Tag Archives: Interest Rate / Policy

Brazil

UPDATE 1-Brazil’s stable currency to ease inflationary pressures, said the head of cenbank | Instant News


(Adding details, quotes, graphics)

BRASILIA, Nov 26 (Reuters) – Brazil’s currency appears to have stopped weakening and is now stabilizing, suggesting the upward pressure on inflation from this year’s persistently weak exchange rate will disappear, Roberto Campos Neto, president of the central bank, said on Thursday. .

In an online interview with media outlet MyNews, Campos Neto said the central bank is taking a longer-term view on inflation, and there is little to suggest long-term price pressures have changed much or inflation will exceed the bank’s target next year.

“We see that the exchange rate has stopped (weakened), or has been at this level for some time, so we think this effect (on inflation) will weaken,” said Campos Neto.

The Brazilian real has become one of the worst performing currencies in the world this year, falling nearly 30% against the dollar due to record low interest rates and uncertainty surrounding the government’s fiscal stability.

This, along with rising food prices and strong consumer demand thanks to the government’s emergency aid payments, has pushed inflation to the point where many economists now say the central bank will start raising interest rates early next year than they previously expected.

The real fell as low as 6.00 per dollar earlier this year but has recovered, and is now testing a key technical level on the 200-day moving average.

Campos Neto said the central bank is not looking at daily inflation, but is taking a longer-term view.

“It’s not just the central bank that thinks long-term inflation expectations won’t increase. The market doesn’t think so either. It’s important to show this, “he said.

The central bank’s official inflation targets for this year, next year and 2022 are 4.00%, 3.75% and 3.50%, respectively. According to the central bank’s latest weekly survey of economists, inflation will fall this year and next year, reaching 3.50% by 2022.

But producer price inflation data on Thursday showed upward pressure remained strong, with factory gate prices in October rising at a record monthly 3.4%.

Reporting by Jamie McGeever and Marcela Ayres; Edited by Toby Chopra and Paul Simao

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Germany

Germany’s second partial lockdown is weighing on consumer morale | Instant News


BERLIN (Reuters) – German consumer morale fell further into December as a partial lockdown to curb a wave of the coronavirus in Europe’s second largest economy hit household income expectations as well as their willingness to buy, a survey showed on Thursday.

FILE PHOTOS: People wearing face masks take pictures on the shopping street Schloss Strasse, as the coronavirus disease (COVID-19) outbreak continues, in Berlin, Germany, 24 October 2020. REUTERS / Fabrizio Bensch

The GfK Institute said its consumer sentiment index, based on a survey of about 2,000 Germans, fell to -6.7 in November from -3.2 in the previous month.

The figure missed Reuters forecasts for a narrower decline to -5.0.

GfK consumer expert, Rolf Buerkl, said although retail shops have remained open so far, the closure of restaurants, bars, hotels and entertainment venues since November 2 has clouded consumers’ moods.

The increasing number of COVID-19 increases uncertainty so that more Germans are holding back their money, Buerkl added.

“The hopes for a speedy recovery that emerged in early summer are definitely dashed,” said Buerkl.

German business morale also fell in November, suggesting that the economy will shrink in the fourth quarter due to new restrictions, the Ifo agency said on Tuesday.

Germany’s infection rate has risen and its cases are close to one million, with daily deaths from COVID-19 hitting a record 410 on Wednesday.

Chancellor Angela Merkel agreed with the leaders of Germany’s 16 federal states to extend and tighten measures against the coronavirus until at least December 20 and they are likely to extend this to January, he said on Wednesday.

“Only a real drop in infections and easing of restrictions will bring even more optimism,” said Buerkl, adding that the rate of infection in the coming weeks will determine whether consumer sentiment can stabilize again.

The consumer climate indicator predicts the development of real private consumption in the following month.

A reading of the indicator above zero indicates growth in private consumption from year to year. Below zero values ​​indicate a decrease compared to the same period last year.

According to GfK, a one-point change in the indicator corresponds to a 0.1 percent year-on-year change in private consumption.

The “willingness to buy” indicator represents a balance between positive and negative responses to the question: “Do you think now is a good time to buy big things?”

The income expectations sub-index reflects expectations about developments in household finances in the next 12 months.

The additional business cycle expectations index reflects the assessment of those who question the general economic situation in the next 12 months.

Reporting by Riham Alkousaa; Edited by Michael Nienaber

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Brazil

UPDATE 1-The head of Brazil’s central bank said it was ‘relatively calm’ on inflation, but was wary | Instant News


By Jamie McGeever, Marcela ayres

(Adding details, quotes)

BRASILIA, November 25 (Reuters) – Brazil’s central bank is relatively relaxed about inflation, bank president Roberto Campos Neto said on Wednesday, noting that policymakers should look through the recent spike in prices and take a longer-term view.

Speaking at a live online event hosted by community finance cooperative Sicoob Engecred, Campos Neto also said policymakers will discuss their “forward-looking” pledge to keep interest rates low for a long time at their next policy meeting in mid-December.

Inflation in Brazil has picked up in recent months, which Campos Neto says is due to a surge in food prices, a weak exchange rate and demand driven by government emergency revenue transfers. This is a temporary phenomenon, he stressed.

“We are vigilant … but the horizons of central banks are always longer. This is a way to conduct monetary policy, ”said Campos Neto. We are relatively calm, we monitor progress.

This week’s figures show that consumer price inflation was 0.8% in the month to mid-November, the highest November reading in five years, and the annual inflation rate was 4.2%, above the central bank’s year-end target of 4.00%.

Campos Neto said that if the central bank takes a short-term view of inflation, it will be under pressure to cut interest rates even lower than a record low of 2.00% a few months ago when inflation was much lower.

Asked whether the central bank will adjust its “forward guidance” pledge to keep interest rates low for a long time, Campos Neto said policymakers will wait several weeks to discuss them at their next policy meeting on December 8-9.

He reiterated his view that the government must continue its agenda of economic reform and fiscal consolidation to regain investor confidence that deficits and debt are on a downward path.

The uncertainty surrounding the fiscal outlook has helped drive up long-term borrowing costs and has been a factor behind the near 30% real depreciation against the dollar this year, he said. ($ 1 = 5.32 reais) (Reported by Jamie McGeever and Marcela Ayres Editing by Chris Reese and Jonathan Oatis)

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uk

Failure to secure a Brexit trade deal will wipe out an extra 2% off UK – OBR output | Instant News


LONDON (Reuters) – Britain and the European Union’s failure to agree on a free trade deal will wipe out an additional 2% of British economic output while driving up inflation, unemployment and public borrowing, official estimates showed on Wednesday.

FILE PHOTOGRAPH: Euro and pound banknotes are seen in front of the letters BREXIT in the image illustration taken on April 28, 2017. REUTERS / Dado Ruvic / Illustration

The Office of Budget Responsibility reviewed Brexit forecasts after ruling the prospect of a “no-deal” exit remained a risk, more than five weeks before Britain completely left the world’s largest trading bloc on December 31.

The OBR said the imposition of tariffs under World Trade Organization rules and disruption at the borders will hit parts of the economy such as manufacturing that have emerged relatively unscathed from the COVID-19 pandemic.

The independent body has predicted Brexit will cost Britain 4% of GDP in the long term even if the UK secures a free trade agreement with the EU, compared to if Britain remains in the bloc.

“This (no deal) will further reduce output by 2% initially and 1.5% on forecast,” he said.

The initial economic hit will be felt at the start of the following year, and OBR estimates that some of the lost output will recover over the next five years.

Unemployment, at 4.8% in the third quarter of 2020, could peak at 8.3% in the third quarter of 2021 if there is no agreement – 0.9 percentage points higher than its central estimate for the period.

Consumer prices could rise 1.5% above the OBR center forecast, and lower tax revenues and higher spending on welfare and other measures could mean borrowing more than 10 billion pounds ($ 13.38 billion) on average. a year from 2021-22 onwards, pushing up debt.

“The imposition of tariffs on EU imports, higher non-tariff barriers, and a fall in the exchange rate all raise consumer prices, making them 1.5% higher than our central estimate,” OBR said.

($ 1 = 0.7473 pounds)

Reporting by Kate Holton and William James; editing by James Davey and Timothy Heritage

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New Zealand

UPDATE, 3-NZ government asks cenbank to include red-hot housing that tames, NZ $ jump | Instant News


* NZ fin min sends letter to RBNZ governor regarding housing crisis

* The proposal includes housing in the RBNZ remit

* Says high house prices lead to financial stability risks (Added RBNZ Governor response and analyst comments)

WELLINGTON, Nov 24 (Reuters) – The New Zealand government has asked the central bank to consider factoring house prices as part of its monetary policy, Finance Minister Grant Robertson said, increasing the local dollar on market bets of less stimulus over the next year. .

As policymakers grapple with soaring house prices and the risk of a property bubble, Robertson said the government is reviewing housing policies, and has written to the Reserve Bank of New Zealand (RBNZ) asking what it can do to help slow the property boom.

He proposes to take house prices into account when formulating monetary policy, along with the bank’s existing inflation mandate and maximum employment.

“I think this move threatens bank independence and questions what areas the Reserve Bank needs to focus on right now,” said Brad Olsen, a senior economist at Wellington-based economic consulting firm Infometrics.

The New Zealand dollar surged to $ 0.6985, the highest since mid-2018, as the government’s move is seen as bolstering expectations the central bank will refuse to move towards negative interest rates next year.

“I am concerned that the recent rapid rise in house prices, and the forecast for them to continue, will affect the government’s ability to meet the economic goals set out under the authority,” the finance minister said in a letter to RBNZ Governor Adrian Orr.

In response, Orr said the bank would consider the suggestion, but added that monetary policy and financial regulation alone cannot solve the problem because there are “long-term structural problems” affecting housing affordability.

MARKET TOO HOT?

Historically low interest rates, along with other monetary and fiscal stimulus to support the pandemic-hit economy have inflated the New Zealand housing market, misguided many economists who forecast a slowdown after years of rising prices.

Robertson’s letter comes amid mounting pressure to contain a booming property market – home values ​​have surged by about 90% in the last decade – and calls from opposition parties to ‘rein’ the central bank.

While the RBNZ is pumping another NZ $ 28 billion into the banking system this month, raising fears this will further inflame house prices, it is also considering reintroducing restrictions on mortgage lending that took off after COVID-19 slowed economic activity.

“With an extended period of low interest rates, and some time before housing supply can catch up with demand, now is the time to consider how the Reserve Bank can contribute to a stable housing market,” said Robertson. (Reporting by Praveen Menon; Editing by Kim Coghill & Shri Navaratnam)

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