central bank – John Hesch http://johnhesch.com/ Tue, 15 Mar 2022 13:43:00 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://johnhesch.com/wp-content/uploads/2021/07/icon-150x150.png central bank – John Hesch http://johnhesch.com/ 32 32 How rising interest rates will affect the stock market https://johnhesch.com/how-rising-interest-rates-will-affect-the-stock-market/ Tue, 15 Mar 2022 13:43:00 +0000 https://johnhesch.com/how-rising-interest-rates-will-affect-the-stock-market/ The Bank of England’s monetary policy committee is due to meet on Thursday March 17 to decide whether or not to raise interest rates. At its last meeting on February 3, the central bank doubled interest rates to 0.5% from 0.25%. According to data from the Office for National Statistics (ONS), a measure of inflation, […]]]>

The Bank of England’s monetary policy committee is due to meet on Thursday March 17 to decide whether or not to raise interest rates. At its last meeting on February 3, the central bank doubled interest rates to 0.5% from 0.25%.

According to data from the Office for National Statistics (ONS), a measure of inflation, the consumer price index (CPI) fell from 5.4% in December to 5.5% in January, marking an acceleration for four consecutive months.

© 2022 Kalkine Media®

Inflation in the UK has reached its highest rate since March 1992, adding pressure to the current cost of living with soaring gas and electricity prices, high weekly shopping expenses and a additional pressure on stagnant wages. The situation was difficult before the start of the Russian-Ukrainian war. Now, with the invasion, inflation is set to climb higher than expected and stay at unexpected levels for longer than experts and industries thought.

READ ALSO : Top 5 Dividend-Paying Consumer Stocks to Watch

Inflation is not always bad for an economy, but extremely high inflation can devalue the currency, increase the cost of living and economic uncertainty, and can even lead to hyperinflation if left untreated. too long.

Usually, to cope with rising inflation, central banks raise interest rates, which means that high interest rates slow down rising inflation because they reduce purchasing power and lower interest rates increase the rate of inflation because they encourage purchasing power. However, central banks cannot massively raise interest rates all at once, as this could lead to economic collapse. Instead, in times of high inflation, central banks raise interest rates in small increments.

Related Reading: How Rising Interest Rates Will Affect Britons

How can rising interest rates impact the stock market?

When the Bank of England decides to raise the interest rate, it increases the cost of borrowing on loans, mortgages and credit cards for individuals and businesses, which slows down cash flow in the ‘economy. This means that if a company wants to take out a loan or debt, it has to pay a higher interest rate, which makes that company’s stock riskier to invest in.

© 2022 Kalkine Media®

Raising the interest rate also reduces the demand for loans in an economy and can reduce available consumer spending. Customers have to pay more on their outstanding bills, which will leave them with less disposable income.

This can again hamper growth and spending in the economy, which is negative for businesses as they may have to raise prices. So this will hit customers again as many won’t or can’t pay. This could slow the sale, reduce corporate profits and ultimately affect their stock price.

However, the impact of rising interest rates can be different across sectors, such as financial institutes that often do well when the central bank raises interest rates because it increases their profit potential.

Conclusion
A little inflation in an economy is considered healthy, but if inflation is rising sharply, it should be a matter of concern and should be addressed.

Investing in stock markets can be risky, especially when the situation is volatile due to a geopolitical crisis. Although many stocks can offer excellent returns to their investors, things could turn out differently. It is therefore very important to study and then invest.

Related reading: How does inflation affect interest rates?

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Have interest rate hikes in New Zealand brought any changes? https://johnhesch.com/have-interest-rate-hikes-in-new-zealand-brought-any-changes/ Wed, 09 Mar 2022 06:25:00 +0000 https://johnhesch.com/have-interest-rate-hikes-in-new-zealand-brought-any-changes/ Wednesday, March 9, 2022, 7:25 p.m.Press release: Kalkin Summary The political action unfolded in the form of several closely spaced interest rate hikes in New Zealand over a short period. The immediate effect of an interest rate hike was felt in the foreign exchange market for the New Zealand dollar. Some experts suggest that domestic […]]]>


Summary

  • The political action unfolded in the form of several closely spaced interest rate hikes in New Zealand over a short period.
  • The immediate effect of an interest rate hike was felt in the foreign exchange market for the New Zealand dollar.
  • Some experts suggest that domestic policy measures may not be effective against inflation resulting from international forces.

In the era of COVID-19, central banks around the world have resorted to interest rate hikes to combat inflationary pressures and move closer to normalcy. For New Zealand, the political action unfolded in the form of several closely spaced interest rate hikes in a short period of time. This has left many people worried about the economy and house prices.

Despite the uncertainty, financial confidence is improving among New Zealanders. According to the latest Financial Resilience Index (FRI) from the Financial Services Council, more and more people feel secure about their jobs. At a time when the country is slowly moving towards economic stability, rising interest rates appear to pose serious affordability and consumer spending issues.

Overall, it is difficult to separate the effects of rising interest rates from a whirlwind of growing geopolitical tensions. In the meantime, some direct impacts of an interest rate hike are already visible. These effects can translate into a slowdown in spending over time if policy tightens again.

GOOD READING: New Zealand consumer confidence plummets, will it rebound soon?

NZD and mortgage rates

The hawkish policy stance taken by the Reserve Bank of New Zealand (RBNZ) has led to many short-term changes across the economy. Finally, the central bank raised interest rates by 25 basis points, bringing the current interest rate to 1%. While the move was largely expected, it was the RBNZ’s third interest rate hike since the pandemic began.

The immediate effect of an interest rate hike was felt in the foreign exchange market for the New Zealand dollar. The indication of a tightening cycle initially pushed the New Zealand dollar higher as the currency found comfort in rising resource prices. However, it recently fell from new 2022 highs after skyrocketing oil prices threatened the global economic recovery.

Besides the local currency, mortgage rates also reacted to changes in interest rates. Following in the central bank’s footsteps, commercial banks like ASB and Westpac have recently raised mortgage interest rates, but to a lesser extent. Both banks took inspiration from ANZ’s decision to raise mortgage rates to dampen inflation.

Experts suggest that rising mortgage rates are crucial for stabilizing house prices as it could discourage even the wealthiest borrowers from taking out a loan. The effects of these expectations are visible in the easing of real estate prices observed in January, with the drop in sales leading the way.

Fight against inflation

While the central bank’s efforts are focused on controlling the rate of inflation, little effect has been observed so far on consumer prices. Rising consumer prices have become a persistent problem amid supply chain constraints and lack of adequate manpower.

Some experts suggest that domestic policy measures may not be effective against inflation resulting primarily from international forces. Supply bottlenecks developed in global economies require a well-integrated solution with a broader reach.

Meanwhile, other experts say interest rates have a direct impact on investors’ risk and investment appetite. They believe that changes in interest rates can affect consumer spending and inflation. However, recent data suggests that these links have led to a slowdown in stock market activity. Alternatively, the successful recovery of the economy has helped support an improvement in corporate profit margins.

Despite tentative results, the central bank is expected to press ahead with tightening measures in the coming months. Speculation is rife that the RBNZ will undertake a more aggressive tightening of monetary policy and reduce its bond holdings of NZ$50 billion acquired under the large-scale asset purchase program in the coming months. It remains to be seen whether this will be the central bank’s longstanding response to skyrocketing inflation.

GOOD READING: New Zealand transport services take a hit amid Omicron wave

Despite continued headwinds, some experts are predicting up to ten consecutive 25 basis point rate hikes from the RBNZ. However, rising interest rates could hamper economic activity, doing little to control the larger problem of rising inflation. Meanwhile, the outlook for New Zealand’s economy remains uncertain amid the ongoing Russian-Ukrainian war, even with adequate political regulation.

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SEC issues rules on interest rate cap for lending and financing firms https://johnhesch.com/sec-issues-rules-on-interest-rate-cap-for-lending-and-financing-firms/ Tue, 01 Mar 2022 16:02:39 +0000 https://johnhesch.com/sec-issues-rules-on-interest-rate-cap-for-lending-and-financing-firms/ SECURITIES and Exchange Commission (SEC) will begin imposing Thursday, March 3 the central bank’s prescribed interest rate cap on loans and Ifnancing companies as well as their online lending platforms (OLP). Bangko Sentral ng Pilipinas (BSP) Circular No. 1133, Series of 2021 prescribes caps on interest rates and fees charged by loan companies and their […]]]>

SECURITIES and Exchange Commission (SEC) will begin imposing Thursday, March 3 the central bank’s prescribed interest rate cap on loans and Ifnancing companies as well as their online lending platforms (OLP).

Bangko Sentral ng Pilipinas (BSP) Circular No. 1133, Series of 2021 prescribes caps on interest rates and fees charged by loan companies and their PLOs. In this context, the maximum nominal interest rate was Ifxed at 6% per month or 0.2% per day, while the effthe effective interest rate (EIR) was 15% per month or 0.5% per day for unsecured covered loans and general purpose loans not exceeding P10,000 and with a term of four months.

The SEC’s implementation guidelines for the BSP Circular have been issued via Circular Memorandum No. 3, Series of 2022, which will take effect.ffetc. March 3.

“The EIR is expressed as the rate that exactly discounts the estimated future cash flows through the life of the loan to the net amount of the loan proceeds,” the SEC said in a statement Tuesday.

“It includes the nominal interest rate as well as other applicable fees and charges, such as processing fees, service fees, notary fees, processing fees and verification fees, among others. It excludes fees and penalties for late payment and non-payment,” he added.

Loan and finance companies will only be allowed to charge late or non-payment penalties of up to 5% per month on the outstanding balance due.

The circular also sets a ceiling of 100% of the total amount borrowed, which covers all interest, other fees and charges “regardless of the duration of the loan.

“The cap on interest rates and other charges will apply to covered loans that finance and lending companies offer once the rules come into effect on March 3,” the regulator said.

All Ifnancing and lending IfCompanies will be required to submit an impact assessment report using a form prescribed by the SEC by January 15 of each year beginning in 2023.

The SEC will also require IfCompanies must submit a business plan, which must detail the company’s loan products and services and applicable pricing parameters which must meet the interest and fee caps prescribed by the BSP.

Business plans must be submitted by May 5 of this year to the SEC.

“The new business plan…will replace the original business plan or operating plan in the company’s SEC filing prior to the issuance of a CA to the loan or finance company” , the regulator said.

If there are changes, loan and finance companies must submit an amended business plan with the changes highlighted. Committee approval is required before changes are effective.

“The Commission may require LCs and CFs to submit additional forms or documents in support of the submitted business plan,” the SEC said in the memorandum.

The SEC memorandum also details administrative penalties and monetary penalties for violations of the guidelines. — Keren Concepcion G. Valmonte

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Fed officials push back on rapid interest rate hikes | Economic news https://johnhesch.com/fed-officials-push-back-on-rapid-interest-rate-hikes-economic-news/ Fri, 18 Feb 2022 21:06:00 +0000 https://johnhesch.com/fed-officials-push-back-on-rapid-interest-rate-hikes-economic-news/ By STAN CHOE and CHRISTOPHER RUGABER, AP Business Writer NEW YORK (AP) — The Federal Reserve is expected to start raising interest rates next month to help contain too-high inflation, New York Federal Reserve Chairman John Williams said Friday. But he added that rate hikes may not need to start as strong as some have […]]]>

By STAN CHOE and CHRISTOPHER RUGABER, AP Business Writer

NEW YORK (AP) — The Federal Reserve is expected to start raising interest rates next month to help contain too-high inflation, New York Federal Reserve Chairman John Williams said Friday. But he added that rate hikes may not need to start as strong as some have suggested.

With inflation at its highest level in two generations, the Fed is expected to seek to cool the economy by raising its benchmark short-term interest rate from its record low of near zero. , where he has been throughout the pandemic. The only question has been how deep and how fast will it be, as too aggressive an approach could stifle the economy while too cautious could let inflation soar further.

“I personally don’t see any compelling case for taking a big step early,” Williams said following an event at New Jersey City University to discuss the economy and interest rates.

Williams, who is vice-chairman of the committee that sets interest rate policy at the Fed, said he saw a hike in March as the start of an “evolving” process to bring rates closer to interest to a level where they no longer stimulate the economy. He also said he expects inflation to decline from its current level due to a confluence of factors, including Fed actions and hoped-for improvements in inflation bottlenecks. supply chain. Last month, inflation hit 7.5% in January compared to a year ago.

political cartoons

Williams’ comments were echoed by other Fed officials, who spoke at a policy conference in New York. This support for a steady approach to rate hikes contrasted with previous statements by St. Louis Federal Reserve Chairman James Bullard, who said the Fed should consider a half-point rate hike when one of its next meetings, double its normal increase. His comments rattled Wall Street, which expected a slower takeoff in rates.

Federal Reserve Board of Governors member Lael Brainard said she expects the Fed at its next meeting in March to “initiate a series of rate hikes.”

Brainard is close to Fed Chairman Jerome Powell and was named vice chairman, the Fed’s No. 2 job.

Krishna Guha, an analyst at investment bank Evercore ISI, said Brainard “largely agrees” with Wall Street’s expectations that the Fed would hike rates six times this year.

She also said the Fed would soon turn to shrinking its massive $9 trillion balance sheet, which more than doubled during the pandemic due to Fed bond purchases. She said they would likely do that faster than between 2017 and 2019, when they let about $50 billion in bonds mature without replacing them.

Charles Evans, president of the Chicago Fed, said on Friday that the Fed needed to adjust its low interest rate policies, which he called “ill-intentioned.” But he also hinted that the central bank might not have to raise rates sharply this year.

Evans also said the high prices were primarily caused by supply chain disruptions and other factors resulting from the pandemic, and will likely subside in part on their own.

And given the current strength in the economy, Fed decisions are unlikely to slow hiring as much as interest rate hikes have in the past, Evans added.

Higher rates can contain inflation by slowing down the economy. But they can also cause a recession if they get too high, and they put downward pressure on all kinds of investments, from stock prices to cryptocurrencies.

Wall Street has recently been obsessed with almost every word of Fed officials, hoping to guess how quickly and how much the Fed will act.

The mix of aggressive and moderate comments left traders’ expectations in flux. Traders were only pricing in a 21% chance of such a half-point move on Friday afternoon, down from 49% a week earlier, according to CME Group.

Williams said he didn’t want to go into great detail about whether market expectations are in line with his own thinking on interest rate policy.

But he said the broad moves made sense, based on expectations that the Fed would bring its key interest rate closer to normal, like 2% to 2.5% by the end of the month. next year. That’s more than the latest forecast from Fed officials. In December, they had a median projection of 1.6% for the federal funds rate at the end of 2023.

Evans, who generally favors lower interest rates, acknowledged that if inflation remains high throughout this year, more rate hikes may be needed.

Other speakers at the New York conference focused on whether the Fed got it wrong when it adopted its new policy framework in August 2020, which aimed to keep rates low until inflation actually materializes. Previously, the Fed typically raised borrowing costs when the economy was healthy to anticipate any inflation.

Frederick Mishkin, former Fed governor and economist at Columbia University, said the Fed had “made a big mistake” in not raising rates sooner to keep inflation from taking off. Now, Fed officials may have to raise rates much more to get prices level, he added.

Evans, however, defended the Fed’s new policy framework by pointing out that in the past, when the Fed raised rates to anticipate inflation, such moves likely cost many jobs. And in some cases, inflation has not materialized.

Following remarks from Williams and Evans, the two-year Treasury fell to 1.46% from 1.49% on Thursday night. It tends to move with expectations regarding Fed rate policy. Stocks and other segments of the bond market also fell on fears of a possible Russian invasion of Ukraine.

Copyright 2022 The Associated press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Banks decide to raise interest rate on deposits by one percentage point citing tight liquidity – myRepublica https://johnhesch.com/banks-decide-to-raise-interest-rate-on-deposits-by-one-percentage-point-citing-tight-liquidity-myrepublica/ Sat, 12 Feb 2022 12:41:09 +0000 https://johnhesch.com/banks-decide-to-raise-interest-rate-on-deposits-by-one-percentage-point-citing-tight-liquidity-myrepublica/ KATHMANDU, February 12: Banks are raising the interest rate on deposits citing the tight liquidity position in the country’s banking system. The Nepal Bankers Association (NBA) at a meeting on Friday decided to raise the interest rate on deposits by one percent. In the revised rate, the apex organization maintained the 11.03% cap on fixed […]]]>

KATHMANDU, February 12: Banks are raising the interest rate on deposits citing the tight liquidity position in the country’s banking system.

The Nepal Bankers Association (NBA) at a meeting on Friday decided to raise the interest rate on deposits by one percent. In the revised rate, the apex organization maintained the 11.03% cap on fixed deposits for individual customers.

The upper limit of the interest rate for institutional depositors has been set at 10.03% per annum. Similarly, the interest rate on savings accounts has been set at 5% lower than the interest rate on time deposits while the interest rate on demand deposits is maintained at 3.015% by year.

According to a banker, the banks are seeking to raise the interest rate following pressure from the Nepal Rastra Bank (NRB) to do so. Amid a growing shortage of loanable funds despite the implementation of various measures by the NRB, the central bank reportedly asked banks to raise interest rates to attract more deposits.

According to NRB records, the base interest rate on loans reached 8.42% in mid-January. Similarly, the average interest rate on deposits reached 6.37% per year.

Following a rise in interest rates on deposits, banks are expected to raise the lending rate soon. Recently, banks raised their base interest rate on loans by more than two percentage points starting in mid-January, citing increased spending on deposit interest.

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CBN extends 5% interest rate on intervention loans https://johnhesch.com/cbn-extends-5-interest-rate-on-intervention-loans/ Thu, 10 Feb 2022 21:55:27 +0000 https://johnhesch.com/cbn-extends-5-interest-rate-on-intervention-loans/ Posted February 10, 2022 Central Bank of Nigeria Governor Godwin Emefiele has said the bank will extend its 5% interest rate on its intervention loans introduced to cushion the effect of COVID-19 on the economy for another year. . He disclosed this during a Bankers Committee press briefing in Abuja, which was also held virtually. […]]]>

Central Bank of Nigeria Governor Godwin Emefiele has said the bank will extend its 5% interest rate on its intervention loans introduced to cushion the effect of COVID-19 on the economy for another year. .

He disclosed this during a Bankers Committee press briefing in Abuja, which was also held virtually.

Emefiele said that to restore stability to the economy by providing assistance to individual households, SMEs and businesses that had been badly affected by the pandemic, as well as the lockdown measures, he reduced the interest rate on CBN intervention loans from nine to five percent.

He said: “Although interest rates on our various intervention facilities were expected to return to 9% effective March 1, 2022, we are announcing that rates would remain at 5% for another year given the promising trajectory that we have established in economic growth and job creation.

“Indeed, the prime interest rate of 5% on our intervention facilities would now be extended until March 1, 2023.”

Copyright PUNCH.

All rights reserved. This material and any other digital content on this website may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without the prior express written permission of PUNCH.

Contact: [email protected]

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Fernanda Vallejos returned to the charge of Alberto Fernández: the time when she called him “squat” and “mequetrefe” https://johnhesch.com/fernanda-vallejos-returned-to-the-charge-of-alberto-fernandez-the-time-when-she-called-him-squat-and-mequetrefe/ Sat, 05 Feb 2022 23:19:57 +0000 https://johnhesch.com/fernanda-vallejos-returned-to-the-charge-of-alberto-fernandez-the-time-when-she-called-him-squat-and-mequetrefe/ The former national deputy Fernanda Vallejos Returned at load from Alberto Fernandez a week after the president reached a preliminary agreement with the International Monetary Fund (IMF) for the $45,000 million debt. The economist, now a reference for the Soberanxs party, estimated this Saturday that the head of state “has already had his turn”. From […]]]>

The former national deputy Fernanda Vallejos Returned at load from Alberto Fernandez a week after the president reached a preliminary agreement with the International Monetary Fund (IMF) for the $45,000 million debt. The economist, now a reference for the Soberanxs party, estimated this Saturday that the head of state “has already had his turn”. From there, many remembered the scandalous audio from WhatsApp where Vallejos herself is heard Branding to Fernandez from “squat” Yes “freuquet”among other qualities.

The recent declarations of the former deputy intervened within the framework of an interview granted to Radio Mitre. First, she analyzed the bases of Argentina’s pre-agreement with the IMF for the debt contracted by the government of Mauricio Macri. In this regard, she maintained: “A debt of these characteristics cannot be recognized or negotiated, which is tainted with illegality from its constitution until its execution, because each of the dollars which have been disbursed have fled, pure and simple.

In this sense, Vallejos warned: “The IMF did not fulfill any of its obligations, it acted with absolute irresponsibility with Argentina and it was a huge scam against the Argentine people, public property and the coffers of the Central Bank”. And then he added: “It is not a debt contracted under conventional conditions, but absolutely irregular.”

Finally, when asked about the 2023 presidential elections, the Soberanxs referent felt that Alberto Fernández should not stand again because “he already had his turn”. And about the possible candidacies of Cristina and Máximo Kirchner and Axel Kicillof, she said: “Obviously one of the three is in my preference.” However, she stressed the importance of having interns. “Thinking about 2023 is difficult for me. Let’s hope that we Argentines can choose it and there can be interns, which we haven’t had for a long time,” she said.

“Sick, entrenched, squatting and whipping”

Last September 16, an audio of Vallejos, then national deputy of the Frente de Todos with a mandate to fulfill, was leaked, in which he called the president “sick, entrenched, squatter and whipper” who is “on loan” in the Casa Rosada and surrounded by “useless people.” It all happened after the ruling party’s first electoral defeat in the legislative primaries.

“We were all hoping that Alberto Fernández’s patient, Alberto Fernández’s squat, Monday at 8 a.m. would hold a press conference at an office, with all the resignations on the table, saying Argentina, not that there were messages from the ballot box as he hypocritically said on Sunday, because obviously you can see that in addition to being blind he is deaf, because he has never heard anything and that he didn’t learn anything from Nestor or anyone else, he didn’t. But he did not do it. Not only did he not do it, he does not want to do it, ”we hear the Kirchnerist leader launch in a WhatsApp audio.

The name of the person to whom the message was addressed was not disclosed, but it is suggested that it is a leader with whom he usually exchanges political analysis. This is how the recording continues: “He wants to keep his core of useless people, who are all there on loan, occupy the offices of the Casa Rosada and have done nothing. There is no political leadership in Cabinet because the Chief of Staff (Santiago Cafiero) is a clown”.

Similarly, the then MP complained that “economic policy should have been subordinated to health policy and not to reducing the budget deficit and respecting the mandate of the IMF”. In this sense, she recalled her questions to the leader of PRO, Mauricio Macri, and said: “How sad to have to say the same thing to a guy we have as president.”

In the post, which has gone viral amid the crisis facing the government after PASO 2021’s defeat, Vallejos reiterated his criticism of Alberto Fernández: “He is entrenched in Casa Rosada. It’s a squat. “This government needs to be revived. It was, it has failed so far. They have managed the pandemic, now we have to turn the page and start a new government,” he continued.

On the other hand, he pointed out, “It’s too late to cry over spilled milk. He cannot continue to be infatuated, even less it seems to me, because he is fine, he hung up the bench and grabbed the cane, but it is clear that he is a tenant”. To conclude, he said: “The owner of the votes, the owner of the legitimacy, the owner of the popular support, the owner of the support base of this government and the one who sat it there is Cristina.”

The Liberation of Vallejos

Given the spread of the message, Vallejos took to his social networks to explain the situation: “I discovered that a private conversation had been leaked where, in the context of the anguish that many of us have generated by Sunday’s result which reflected the suffering of our people and that we were not able to meet their aspirations, I had really inappropriate expressions, ”he justified.

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Despite record inflation, the Bank of Canada is keeping interest rates steady – for now https://johnhesch.com/despite-record-inflation-the-bank-of-canada-is-keeping-interest-rates-steady-for-now/ Wed, 26 Jan 2022 18:47:18 +0000 https://johnhesch.com/despite-record-inflation-the-bank-of-canada-is-keeping-interest-rates-steady-for-now/ The Bank of Canada has decided not to raise its benchmark interest rate for the time being. Like many other central banks around the world, the bank lowered its policy rate – known as the target for the overnight rate – at the start of the pandemic in March 2020, to ensure that consumers and […]]]>

The Bank of Canada has decided not to raise its benchmark interest rate for the time being.

Like many other central banks around the world, the bank lowered its policy rate – known as the target for the overnight rate – at the start of the pandemic in March 2020, to ensure that consumers and businesses have access to cheap loans to keep the economy afloat.

But two years of lower borrowing rates have been a major contributor to inflation, which hit nearly 5% in Canada last month, its highest level in more than 30 years.

This has raised expectations that the bank will soon start raising its rate. But the bank has decided not to do so for the time being, opting to keep its rate at 0.25%, the same level it has been for the past 670 days.

But it made it clear that he might lean that way in the very near future.

Although the rate remained the same, the bank decided to remove what it calls its “exceptional forward guidance” to keep rates where they are for as long as necessary, until the economy slows. be absorbed.

“This is a significant change in monetary policy,” Governor Tiff Macklem said at a press conference after the announcement. “[It] signals that interest rates will now be on an upward trajectory.”

But the bank said continued uncertainty around the Omicron variant means it is not yet ready to take its first steps down that path.

WATCH | The Bank of Canada explains why it’s not ready to raise rates yet:

Bank of Canada governor discusses timeline for post-pandemic return to normal

Tiff Macklem is asked when the bank will be ready to remove stimulus from the economy. 1:52

At least one bank supervisor says standing up was a mistake.

“The decision, in our view, is a political faux pas,” said FX analyst Simon Harvey of Monex Canada, “and it’s a move that could prove costly down the road.”

By waiting to raise its rate, Harvey said, the bank risks “emboldening near-term inflation expectations and stoking the fire under the housing market.”

The Canadian housing market has been on fire during the pandemic, with cheap loans acting like rocket fuel on the scorching tinder of demand, driving up prices.

The central bank rate affects the rates Canadians get from their banks on things like variable rate mortgages, so keeping the rate low will prolong that.

Adrian Howell owns a condo in Toronto and took out a variable rate loan. He says he is looking to secure a fixed rate before interest rates rise. (Doug Husby/CBC)

That’s good news for Adrian Howell, who has an adjustable-rate loan on his Toronto condo and is watching the market carefully, waiting for a moment to lock in before rates rise.

“With interest rates remaining the same, I have a bit more time to make comparisons, but I will definitely lock in my rate or lock in a fixed mortgage at some point before March,” he said. he declares. told CBC News in an interview.

He is not the only one. Mortgage broker Sung Lee of Rates.ca says she sees a number of existing homeowners and potential buyers trying to lock in ahead of upcoming hikes.

“Whether it’s potential customers looking to make an offer for a home or for mortgages to renew, we get a lot of early renewal requests,” she said. “People are trying to take advantage of the really low interest rate environment before they see further increases.”

Small increases add up quickly

While the bank should start to climb slowly, a number of consecutive small hikes would add up.

Lee says that today a qualified buyer on an adjustable rate loan could get a $500,000 mortgage that would cost him $1,964 a month to pay off over 25 years.

One rate hike would add $58 a month to their monthly payment, while four hikes would bring it to just over $2,200 a month. Their mortgage rate would only have increased by one percentage point, from 1.35% to 2.35, but their actual payment would have increased by more than 12%.

And it is only with four rises, not the six or seven that the market anticipates. Calculations that add up quickly could be hard to swallow “if someone is on a really tight budget and they don’t want to have to worry about their payments fluctuating,” she said.

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China warns the West against a rapid rise in interest rates | Mondial economy https://johnhesch.com/china-warns-the-west-against-a-rapid-rise-in-interest-rates-mondial-economy/ Mon, 17 Jan 2022 20:39:00 +0000 https://johnhesch.com/china-warns-the-west-against-a-rapid-rise-in-interest-rates-mondial-economy/ China has warned the United States and Europe against a rapid rise in interest rates that would “stifle” the global recovery from the pandemic. Central banks would have to maintain monetary stimulus or risk “serious economic consequences” from spillover effects, with developing markets bearing the brunt. In a virtual address to open the World Economic […]]]>

China has warned the United States and Europe against a rapid rise in interest rates that would “stifle” the global recovery from the pandemic.

Central banks would have to maintain monetary stimulus or risk “serious economic consequences” from spillover effects, with developing markets bearing the brunt.

In a virtual address to open the World Economic Forum’s Davos Agenda, Chinese President Xi Jinping said that as global inflation risks emerge, policymakers should strengthen economic policy coordination and develop policies. to prevent the global economy from plunging again.

“We must do whatever is necessary to erase the shadow of the pandemic and spur economic and social recovery and development,” he said.

“If major economies slow down or reverse course in their monetary policies, there will be serious negative fallout. They would present challenges to global financial and economic stability and developing countries would bear the brunt of it.

China is among many countries in Asia, Africa and South America concerned about plans announced by the US central bank to accelerate a series of interest rate hikes scheduled for this year and begin to cancel its program. quantitative easing stimulus.

The Federal Reserve has come under intense pressure to respond to rising inflation, which soared to 7% in December, its highest level in 40 years.

Rising US interest rates will make it more expensive to finance dollar-denominated debt.

Policymakers at the Bank of England and the European Central Bank are also expected to tighten monetary policy in the coming months, increasing the risk that indebted countries fail to repay their loans.

Tensions with the United States extend beyond monetary policy to concerns over intellectual property, trade, the fate of Taiwan, human rights and the South China Sea.

Xi said, “We must abandon the Cold War mentality and pursue peaceful coexistence and win-win outcomes. Our world today is far from tranquil,” Xi said, through a translator.

“Protectionism and unilateralism cannot protect anyone. Ultimately, they harm the interests of others as well as his own. Worse still are the practices of hegemony and intimidation, which run counter to the course of history.

“A zero-sum approach that increases one’s own gain at the expense of others won’t help,” he added. “The right path for mankind to follow is peaceful development and win-win cooperation.”

Xi was speaking after latest figures showed China’s economy had slowed at the end of last year to 4% in the three months from October to December compared to the same period in 2020.

Data from the National Bureau of Statistics revealed the weakest expansion in 18 months as the Covid-19 pandemic and crisis in its property sector hit growth.

In the first three quarters of 2021, China’s economy grew by more than 9%, but since the summer it has slowed significantly, prompting Beijing to cut a key interest rate.

Analysts have blamed Beijing’s zero-tolerance approach to the Covid-19 virus, which has included restricting all movement in cities that have only a handful of cases.

Retail sales growth slowed sharply to just 1.7% year-on-year in December from 3.9% previously, the bureau said.

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The repercussions of the crisis on indebted real estate developer Evergrande have also weighed on the Chinese economy.

Louis Kuijs, head of Asian economics at Oxford Economics, said Xi’s administration was unlikely to tolerate GDP growth below 5%, meaning further cuts in borrowing costs were possible. .

“If growth is weaker than that, Beijing will feel strongly motivated to pursue further policy easing,” she said.

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Week Ahead: Interest Rate Anxiety Intensifies https://johnhesch.com/week-ahead-interest-rate-anxiety-intensifies/ Sun, 16 Jan 2022 05:03:00 +0000 https://johnhesch.com/week-ahead-interest-rate-anxiety-intensifies/ Can earnings season soothe investors’ nerves? It’s been a turbulent start to the year in the markets and that’s unlikely to change as we enter earnings season. Fear of high inflation and accelerated monetary tightening has driven much of the volatility seen in financial markets over the past two weeks and is unlikely to ease […]]]>

Can earnings season soothe investors’ nerves?

It’s been a turbulent start to the year in the markets and that’s unlikely to change as we enter earnings season. Fear of high inflation and accelerated monetary tightening has driven much of the volatility seen in financial markets over the past two weeks and is unlikely to ease any further. soon, with a peak still ahead of us.

Earnings season could help soothe nerves in the weeks ahead as we are reminded that the economy is still in good shape despite the challenges it faces. But even that comes with an element of uncertainty given that Omicron hit in late November, which will no doubt have had an impact. Of course, as we have seen over the past two years, there are also winners when consumers stay home and restrictions are imposed.

Ultimately, however, central banks currently remain high on the list for investors and the week ahead offers a selection of meetings, minutes and speakers that are sure to attract plenty of attention. It’s hard to look past CBRT as one of the highlights for next week. After an aggressive easing cycle that has cost a lot of money, will the central bank finally slam the brakes?

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The week ahead is busy with economic data and earnings results. Goldman Sachs (NYSE:), Bank of America (NYSE:) and Morgan Stanley (NYSE:) will close big bank earnings, while Procter & Gamble (NYSE:) may provide better insight into the scale of price increases additional that the consumer can expect.

On Tuesday, activity should have cooled in January. Wednesday is all about real estate activity which could show both up and down slightly.

On Thursday, they are expected to resume their decline, while they should improve, and could show a slight decline.

Blackout dates are in effect for the Fed, so it will be quiet until the FOMC meeting on Jan. 26. While financial markets are pricing in more than a 90% chance of the Fed raising rates in March, they seem to be forming a range just below the 1.80% level.

EU

With the ECB among the minority of central banks still singing from the transitional hymn sheet, the focus this coming week will be on the ECB’s accounts from December, comments from policymakers including the President Christine Lagarde on Monday, and the final inflation figures for December. At 5%, it is uncomfortably high and the central bank could soon give in like the others if the pressures do not ease quickly.

UK

The week will be a data dump week for the UK, with the labor market, and everything will be released. But Wednesday is undoubtedly the star, with the governor due to speak hours after the CPI is released, which could make for some interesting comments. Three or four rate hikes are expected this year, so expectations are quite hawkish, but as we’ve seen recently, there are growing fears that more may be warranted.

Russia

No major data or economic events next week, so the focus will remain on the various geopolitical risks at the center of which Russia has found itself. A possible invasion of Ukraine tops the list, with a week of intense talks between the United States and Russia apparently failing to yield a breakthrough.

Russia is also intrinsically linked to the energy crisis in Europe which is intensifying as new failures of French reactors put additional pressure on limited reserves.

South Africa

Inflation data next week is expected to show mounting price pressures, rising to 5.7%, which will increase calls for further rate hikes from the SARB.

Turkey

A rare period of relative stability for CAF which should not last, since CAF meets next week. Can the central bank resist the urge to cut again or are bigger losses on the horizon? Not cutting could provide some support for the reading as it could signal the end, for now, of the easing cycle.

China

China releases Q4 and Monday. Markets are bracing for slower growth, with a consensus of 3.5%, down from the 4.9% gain in Q3. It would be the weakest GDP report since the second quarter of 2020.

Retail sales are forecast at 3.8% year-on-year in December, from 3.9% previously. The government has adopted a zero COVID strategy, which has restricted travel and restaurants. Weak income growth is also hurting consumers and dampening consumer spending.

China’s real estate sector remains in deep crisis, with no sign of improvement on the horizon. Evergrande (HK:) and other developers owe billions and investment growth and household lending has declined. The government has eased restrictions on housing finance, but these measures have so far proved ineffective.

China was liberated on Saturday. The previous version, however, showed 3% growth and is widely considered low impact data.

Also on Monday, before the GDP release, the PBOC will decide whether or not to keep the MLF rate at 2.95%.

India

No major economic data or events next week.

Australia

Australia releases key jobs data for December next week. is expected to slow to 60,000 from 366,100 in November. The is expected to decline to 3.5% from 3.6%.

Prices hit their highest level in three months as heavy rains hit Brazil’s mining region, raising supply concerns.

New Zealand

It’s a quiet economic calendar next week. On Thursday, New Zealand releases the for December. The PMI was flat in November, reading 50.6 points.

Japan

Inflationary pressures in Japan are much lower than those in the UK or the US, but are nonetheless rising after years of deflation. The Bank of Japan is expected to maintain its ultra-accommodative policy on Tuesday, but will likely revise its view on inflation risks for the first time since 2014.

Inflation remains well below the bank’s 2% target, but the BoJ may consider raising interest rates before reaching it.

Economic Calendar

Sunday January 16

The National Retail Federation of the United States opens its annual Retail’s Big Show at the Javits Center in New York

Monday January 17

Economic data/events

  • US stock and bond markets are closed for the Martin Luther King Jr. holiday.
  • China GDP, retail sales, industrial production, surveyed unemployed, real estate investment, medium-term loans
  • Handelsblatt Energy Summit with German Economics Minister Habeck
  • Euro region finance ministers meet in Brussels
  • Japanese Prime Minister Kishida addresses parliament
  • Sales of existing homes in Canada
  • CPI Poland
  • Japanese industrial production, basic machinery orders, tertiary industry index
  • Singapore Electronic Exports
  • Russia Trade
  • Norway Trade
  • Remittances to the Philippines Abroad
  • Rightmove UK house prices
  • Sight deposits in Switzerland, Bloomberg Economic Survey January
  • Turkish central government fiscal balance

Tuesday, January 18

Economic data/events

  • US cross-border investment, empire making, NAHB housing market index
  • BOJ Rate Decision: No Change in Monetary Policy, May Adjust View on Inflation Risks
  • Japanese industrial production, capacity utilization
  • EU finance ministers meet in Brussels and hold a policy debate on global minimum taxation for multinational companies.
  • Australian consumer confidence
  • Housing starts in Canada
  • Registrations of new cars in the euro zone
  • Expectations from the ZEW survey in Germany
  • New Zealand house sales
  • Russia Trade
  • Mexico’s international reserves
  • Claims for unemployment insurance in the UK, unemployment
  • CPI Poland
  • Producer and import prices in Switzerland
  • Mining, gold and platinum production in South Africa
  • Property price index in Turkey
  • Sweden Riksbank Gov Ingves speaks during a panel at a blockchain and stablecoin conference

Wednesday January 19

Economic data/events

  • Housing starts in the United States
  • UK CPI, house price index
  • French President Macron addresses the European Parliament
  • BOE Governor Bailey addresses the UK Parliament Treasury Committee
  • IPC Canada
  • CPI Germany
  • IPC South Africa
  • Construction output in the euro area
  • Australia Westpac consumer confidence
  • Card spending in New Zealand
  • Retail sales in South Africa
  • Current account Russia
  • Banking profits of BoA and Morgan Stanley

Thursday January 20

Economic data/events

  • Sales of existing homes in the United States, first claims for unemployment
  • ECB December Policy Meeting Minutes
  • BOJ December Meeting Minutes
  • UK RICS housing prices
  • Norway Rate Decision: Should keep rates stable
  • Turkey Rate Decision: Should Keep Rates Stable
  • Hungary Rate Decision: Rates Expected to Hold Stable
  • Eurozone CPI
  • Hong Kong CPI
  • CPI Russia
  • Japan Trade
  • Preferential Chinese Lending Rates, Fast Global Payments
  • Australia Unemployment, Consumer Inflation Expectations, RBA FX Trades
  • New Zealand food prices, heavy traffic ANZ Truckometer
  • Germany PPI
  • Taiwan export orders
  • Unemployment in Mexico
  • Spain real estate transactions, trade
  • Business and industry confidence in France
  • Unemployment in the Netherlands, consumption expenditure
  • Consumer confidence in Poland
  • EIA Crude Oil Inventory Report
  • Netflix releases earnings after the bell

Friday January 21

Economic data/events

  • Conf. Board Main Index
  • CPI Japan
  • UK retail sales
  • BOE Mann speaks at the Official Monetary and Financial Institutions Forum
  • Retail in Canada
  • Eurozone consumer confidence
  • The Bank of Italy publishes the Quarterly Economic Bulletin
  • Consumer confidence in Turkey
  • New Zealand Manufacturing Index Performance, Net Migration
  • Singapore Property Prices
  • Switzerland Money supply
  • Russia Money supply
  • Thailand trade, futures, foreign exchange reserves
  • China FX Net Settlement
  • Poland sold industrial output, construction output, employment, PPI

Sovereign Ratings Updates

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