• IIF's Charles Dallara due in Athens tomorrow
• Merkel concedes Greek bailout not working
• Double-dip recession fears as UK GDP falls
• George Osborne refuses to change tack
• Heather Stewart: So much for the march of the makers
• Today's agenda
• Follow our live Davos coverage here
The European Central Bank is not impressed by the suggestion from Christine Lagarde today (10.53am) that public bodies who hold Greek debt may have to increase support if private creditors don't go far enough.
Bloomberg is reporting that two people "close to the ECB's governing council" say that such a haircut would not be acceptable to the central bank. Details here
A senior member of Angela Merkel's Christian Democrats has also attacked the proposal. Michael Meister said:
I can't imagine that European politicians would allow third parties to make such an indecent claim on our central bank...That contradicts our philosophy.
Megan Greene, senior economist at Roubini Global Economics, explains that the idea of funding the Greek bailout in this way would indeed be anathma to the ECB.
The ECB participating in PSI is a form of debt monetisation. Consequently I don't think the ECB will be willing. on.ft.com/yuQqvB
— Megan Greene (@economistmeg) January 25, 2012
FT Alphaville, though, reckons that the IMF might triumph over the ECB in this battle - details here.
Poor Portugal. Literally.
It's been a rough day for one of the eurozone's weakest members. Its government bonds have fallen in value, pushing the yield (or interest rate) on its five-year bonds up 19.2% (Reuters data).
At that level, traders are pricing in a significant risk that the debt will be restructured.
The cost of insuring this debt against default hit a record high. A five-year Portuguese credit default swap rose by 31 basis points to 1,310bp -- that means it would cost €1.31m per year to insure €10m of debt.
Portugal appears to be suffering the knock-on effect of the deadlock in Greece, with investors fearing the consequences of a disorderly default over there.
There is also concern that Portugal is heading towards a second bailout -- following comments from the head of its industry confederation.
Antonio Saraiva told Reuters that the €78bn that runs through 2013 did not take into account massive debts by inefficient, loss-making public companies, especially in the transport sector.
Portugal was also cut to junk status by S&P last week. And as economist Shaun Richards warns here, the mistakes of Greece are being made all over again.
Out in Davos, our colleague Jill Treanor has been discussing the European Central Bank's offer of almost €500bn of cheap, three-year loans with Lord Turner, chairman of the Financial Services Authority.
Lord Turner reckoned that the ECB's decision before Christmas to flood the markets with cash created a valuable opportunity, which European leaders must not squander.
He told Jill that:
It is important and has given some breathing space. But the eurozone needs to use that time. "We still need a long term solution.
Speaking of Davos, it appears that Peter Mandelson was hissed by an audience after he criticised the banking sector's role in the crisis.
Full details over on our Davos live blog (with a hat-tip to Juliet Samuel of City AM)
Time for a lunchtime round-up, after quite a busy few hours #phew
• Angela Merkel has admitted that Europe may fail to save Greece from meltdown. In an interview with six European newspapers, including the Guardian, the German chancellor said that "neither the Greeks themselves nor the international community have yet managed to stabilise the situation". Merkel added that she had doubts about the way the crisis was being handled, like any good leader. The full story is here.
• Greece's creditors are heading back to Athens for fresh talks. Charles Dallara, head of the IIF, will return to Athens tomorrow. The move came after Greek prime minister Lucas Papademos threatened to force losses on Greek bondholders if they didn't agree to a voluntary deal.
• Christine Lagarde has suggested that "public sector creditors" should take losses on its Greek debt. The head of the IMF floated the idea this morning, shortly before David Cameron reiterated Britain's reluctance to bailout the euro.
• Britain's economy shrank by 0.2% in the last three months. George Osborne blamed the eurozone, after UK manufacturing and construction both contracted in the fourth quarter of 2011. Ed Balls, though, said the government's economic programme was to blame. Full story here.
• The euro crisis also dominated the World Economic Forum in Davos. George Soros said that Greece was likely to default and quit the euro. Nouriel Roubini called for less austerity and more growth.
The eurozone's woes continues to loom over Davos today, with leading economist Nouriel Roubini warning that Europe's response to the crisis is "making the recession worse".
Roubini made his warning at a popular lunchtime session attended by our colleague Jill Treanor. She reports that Phillip Jennings, general secretary of the UNI global union, was also in gloomy mood.
#davos gloom. Roubini says eurozone needs "less austerity and more growth"; Jennings wants technocrat gvts play with "political gunpowder"
— Jill Treanor (@jilltreanor) January 25, 2012
Another snippet from George Soros in Davos (see also 11.45am and 11.59am). This time, the billionaire investor commented on the news that UK GDP contacted by 0.2% in the last quarter.
Soros said that it was "unrealistic" to expect the UK to rebound, in the current climate. On the upside, he pointed out that Britain benefits "currently by not being part of the euro."
The 81-year old investor-turned-philanthopist also admitted that he is glad that he no longer runs a hedge fund, as he wouldn't know how to invest his money in the current climate of uncertainty.
David Cameron has reiterated that Britain will not provide more funding to the International Monetary Fund unless EU politicians do more to fix the crisis.
During Prime Minister's Questions, Cameron told parliament that the UK will not contribute to the IMF (which hopes to raise an extra $500bn) until Europe has devised a full rescue plan. The PM also insisted that Britain was only prepared to help "countries, not currencies".
He was responding to a question from Sir Peter Tapsell MP, who claimed that Britain would effectively be "subsidising Germany" if it gave more support to the IMF. Tapsell argued that Germany was "not fully supporting its currency while benefitting from its depreciation".
Not much argument with his second point.....
The news that the IIF is returning to Greece (see 12.05pm comes after the Greek government threatened to force losses on creditors if a restructuring deal could not be agreed.
Helena Smith our Athens correspondent explains:
Greece's technocrat prime minister Lucas Papademos has publicly said that if a deal is obstructed by recalcitrant creditors refusing to participate he would seek recourse in the law by having the Greek parliament legislate collective action clauses (CACs) which would force investors into a write-off.The leader, a world-renowned macro economist himself, is personally overseeing discussions with IFF. Late Tuesday he told reporters that he expected the group's chief negotiator, Charles Dallara, to visit Athens "for a last time" this week - implying that an agreement was practically in the bag.
Without a deal on private sector involvement, of course, Greece won't receive the next installment of its aid package.
Just in -- the Institute of International Finance, which represents Greece's creditors, is heading back to Athens to resume talks over the Greek debt restructuring.
A greek government spokeman has announced that Charles Dallara, head of the IIF, is expected back in Greece on Thursday. The IFF is acting on behalf of the banks, insurers and hedge funds holding Greek debt.
Dallara left Athens over the weekend, declaring that the creditors had made their final offer. That offer was then rejected by eurozone finance ministers on Monday night.
As we reported at 11.17am, IIF officials who stayed behind in Greece found themselves locked in a hotel today. Tensions are running high....
George Soros has also warned in Davos that Greece is likely to be forced out of the Eurozone.
Soros told the media in Switzerland that:
Greece is on the edge of default, which could push it out of the euro. The odds are in that direction.
George Soros, the billionaire investor, has attacked Germany's determination to impose austerity on Europe's indebted member states, and warned that some of them could become like "third-world" nations.
Soros has been discussing the eurozone crisis at a lunch at Davos. Larry Elliott, our economics editor, is there and reports that:
Soros says the eurocrisis is ongoing. The ECB has relieved the pressure on banks, but has not cured the problem of highly indebted countries. They are in danger of becoming like third-world countries, Soros explained, adding that political and economic tensions could destroy the European Union.
Soros, who famously "Broke the Bank of England' on Black Wednesday, was also critical of Angela Merkel's approach to the crisis, telling reporters that:
The austerity Germany wants to impose will push Europe into a deflationary debt spiral.
Here are the main points from our interview with Angela Merkel:
• She admits the Greek bailout is not working - "Neither the Greeks themselves nor the international community have yet managed to stabilise the situation"
• She calls for the European Court of Justice to be empowered to police the eurozone's spending and budget policies
• She calls for the eventual creation of a European political union
You can read the full story here.
Our Athens correspondent Helena Smith reports there has been no immediate response in Greece to German chancellor Angela Merkel's implicitly expressed doubt that the country might not be able to be saved.
Media speculation suggests that the German leader's comments are part of the "brinkmanship game" currently being played as mission chiefs representing Athens' "troika" of creditors, the EU, ECB and IMF, prepare to give Greek government ministers a grilling over the lack of progress in the country's crucial fiscal adjustment and structural reform programme.In a sign of the gathering storm around the internartional monitors' latest visit, militants from the communist-aligned labour force, Pame, physically tried to stop inspectors leaving the Hilton, their hotel, this morning. "We thought the best way of stopping their evil policies was to physically stop them getting to meetings with officials," one unionist told me. It was only when riot police were dispatched to the hotel that they could leave.
But Greece's temporary tripartite coalition government is acutely aware that ten weeks into office, criticism of its performance is growing perilously loud. The Greek media is full of reports out of Berlin of Teutonic anger over the lack of headway Athens has made in applying a privatisation program that was meant to be in full steam by now but instead has barely get off the ground. Greece, as readers will recall, announced an ambitious €50bn firesale of its loss-making public assets in July when the EU and IMF agreed to extend a second package of rescue funds to the debt-stricken nation.
There is little respite for Britain's manufacturers: The latest CBI manufacturing survey shows British factory orders continued to decline this month, although by less than forecast. The pace of decline slowed from the previous month, with the factory orders balance at -16 from -23 in December, and compared with expectations of -20.
CBI director general John Cridland said:
The crisis in the eurozone is still hanging over the UK, threatening future growth. Nevertheless, within this survey there are some tentative signs that things could improve somewhat in the coming quarter. Key factors behind this include the fact that US recovery has been better than expected, and the impact of the credit rating downgrade in the euro area has been muted.
A quick look at the markets: shares have turned negative - no wonder given Angela Merkel's scepticism and the worse-than-expected UK GDP figures.
The FTSE is trading 45 points lower at 5706, a 0.8% fall. Germany's Dax is off 25 points, or 0.4%, while France's CAC has slipped 21 points, or 0.6%.
IMF chief Christine Lagarde has floated the idea of Greece's public sector creditors participating in a restructuring of the country's debt - if a haircut negotiated with private sector bondholders is not enough to put Athens' debt on a sustainable footing.
Lagarde told journalists in Paris today:
The balance between the participation of the private and the public sector is a concerning question. If the level of Greek debt held by the private sector is not sufficiently renegotiated, then public sector holders of Greek debt should also participate in the efforts.
She added that the US also needs to do its bit to get the global economy back on track:
The world economy is on a narrow path with little margin for manoeuvre. America's debt and deficit - the lack of a medium-term plan to reduce it - that is a real problem. The situation is comparable in Japan.
In an interview with the Guardian and five other leading European newspapers, German chancellor Angela Merkel has for the first time cast doubt on Europe's chances of saving Greece from financial meltdown and sovereign default. Read more here.
Here's a round-up of economists' reaction to the GDP figures.
James Knightley, UK economist at ING, said:
Unfortunately UK economic activity is likely to get worse before it gets better with a technical recession likely to be confirmed by 1Q12 GDP numbers. Household spending is constrained by the fact that wages have failed to keep pace with the cost of living for four consecutive years while job insecurity is rising once again. At the same time, austerity measures mean government spending will contract and the Eurozone sovereign debt crisis is hurting exports to the UK's largest trading partners. With such economic uncertainty, firms are reluctant to invest and hire so it is difficult to see where any growth will come from in the next couple of quarters.
That said, we are more optimistic on the second half given tax changes will put an extra £1bn in the pockets of low and middle income earners while compensation payments from the miss-selling of payment protection insurance will also help. Key will be the sharp drop in inflation, which could finally allow real incomes to turn positive in late 2012. Furthermore, assuming we do get some form of resolution to the sovereign debt crisis then positive risk appetite could push asset prices higher and help boost both consumer and business confidence. Such an outcome would encourage firms to invest and get the recovery back on track.
Chris Williamson, chief economist at Markit, said:
While the UK clearly faces a clear risk of sliding back into another recession, which is commonly defined as two consecutive quarter of declining GDP, there are growing indications that any downturn is likely to be mild and short-lived.
"The huge uncertainty is the eurozone, and a worsening of the region's debt crisis remains the single biggest threat to the UK economy. Recent tentative signs of improving growth could quickly fade away if the crisis deteriorates. On the other hand, an improvement in the situation in the euro area could lead to business and consumer confidence continuing to revive, spurring on a return to economic growth in early-2012.
Professor Philip Booth from Cass Business School, said:
It is not surprising that the latest economic growth figures are grim given the headwinds from the eurozone. However, this should not tempt the government to change track on deficit reduction. There is no evidence that increasing government borrowing will increase economic growth. Indeed, if anything, part of the setback in growth has been caused by the necessary reversal of the irresponsible government borrowing in the immediate post-crash period.
Whilst the government cannot solve the eurozone crisis, it can radically deregulate the UK economy to create the best possible conditions for economic growth. The government must press ahead with planning reform and begin to deregulate the British labour market. In this area, the government has been moving in precisely the wrong direction and it must change course.
George Osborne has given his reaction to today's GDP data -- in short, he's not changing course.
Speaking outside 11 Downing Street, the chancellor said:
Countries that aren't dealing convincingly with their debts face worse economic prospects that we do.
So I think we've got the right plan, we've got to stick to it, but we've got to accept that Britain's economic problems - difficult as they are, build up as they have been over the last 10 years - have been made worse by the situation in the eurozone and by the crisis on our doorstep.
You can follow all the political reaction today at Andrew Sparrow's Politics Live blog.
Alistair Darling, the former UK chancellor, has described the fall in UK GDP as "very, very worrying", at a time when the European debt crisis is threatening to derail world economic growth.
Darling told Sky News that:
Unless action is taken in this country and in Europe, the best scenario is that we will flatline. At worse, we will fall back into recession.
A fall of 0.2% is bad, but it could easily have been worse.
The detailed breakdown of the figures shows that without a rise in 'government services' such as health and education, which were up by 0.4% on the quarter, GDP would have fallen even faster, by 0.3%.
Joe Grice, the ONS's chief statistician, has refused to be drawn on whether this marks the onset of
recession.
Grice restricted himself to:
We have announced a relatively small reduction in economic activity; what happens next, we'll have to wait and see.
Here's some instant analysis from the Office for National Statistics briefing, from Heather Stewart, the Observer's economics editor:
It's worth remembering that the OBR was expecting a negative quarter, which will help George Osborne will brush this off - but another contraction in the Spring would mark a recession, which would be far harder to explain away.
So much for the march of the makers Osborne hoped would lead the economy to recovery: production output (which also includes mining and energy) fell by 2.6% in 2011.
Compared with the same quarter in 2010, the UK economy eked out growth of just 0.8% between October and December, the ONS says.
So don't expect Ed Balls to stop doing that 'flat-lining' hand gesture any time soon!
Some in the City reckon the UK is back in recession (defined as two or more consecutive quarters of contraction). Vicky Redwood, chief UK economist at Capital Economics, said:
Of course, we won't know for sure whether the economy is actually back in recession until we get Q1's figures. And it is of some comfort that the CIPS/Markit business surveys were heading up at the tail-end of Q4. But this might just have been a temporary improvement. Indeed, our bet is that the UK is now back in recession and that the economy will continue to contract for most of this year.
Meanwhile, January's monetary policy committee (MPC) minutes suggest that the committee remains split on whether further asset purchases are needed, with some members still not convinced that inflation will fall below the target in the medium-term. However, there were clear signs that at least some will vote for more QE next month - for these members, "the risks of undershooting the target meant that a further expansion of asset purchases was likely be required." Mervyn King's speech last night suggests that he is in this camp. Indeed, we expect another £75bn of QE to be announced next month.
Minutes of the Bank of England's last meeting a fortnight ago, released this morning, revealed its rate-setting committee voted unanimously to keep monetary policy on hold.
The ONS is getting into the nitty-gritty of today's data.
Estate agents saw an increase in activity in the fourth quarter, it said, but it was offset by a downturn in banking and legal services.
Overall, business services and finance output was flat.
And with that, an ONS press officer brings the briefing to a close, telling the assembled media:
Thanks for coming, have a wonderful day.
Joe Grice, the ONS's chief statistician, describes the 0.2% decline as 'relatively minor'.
The ONS also estimated that November's strike probably had some impact on GDP, but we can't quantify it yet (that's via our colleague Heather Stewart who is at the ONS briefing).
The breakdown of the GDP numbers reveals that manufacturing acted as a big drag on the economy. Factory output fell by 0.9% between October and December, the biggest quarterly fall since the autumn of 2009. Overall industrial production, which also includes utilities and mining, was down 1.2%.
Construction output fell by 0.5% while service industries recorded a flat performance.
More on the UK GDP numbers. The Office for National Statistics' first estimate for the fourth quarter (-0.2%) showed the first contraction in a year. In 2011 as a whole, the economy grew by 0.9%, less than half the pace of 2010.
The British economy shrank by 0.2% in the fourth quarter of 2011, according to official figures, edging closer to a recession. This is slightly worse than economists expected - they had pencilled in a 0.1% contraction. In the third quarter, the economy had grown 0.6%.
While we're waiting for the fourth-quarter GDP figures for the UK, out at 9.30am, why don't you take a look at my colleague David Shariatmadari's live blog on Davos.
The Office for National Statistics is holding a press conference for the release of the GDP figures in Westminster, from where Heather Stewart, the Observer business editor, will be reporting.
Germany's closely-watched Ifo business sentiment index is out. It climbed for a third month to hit 108.3 in January, against forecasts of 107.6. The index is based on a monthly survey of around 7,000 companies. This boosted the euro to a session high of $1.3052.
Economist Klaus Abberger of the Munich-based research institute Ifo said the weak euro had helped the German economy, and that a recession seemed unlikely.
On currency markets, the yen has dropped to one-month lows against the dollar and the euro, after Japan reported its first annual trade deficit since 1980.
However, some were sceptical that this would have a lasting impact on the yen. Takuji Okubo, chief economist at Société Générale in Tokyo, said:
Japan's current account balance is still in surplus, as the income from japan's vast foreign assets, boht direct investment as well as its security investments, is more than offsetting the deficit from trade. In addition, capital flows are much more important for the yen than trade flows.
Meanwile, the pound slipped as traders braced themselves for a negative fourth-quarter GDP number for the UK. Sterling fell to $1.5558, down from a three-week high of $1.5629 hit overnight.
Citi economist Michael Saunders has digested BOE governor Sir Mervyn King's speech from last night. He says the speech – one of only three major speeches the governor aims to give each year – paves the way for more QE, while also highlighting King's view that the UK also needs further substantial banking reform and supply-side reform.
The governor makes two key points. First, he stresses the unavoidable weakness of the economy, and big uncertainties in the outlook.
Second, the governor argues the case for three key policy responses. This includes "monetary policy – to prevent the deleveraging process from tipping the economy into a renewed severe downturn…And, with inflation falling back and wage growth subdued, there is scope for interest rates to remain low, and, if necessary, for further asset purchases, to prevent inflation falling below the 2% target." The governor goes about as far as he can to indicate that extra QE is likely soon, and also subtly reiterates the MPC's view that QE is appropriate if the MPC faces risks of inflation undershoot, and is not just reserved for the rare cases when deflation threatens. In addition, King stresses the BoE's willingness to backstop banks in event of a crisis. "The Bank of England stands ready to provide liquidity to healthy banks against good collateral should market conditions deteriorate" but repeats his calls for banks to raise their capital ratios by squeezing pay and dividends.
King ends with some relatively optimistic comments – relative to the gloomy tone of the rest of the speech that is. "The position of the world economy, especially in the euro area, is serious. But there is no reason to despair. All crises come to an end, and businesses will find ways to trade with each other and meet the needs of consumers whatever the transitional problems posed by deleveraging. Helped by the right policy actions, the UK and world economies can and will recover. And when they do so, they will be on a more sustainable footing than at any point in the past fifteen years." But he makes it clear that policy will play a key role in determining whether or not we get to that "more sustainable footing", again reinforcing the case for extra QE.
Marc Ostwald, strategist at Monument Securities, looks ahead to today's events:
While the spectre of Greece descending into a disorderly default will cast a very long shadow over the day's proceedings, there is so much else to digest that should plenty of food for thought, and may even provide some challenges to what are reasonable market assumptions: e.g. that the BoE's MPC will deliver more QE in February, that the FOMC will push out its forecasts for the expected timing of its first rate hike... and a German 30-yr Bund auction, where the 30 bps concession that has been built in over the past week may still not be enough to attract much demand, particularly with equivalent maturity [French] OATs yielding 3.88%.
Bank of England governor Sir Mervyn King certainly hinted at more QE last night, when he said the path to economic recovery would be "arduous, long and uneven". He warned that the huge debt burden run up by households, banks and the government would weigh on the economy for years to come. The comments came after official figures showed the UK's national debt had surged past £1tn for the first time.
Larry Elliott, our economics editor, reports from Davos this morning that the Occupy protests appear to have influenced the tone of this year's World Economic Forum.
From a snowy Switzerland, Larry writes that:
The theme of this year's Davos is the Great Transformation, the title of a book written in the 1940s by Karl Polanyi. It was a critique of 19th Century laissez faire capitalism, which Polanyi said could not survive in its pure utopian form.
There seems to be a nervousness around this year about whether the current model is sustainable either. The first sessions this morning include a debate on Capitalism (Is 20th century capitalism failing 21st century society?); Global Risks 2012: The safety of our safeguards; and another Global Risks 2012: The seeds of dystopia.
Seems like the protests of the Occupy Movements have had some effect!
The Daily Telegraph's Jeremy Warner is also in Davos, and reports on Twitter that the eurocrisis is dominating the event:
#Davos. Just caught up with Ben Verwaayen of Alcatel who says business in Europe is frozen until decisions r made re future of the euro
— jeremy warner (@jeremywarnerUK) January 25, 2012
Here's today's agenda:
• German Ifo business climate data released - 9am GMT / 10am CET
• UK GDP for Q4 2011 released - 9.30am GMT
• Minutes of Bank of England's January meeting - 9.30am GMT
• Germany auctions €3bn of 30-year bonds - 10.15am GMT / 11.15am CET
• US Federal Reserve announces interest rate decision - 17.30pm GMT /
12.30pm EST
+ World Economic Forum begins annual meeting in Davos
The cuts in the IMF forecasts have cast gloom over the World Economic Forum's annual meeting, writes Larry Elliott, the Guardian's economics editor, from Davos.
This is the fifth meeting of the global policy elite since the start of the financial crisis in 2007 and each has had its own mood: concern in early 2008, total panic in the dark winter of 2009, tentative optimism in 2010 that the worst was over, confidence in 2011 that better times were just around the corner, and now the sense that recovery will be longer and tougher than most of the Davos crowd ever envisaged.
Read more here.
European stock markets have got off to a good start. The Dax in Frankfurt and the CAC in Paris are both up 0.5%, while Spain's Ibex has climbed 0.4% and Italy's FTSE MIB 0.6%. The FTSE 100 index in London has risen more than 18 points to 5770, a 0.3% gain.
IMF chief Christine Lagarde reiterated this morning that combining the European Union's temporary EFSF rescue fund with the permanent ESM mechanism would help restore confidence and create a firewall to stop the Greek crisis spreading to Italy and Spain.
She told Europe 1 radio:
If the two of them could make a common European pot, that would send a very strong sign of confidence in Europe.
Lagarde, a former French finance minister, said the next few weeks would be crucial for the world economy, after the IMF slashed its global growth forecast to 3.3% for 2012 yesterday. She called for measures to boost growth and competitiveness, as well deficit as reduction plans in some countries.
If the right decisions are taken in the coming weeks, not only at the heart of the eurozone - which is essential - but also in the United States, Japan, in the major emerging economies, then the end of 2012 will be better than the beginning. But only if the right decisions are taken.
Good morning and welcome back to our rolling coverage of the world economy and European debt crisis. The Davos summit in Switzerland gets underway today, while in the UK the main event is the release of the fourth-quarter GDP numbers.
City economists reckon the economy slipped back to a 0.1% decline between October and December, following 0.6% growth in the previous quarter. The International Monetary Fund slashed its 2012 growth forecast for the UK yesterday to a paltry 0.6%, from 1.6%. However, even so Britain is set to outperform other major European economies - beating Germany (0.3%) and France (0.2%).
Minutes from the last Bank of England meeting a fortnight ago are also out this morning, and could shed some light on how much debate there was with regard to further asset purchases. In the US, following last night's State of the Union address by Barack Obama we have the first FOMC meeting of 2012.
Michael Hewson, market analyst at CMC Markets, said:
The three more hawkish dissenters to "operation twist" have left the committee and have been replaced with arguably slightly more dovish members. This meeting will give markets the opportunity to determine the credentials of each new member, as well as how much more dovish this committee will be relative to the old one.
At his press conference Bernanke is expected to outline the Fed's new communication strategy to markets with respect to the future direction of the Fed Funds rate forecasts. The last few policy statements have referred to rates remaining low until mid 2013. This could well change and it will be key to future rate expectations as to how far further out this date gets pushed.