Independnce Day of India

Posts Tagged: interest rate

 

Russia’s central bank is set to admit it made a mistake in hiking interest rates by 6.5 percentage points last month by slashing them.

Bank of Russia raised the country’s benchmark rate to 17pc on December 15, just days after raising it to 10.5pc, in a bid to stop a full-blown currency crisis.

However, the move has failed to curb rises in the euro and dollar, and has been met with anger by consumers and businesses after interest rates on bank loans soared.

The move has also failed to curb inflation, which jumped from 8.9pc at the end of November to 11.4pc at the end of December. Economy Minister Alexei Ulyukayev said on Wednesday that he sees inflation reaching 13pc at the end of this month, or slightly higher.

In a statement, Elvira Nabiullina, governor of the Bank of Russia, said: “The board of directors of the Bank of Russia will take a decision on the key rate primarily based on the need to curb inflation, which in the current environment is a priority issue for people and for business.

>> Read More

 

China’s economic growth continues to slow from the breathtaking pace logged a few years ago. Statistics showed real gross domestic product growth of 7.4% in 2014, the weakest expansion in 24 years.

     Wang Tao, an influential UBS economist, said at a recent lecture in Shanghai that the world’s second largest economy will further lose its momentum in 2015.

     Excerpts of Wang’s speech, delivered in Chinese, follow.

Oil pressure

China’s gross domestic product growth will likely to slow to 6.8% in 2015, while the economy comes under stronger deflationary pressure as plunging crude oil prices pull back the consumer price index to 1.5%. The country will likely continue to increase its trade surplus.

     China is expected to lower the required deposit reserve ratio for banks twice this year, for a total cut of 0.5 percentage point. The yuan is forecast to drop in value against the U.S. currency by more than 2% to around 6.35 yuan per dollar. >> Read More

 

Faced with falling prices and the risk of another recession, the European Central Bank this week is expected to announce a massive economic stimulus after trying to avoid taking the dramatic and controversial step for more than a year.

Many economists predict the ECB’s 25-member governing council Thursday will vote to buy large amounts of government bonds to hold down long-term interest rates and stimulate growth. The program, known as quantitative easing, is similar to Federal Reserve bond purchases credited with jolting the U.S. economy after the 2008 financial crisis. The last round of those purchases ended in October.

A eurozone bond-buying program got a major boost last week when the advocate general of Europe’s highest court stated that such an initiative would not violate a prohibition against using monetary policy to finance national budgets. The court typically follows the advocate general’s recommendation.

Quantitative easing, or QE, initially is likely to weaken the euro and further strengthen the dollar, hurting U.S. exports. But ultimately what’s good for the eurozone economy is good for U.S. multinational firms, and so stocks could get a lift if the ECB finally pulls the trigger, says Lucy O’Carroll, chief economist of Aberdeen Asset Management. >> Read More

 

Interview with Die Zeit

Interview with Mario Draghi, President of the ECB, conducted by Giovanni di Lorenzo on 17 December 2014, published on 15 January 2015

You have a clear-cut reputation. Luca di Montezemolo, the former CEO of FIAT and Ferrari who attended the same school as you in Rome, said that you were always the most competent and serious one – Mario, the prize pupil.

He exaggerates. I’ve never regarded myself as the best. Most certainly not. I went to school because I was sent there.

But you may have felt the burden of responsibility more than others: you lost your father at the age of fifteen, and your mother passed away only a little later. You were suddenly a very young head of family.

I can remember when, as a 16-year-old, I came back from holidays at the sea with a friend. He went home and could do what he liked. I, by contrast, was confronted with a stack of letters that I had to deal with, bills that had to be paid. But young people do not reflect on what they have to deal with and how they should do so. They simply get on with it. That is important, that is what prevents them from becoming depressed even in adverse circumstances.

They perhaps also understand at an early stage what they must do to survive, for example, work hard.

Belief in hard work was something that my parents taught us. My father used to say that work is the most important element in any person’s life.

>> Read More

 

America’s jobs market ended 2014 on a solid footing.

The US economy created 252,000 jobs in December compared with a revised 353,000 in November, the Department of Labor said on Friday. The unemployment rate fell to 5.6 per cent from 5.8 per cent.

Economists had expected a tally of 240,000 and an unemployment rate of 5.7 per cent.

The improvement in the US labour market proved more consistent in 2014 than the performance of the overall economy, which contracted sharply in the first three months of the year before rebounding to clock growth of 5 per cent in the third quarter. >> Read More

 

The final US monthly jobs report for 2014 is released later today and should cap the strongest year for jobs growth in America since 1999.

Department of Labor releases the figures at 8:30am.

How robust will the numbers be?

Economists predict the US will have added 240,000 jobs in December.

That would be lower than November’s surprise 321,000 – which was the highest print since January 2012. But it would still mean another print above the average of 228,000 over the past 12 months, and be a further sign that the US economy is doing well.

Economists at Deutsche Bank, who are predicting a gain of just 200,000, stress that “in no way” should a below-trend increase in the December fan concerns about a slowdown in the labour market. Even with a gain of 200,000, they point out, job gains would have risen by 2.9m in 2014, the largest annual increase since 1999.

What about the unemployment rate?

This is forecast to fall, from 5.8 per cent in November to 5.7 per cent in December.

The further the unemployment rate falls, the harder it is for the Federal Reserve to keep interest rates from rising, many economists argue. Those at Capital Economics think that if the unemployment rate does fall to 5.7 per cent, some Fed officials will have to reconsider whether rates can remain close to zero until the middle of the year.

How will the dollar react?

The dollar is very sensitive to signs that the Federal Reserve is more likely to raise interest rates at the moment, with last month’s jobs figures pushing the currency up. >> Read More

 

An improving year for job creation in the US ended on an encouraging note. That at least is the message from the latest survey of the jobs market by ADP.

The world’s largest economy created 241,000 jobs last month, up from 208,000 in November, a monthly survey from ADP showed on Wednesday.

Economists had forecast a total of 225,000.

The monthly survey by ADP, a New Jersey-based company, gained greater prominence in 2012 and 2013 because the health of the jobs market was clearly key to shaping when the Federal Reserve would raise interest rates.

The official jobs report for December from the Department of Labor is released on Friday and is expected to show 240,000 jobs were created compared with 321,000 in November.

But with the economy generating just under 230,000 jobs a month over the last year, anxiety over the low level of inflation is arguably a bigger concern for policymakers at the Federal Reserve and investors.

 

From Bill Gross’ 2015 Investment Outlook

“Ides”

A January Investment Outlook should normally be filled with recommended “do’s and don’ts,” “picks and pans” and December 31, 2015, forecasts for interest rates and risk assets. I shall do all of that as usual when I travel to New York City for the annual Barron’s Roundtable in a few weeks’ time. That is always an opportunity for me to engage in verbal jousting with Marc Faber, Mario Gabelli and the usual bearish forecast from the Gnome of Zurich, Felix Zulauf. So I’ll leave the specific forecasting for a few weeks’ time and sum it up in a few quick sentences for now: Beware the Ides of March, or the Ides of any month in 2015 for that matter. When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over.

Timing the end of an asset bull market is nearly always an impossible task, and that is one reason why most market observers don’t do it. The other reason is that most investors are optimists by historical experience or simply human nature, and it never serves their business interests to forecast a decline in the price of the product that they sell. Nevertheless, there comes a time when common sense must recognize that the king has no clothes, or at least that he is down to his Fruit of the Loom briefs, when it comes to future expectations for asset returns. Now is that time and hopefully the next 12 monthly “Ides” will provide some air cover for me in terms of an inflection point. Manias can outlast any forecaster because they are driven not only by rational inputs, but by irrational human expressions of fear and greed. Knowing when the “crowd” has had enough is an often frustrating task, and it behooves an individual with a reputation at stake to stand clear. As you know, however, moving out of the way has never been my style so I will stake my claim with as much logic as possible and hope to persuade you to lower expectations for future returns over the next 12 months. >> Read More

 

FOMC minutes

On Wednesday, the minutes of the December meeting of the Fed’s Open Market Committee (FOMC) are released and should reveal a lively discussion among policymakers on how much stimulus – if any – the US still requires.

The Dec 16-17 meeting, which was followed by a press conference from chairwoman Janet Yellen, caused confusion as the Fed dropped a pledge to keep interest rates low for a “considerable period” but, at the same time, suggested that change didn’t mean rates would be raised soon. The minutes will be released at 2pm local time.

International Consumer Electronics Show

The annual gathering of the consumer electronics industry begins in Las Vegas on Tuesday. The show should showcase the ways in which the largest technology companiesare planning to further entrench web-based gadgets into people’s lives. >> Read More

 

Russia’s Central Bank said on Friday it had raised the limit on foreign exchange swap operations to $10 billion from $2 billion for Dec. 19 to alleviate a shortage of rubles in the money market.

Interbank overnight ruble rates climbed to around 25 percent on Friday, far above the bank’s 17 percent benchmark interest rate, as banks scrambled for rubles to balance up their books for the day and manage their liquidity needs.

To bring market rates back into line with the benchmark rate, the Central Bank will allow lenders to hand in more dollars and will lend them rubles in return.

“This measure contributes to narrowing the spread between the interbank market rates and the Bank of Russia key rate,” the Central Bank said in a statement.

The Central Bank has been limiting ruble liquidity in recent months to underpin the currency, which has nearly halved in value against the dollar this year. But this has led to ruble shortages among lenders, who are required to keep a certain amount of liquid cash on hand.

The bank had said a week ago that it would keep the limit on forex swap operations to an equivalent of $2 billion a day for Dec. 15-21.

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Baroda, India.