inflation

 
 

Key moments in Draghi’s eventful ECB tenure

FRANKFURT, Oct 21 — Mario Draghi hands over the keys of the European Central Bank to Christine Lagarde on October 31, leaving the former IMF chief an economy struggling to stay in gear. Here are some of the key moments that made the Italian…


Departing Draghi leaves divided ECB to Lagarde

FRANKFURT, Oct 21 — Departing European Central Bank president Mario Draghi will leave a conflicting legacy after chairing his final governing council meeting on Thursday, credited with saving the euro but dividing the institution with his…


IMF: Strong ownership, enhanced dialogue needed in economic reform

KUALA LUMPUR: A major push for structural reform in an economy requires strong ownership by all stakeholders of the reform agenda as well as enhanced dialogue between the government with business and civil society, says the International Monetary Fund.

The IMF said in its blog that while there has been broad agreement on the economic benefits of structural reforms, the political impact is less settled because it would only generate gains in the longer term while inflicting short-term pain on some sectors.

It said those affected might be highly vocal and when this happens, politicians might hold back on reforms for fear they would be penalised at the ballot box.

“Policymakers should factor in any harm reforms might have on income distribution and take well-communicated upfront steps to offset such side effects.

“Strong social safety nets and active labour market programmes that help displaced workers find new jobs can help in this regard, given that reforms often mean simultaneous job creation and destruction,” it said.

In its research, the IMF said reforms are generally benign or even favourable politically when implemented swiftly after elections so that governments could reap the rewards from the medium-term economic gains.

On the other hand, electoral risks are heightened when governments delay and enact reforms on the eve of an election, given short-term dislocation effects often wrought by reforms.

The IMF said reforms do not seem to lead to political costs when enacted at times of robust economic activity whereas it would be more challenging politically under weak economic conditions.

“Even when economic conditions are difficult, though, governments may be able to implement reforms without an electoral penalty. For example, the cases of Spain in 1979 and Peru in 1995 show that crisis periods often present unique reform opportunities that do not necessarily incur political costs.

“What it takes is strong ownership by leaders to build consensus in society that reform with stabilisation is unavoidable. In both cases, new governments instituted reforms during periods of slowing growth and high inflation and were returned to office with solid shares of the vote,” it added. — Bernama


Lagarde thanks EU leaders after ECB confirmation

FRANKFURT, Oct 18 — Incoming European Central Bank (ECB) chief Christine Lagarde tweeted her “sincere thanks” to EU leaders today, after the European Council made official her appointment as next president of the Frankfurt institution. “My…


Tokyo's Nikkei hits 10-month high on US rallies

TOKYO, Oct 18 — Tokyo's benchmark Nikkei index rose to its highest level in more than 10 months following rallies on Wall Street, though trade was cautious ahead of a British vote on a new Brexit deal. The Nikkei 225 index rose 0.18 per cent, or…


Mexico's president vows wage growth, labour reform funding in push for trade deal

MEXICO CITY, Oct 18 — Mexico's President Andres Manuel Lopez Obrador vowed yesterday wage increases and funding for the implementation of labour reforms, part of a campaign to convince US Democratic lawmakers to ratify a new North American trade…


Sterling, UK stocks fall on concerns Brexit talks have stalled

LONDON, Oct 16 — Sterling weakened from five-month highs and stocks in London dropped today on concerns that talks between Britain and the European Union to secure a Brexit deal could fall apart. In another highly volatile day of trading for UK…


S.Korea cuts interest rate again as Japan trade row rumbles

SEOUL, Oct 16 ― South Korea's central bank today cut its key interest rate to the lowest point in two years in an effort to prop up its slowing economy as it is hit by a trade spat with Japan. The move comes as President Moon Jae-in battles to…


Australia shares extend rally for 5th day cheered by Wall St

Australian shares rose on Wednesday, boosted by a solid start to the U.S. earnings season and reports that Britain still has a chance of avoiding a messy exit from the European Union.

The S&P/ASX 200 index notched up 0.9%, or 55.6 points, to 6,707.6 by 0123 GMT, poised for a fifth day of gains, after having added 1.6% in the last four sessions combined.

A string of strong third-quarter earnings reports helped dispel some concerns over a global economic downturn and pushed Wall Street up 1%, while news of a possible breakthrough in Brexit negotiations also aided investor confidence.

“A lot of these moves are predominantly short covering as the market was worried about this month,” said Mathan Somasundaram, market portfolio strategist at Blue Ocean Equities.

Markets have long been gripped by worries of escalation in the bruising U.S.-China trade war, but recent news of the “Phase 1” trade deal between Washington and Beijing had helped dial back risk ante even though nothing was agreed on paper.

“It will be short lived in my opinion…it’s a suckers rally,” said Brad Smoling, managing director at Smoling Stockbroking.

Australian bank stocks, the heaviest components on the benchmark, climbed as much as 1.3% and were set for their best session since end-August.

The “Big Four” banks advanced between 1% and 1.5%.

Energy firms gained more than 1%, lifted by improving oil prices, with the country’s biggest oil and gas producer Woodside Petroleum Ltd tacking on as much as 1%.

Industrial engineering company WorleyParsons moved up as much as 3.7% after it informed the foreign investments regulator of “creeping acquisitions” by its biggest shareholder, Dubai-based Dar Group.

Higher third quarter output from Brazilian miner Vale SA pressured China iron ore prices and sent the domestic mining sub-index down as much as 0.4%.

The world’s biggest miner, BHP Group Ltd, gave up 0.3%. Smaller peer Rio Tinto lost as much as 0.4% despite reporting a 5% rise in third-quarter iron ore shipments, helped by higher demand from Chinese steelmakers.

Gold miners fell as much as 2.8% to their weakest in 15 weeks, set for a fifth session of losses on diminished risk aversion.

Newcrest Mining declined as much as 2.5% to a more than two-month low.

The New Zealand benchmark rose 0.8% to 11,133.55, marking its fourth straight session of gains. Restaurant Brands New Zealand was the top gainer after upbeat guidance.

New Zealand’s inflation accelerated at a slightly faster-than-expected pace in the third quarter, but it did little to change the view that interest rates would be cut further this year to bolster the economy. -Reuters


Trade pressure seen denting China’s 2019 growth to 29-year low at 6.2%, 5.9% in 2020

BEIJING: China’s economic growth is expected to slow to a near 30-year low of 6.2% this year and cool further to 5.9% in 2020, a Reuters poll showed, underlining the stiff challenge faced by Beijing even as it steps up stimulus amid a bruising Sino-U.S. trade war.

The median forecast for 2019 growth is near the lower end of the government’s target range of 6-6.5%, and would be the weakest expansion for the world’s second-biggest economy since 1990.

The poll of 83 analysts also forecast third-quarter growth at 6.1% year-on-year, lower from 6.2% in the last survey done in July and a touch below the 6.2% pace in the second quarter.

On the whole, it would mark a further slowdown from growth of 6.6% in 2018 and 6.8% in 2017, highlighting the intensifying global and domestic pressures on the Asian powerhouse.

China will release its third-quarter gross domestic product (GDP) data on Oct 18.

Growth in 2020 will likely cool further to 5.9%, the poll showed, below the 6.0% forecast in the previous survey.

A raft of downbeat data in recent months has highlighted weaker demand at home and abroad, fanning market expectations that Beijing will need to unveil more stimulus steps to ward off a sharper slowdown and prevent more job losses.

“Should labor market deteriorate sharply in late 2019 and early 2020, policy support may intensify in March next year,” Tao Wang, China economist at UBS, said in a note.

“As policy measures strengthen and take effect, and as the shock of higher tariffs peaks in Q1 2020, we see China’s GDP growth rebounding from Q2 2020 onwards.”

Beijing has been relying on a combination of fiscal stimulus and monetary easing to weather the current slowdown, but analysts say the room for aggressive policy action has been limited by worries over debt and housing risks.

Chinese central bank governor Yi Gang said late in September there was no urgent need to implement large interest rate cuts following Beijing’s reiteration that it would not use “flood-like” stimulus measures.

MORE POLICY SUPPORT EXPECTED

The outlook is unlikely to change for the better anytime soon even as tensions in the protracted trade war between Beijing and Washington have eased somewhat. U.S. President Donald Trump said on Friday the two sides had reached agreement on the first phase of a deal and suspended a tariff hike, but officials said much work still needed to be done.

Analysts in the latest Reuters poll expect the People’s Bank of China (PBOC) would ease policy further by cutting banks’ reserve retirement ratios (RRR) and the one-year loan prime rate (LPR), its new benchmark lending rate.

The PBOC has already cut RRR seven times since early 2018, in addition to two modest reductions in the one-year LPR since August.

Analysts expect the PBOC to deliver another 50 basis-point RRR cut in the fourth quarter, and two more RRR reductions in the first half of 2020, according to the poll.

The central bank is also forecast to slash the one-year LPR to 4.00% by the end of 2019, down by 20 basis point from its current level.

However, they do not expect it to cut its previous benchmark lending rate, which remains in place but will be replaced by the new benchmark lending rate over time.

Economists expect the central bank to keep its benchmark rate unchanged at 4.35 percent through at least the end of 2020.

The poll also predicted annual consumer inflation will pick up to 2.5% in 2019, quickening from 2.3% estimate in the July survey, but below the government target of around 3%.

Data earlier in the day showed China’s factory gate prices declined at their fastest pace in more than three years in September.

Consumer inflation accelerated to 3% in September – the highest since October 2013, but analysts attributed this to the supply-side impact of rising food costs, driven by surging pork prices as African swine fever diminishes hog supplies.

Separate data, also released on Tuesday, showed China’s banks extended more new yuan loans than expected in September, highlighting policymakers’ ongoing efforts to boost credit growth in the face of cooling demand and U.S. trade pressures. – Reuters