31 October 2014 - 0:44 am
Bad loans at China’s biggest banks rose at the fastest pace in at least seven years during the third quarter as a slowing economy squeezed corporate borrowers. Analysts said the fall in asset quality was manageable.
Industrial & Commercial Bank of China and China Construction Bank, the country’s two biggest banks by assets, reported their biggest quarterly jump in bad loans in at least seven years, with rises of 9 and 10 per cent respectively.
Analysts warned against misinterpreting the rise at the two banks. “The market might be over-concerned with ICBC and CCB’s nonperforming loans,” said Dorris Chen, China financial institutions analyst at Standard Chartered. “NPLs rose because these banks are reluctant to sell them to distressed asset managers. It doesn’t indicate a bigger underlying problem with asset quality.”
Data from the central bank this week showed that lenders have trimmed their exposure to China’s troubled property sector. Loans to home buyers and developers fell 5 per cent in the third quarter from the same period a year earlier. >> Read More
30 October 2014 - 21:08 pm
No negative rates for the putative Bancor... Keynes must surely be rotating in his grave. It turns out the IMF is not going to lend SDRs for less than nothing, thus breaking ranks with some well-known central banks out there (no need to name names), and even the central bank-manipulated “market” in which investors accept negative rates on certain government bonds as if that made any sense.
Instead, the IMF has decided to set a floor for its SDR interest rate to maintain its role as a profit center…it will be at what is nowadays a downright usurious height of 0.05%. So at least at the IMF, there will be no pretense that time preferences can actually turn negative.
However, the IMF is thereby effectively raising its interest rate, which until recently was at a mere 0.03%:
“The International Monetary Fund is setting a 0.05 percent floor on the interest rate used to determine borrowing costs for some of its loans.
The executive board modified rules today to make the change, according to a statement today in Washington.
The IMF’s Special Drawing Right, based on a basket of the dollar, yen, euro and pound, is the fund’s unit of account that serves as a supplemental reserve asset and was designed to improve global liquidity.
The SDR interest rate was quoted on the IMF website at 0.03 percent today compared with 0.13 percent in April and more than 3 percent in August 2008, before central banks slashed borrowing costs to zero to boost growth in the aftermath of the financial crisis.
>> Read More
26 October 2014 - 7:58 am
Haruhiko Kuroda, governor of the Bank of Japan, sometimes asks close aides how he will be remembered. The central bank chief is well aware of the enormity of the challenge he is tackling.
The BOJ governor took the helm in March last year and soon after unleashed an unprecedented easing program that aimed to push inflation to 2% within two years.
If he manages to pull this off, and end the easing incident-free, Kuroda believes he will deserve the title of “great central banker.” The challenge is formidable: Japan’s growth potential is declining due to a confluence of factors, most importantly the shrinking population.
Short-term government bills, or T-bills, in recent days have been posting negative yields. That means investors are paying more money than they can expect to earn when the bills mature. In effect, they are paying simply to hold these securities. >> Read More
25 October 2014 - 14:09 pm
Finance Minister Arun Jaitley favours a cut in interest rates to trigger demand in the construction sector, but the Reserve Bank of India (RBI) has signalled it will not ease policy until it is confident of lower inflation.
In May, Prime Minister Modi was elected on promises that his government would create jobs and rejuvenate the economy, but experts were disappointed by Jaitley’s first budget and a lack of early progress on fixing structural economic problems.
“Currently, interest rates are a disincentive. Now that inflation seems to be stabilising somewhat, the time seems to have come to moderate the interest rates,” Jaitley said in an interview with the Times of India.
Last month, the RBI sent a strong signal that it would refrain from cutting interest rates until the central bank was confident that consumer inflation can be cut to a target of 6% by January 2016.
Retail inflation eased for a second straight month in September, but the risks of price shocks from weak monsoon rains and oil are expected to prevent the central bank from cutting interest rates soon.
Consumer prices rose a slower-than-expected 6.46% from a year earlier, the lowest since figures were first published in January 2012.
09 October 2014 - 0:14 am
Federal Reserve officials have become more concerned about weak growth overseas and the impact of a strengthening U.S. dollar on the domestic economy, according to minutes of the Fed’s September policy meeting released Wednesday.
Officials worried at the Sept. 16-17 policy meeting that disappointing growth in Europe, Japan and China could crimp U.S. exports. Meantime, the stronger currency, by reducing the cost of imported goods and services, could hold U.S. inflation below the Fed’s 2% objective. Fed staff also reduced its projection for medium-run growth in part because of these concerns.
The collective worry is added reason for the Fed to hold short-term interest rates near zero, even as the economy improves. >> Read More
08 October 2014 - 21:53 pm
If the Federal Reserve’s post-meeting statements are known for their concision, the minutes of the same meetings stretch to 12 pages. That won’t stop investors leafing (at least digitally) through the latest set when they are released later on Wednesday.
The September 16-17 meeting of the Fed’s Open Market Committee offered a wide – and sometimes contradictory – set of views.
There were the forecasts from individual governors for the Fed’s overnight lending rate, growth and inflation predictions as well as a press conference from chairwoman Janet Yellen.
The minutes will be released at 2pm local time, and here’s what to watch for.
Why did the phrase ‘considerable time’ stay? >> Read More
04 October 2014 - 10:14 am
Here is an analysis of the latest jobs data and how it might influence the thinking ofFederal Reserve officials considering the outlook for interest rates.
The U.S. jobless rate, at 5.9% in September, was already where Fed officials recently projected it would be by year end. Moreover payroll employment growth is robust, averaging more than 200,000 per month. That means early interest rate increases next year–before mid-2015–remain on the table. That was not the Fed’s expected path before today.
In addition, the employment report leaves officials with tough decisions about whether to alter their guidance about the interest rate outlook at their policy meeting later this month or wait until they update their economic forecasts in December.
Before today, many Fed officials expected they would start raising their benchmark short-term interest rate from near zero in the middle of next year, and encouraged that view in the markets. The jobs report strengthens the hands of those who want to move before midyear.
“A liftoff date at the end of the first quarter of 2015 would already be well past what is called for by a standard monetary policy rule,” said James Bullard, president of the St. Louis Fed and an early rate hike proponent, said in a presentation Thursday. >> Read More
03 October 2014 - 18:05 pm
America’s jobs market rediscovered more momentum than expected in September.
The US created 248,000 jobs last month, the Labor Department said on Friday in its monthly snapshot of the labour market. That compares with 180,000 in August, which was revised higher from 142,000.
The unemployment rate was 5.9 per cent compared with 6.1 per cent in August.
While broader US economic growth has been uneven this year, the improvement in the jobs market has proved more consistent. Excluding September’s tally, monthly jobs growth has averaged 215,000 this year compared with 194,000 in 2013.
The unemployment rate has fallen from 6.6 per cent at the start of the year and the 10 per cent in touched in 2009, when the world’s largest economy was engulfed by its worst recession since the 1930s.
Whether the scale of the improvement is enough to justify the first rise in official interest rates since the crisis is a matter of intensifying debate at the US Federal Reserve.
September’s meeting of the Fed’s rate setters revealed an emerging – though still small – split between a majority who favour keeping interest rates low and those who fear the central bank is putting financial stability at risk unless it begins to tighten.
29 September 2014 - 18:38 pm
Patience is a virtue.
Charles Evans, the president of the Chicago Federal Reserve and an influential observer of the US labour market, on Monday urged Federal Reserve officials to err on the side of caution as they debate when to raise interest rates.
As the Fed prepares to wrap up its bond-buying programme next month, there are signs of an emerging split at the central bank’s top table over when to raise interest rates.
Two Fed governors, Charles Plosser and Richard Fisher, this month dissented from the Fed’s overall pledge that it would keep interest rates low for a “considerable time” after it finishes buying bonds.
In a speech to the National Association for Business Economics in Chicago, Mr Evans insisted: >> Read More