ben Bernanke is going back to school - and the public is invited to watch. As part of his efforts to demystify the nation's central bank, Bernanke has agreed to deliver four lectures to George Washington University. The first, focusing on financial panics that led to the Fed's creation in 1913, can be viewed online starting at 9:45 a.m. PDT Tuesday. Additional lectures this Thursday and on March 27 and 29 will cover the later history of the Fed. Bernanke, a former economics professor at Stanford and Princeton, will become the first Fed boss to teach as a side job. He's already become the first to hold regular news conferences and town hall-style meetings.

Federal Reserve officials issued a more upbeat, though still cautious, assessment of the economy, prompting analysts to predict that the improved outlook would reduce the odds that the central bank would take further steps to spur growth. Emerging from a policy meeting Tuesday, the Fed, as expected, left intact its existing easy-money stance, keeping short-term interest rates near zero and reaffirming its January pledge that it would probably hold rates at rock-bottom levels at least until late 2014.

The Federal Reserve, taking an innovative step in its public statements, will start providing a quarterly forecast of when it plans to make a shift in the key short-term interest rate that it sets — its latest effort to spur the sluggish economy and calm volatile stock markets. The projections, to start late this month, could act as an economic stimulus by offering a tentative financial road map to consumers and businesses to encourage them to borrow and take risks. It also could help ease market tension and push down already historically low yields on long-term bonds.

The Federal Reserve, looking at an improving U.S. economy that still faces "significant downside risks" from Europe's debt crisis, left its benchmark short-term interest rate near zero and put off any new policy action until next year. Top Fed officials, at the end of their last regular meeting of the year Tuesday, said in a statement that "the economy has been expanding moderately. " And they noted "some improvement" in the job market. Overall, the statement marked a striking change of tone from a few months ago, when the central bank fretted about "considerably slower" U.S. economic growth and a "deterioration in overall labor market conditions.

Europe's worsening debt crisis has been a source of mounting fear and frustration for U.S. government officials and the biggest single threat to the struggling American economic recovery. On Wednesday, policymakers found an opening to act, with the Federal Reserve coordinating a move by six central banks to give European lenders cheaper access to dollars. The effort, designed to quell fears of a credit squeeze, triggered a huge rally in global stock markets, with the Dow gaining 490.05 points, the biggest one-day advance since March 2009.

Dramatic efforts by central banks to pump more money into the global financial system are allowing investors to turn their attention back to more promising signals coming from the U.S. economy. Investors turned exuberant Wednesday after a series of strong economic snapshots pointed to healthy job creation and more robust business activity in the nation. The strong data sent the Dow Jones industrial average to its best single-day performance since March 2009 and eased lingering concerns about the U.S. falling back into a recession.

Arab efforts to reach a compromise with Syria over its handling of months of unrest appeared to be all but over Sunday as foreign ministers meeting in Cairo voted overwhelmingly to impose punishing sanctions on the regime of President Bashar Assad. The unusually aggressive move by the Arab League, an organization often criticized as spineless and ineffective, came after Syria refused to halt a violent crackdown on dissent and repeatedly ignored deadlines to accept Arab observers to monitor a peace plan the league negotiated with the government this month.

Despite weeks of tough warnings, the Obama administration has backed away from its calls to impose new and potentially crippling economic sanctions against Iran in retaliation for an alleged plot to kill Saudi Arabia's ambassador on U.S. soil, according to diplomats and American officials. Though U.S. officials had declared that they would "hold Iran accountable" for a purported plot, they now have decided that a proposed move against Iran's central bank could disrupt international oil markets and further damage the reeling American and world economies.