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Tag Archives: Central Bank

Chart: Where Central Banks Have Issued Digital Currencies

Source : Statista

New Zealand’s Central Bank Lifts Benchmark Cash Rate to 2.5%

New Zealand’s central bank on Wednesday lifted its benchmark interest rate by half a percentage point to 2.5% as it attempts to curb inflation.

It was the third time this year that the Reserve Bank of New Zealand has lifted the cash rate by 50 basis points, following hikes in April and May. There was also a quarter percentage point rise in February.

The bank has forecast that the rate will peak at 4% late next year.

It said in a statement that it “remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and support maximum sustainable employment.”

New Zealand’s inflation is running at 6.9% and the unemployment rate is 3.2%.

The bank manipulates interest rates to try to contain inflation to a target band between 1% and 3%.

The bank will next consider raising the cash rate at its meeting on Aug. 17.


Source : AP

Chart: Canada Central Bank Raised Interest Rate by 1%

Largest Bank of Canada rate hike since 1998

The Bank of Canada joins more than 30 other central banks around the world that have raised interest rates by a full percentage or more this year.


Source : Bloomberg

Banking Body Urges Decisive Wave of Global Rate Hikes to Stem Inflation

Marc Jones wrote . . . . . . . . .

The world’s central bank umbrella body, the Bank for International Settlements (BIS), has called for interest rates to be raised “quickly and decisively” to prevent the surge in inflation turning into something even more problematic.

The Swiss-based BIS has held its annual meeting in recent days, where top central bankers met to discuss their current difficulties and one of the most turbulent starts to a year ever for global financial markets.

Surging energy and food prices mean inflation in many places is now its hottest in decades. But the usual remedy of ramping up interest rates is raising the spectre of recession, and even of the dreaded 1970s-style “stagflation”, where rising prices are coupled with low or negative economic growth.

“The key for central banks is to act quickly and decisively before inflation becomes entrenched,” Agustín Carstens, BIS general manager, said as part of the body’s post-meeting annual report published on Sunday.

Carstens, former head of Mexico’s central bank, said the emphasis was to act in “quarters to come”. The BIS thinks an economic soft landing – where rates rise without triggering recessions – is still possible, but accepts it is a difficult situation.

“A lot of it will depend on precisely on how permanent these (inflationary) shocks are,” Carstens said, adding that the response of financial markets would also be crucial.

“If this tightening generates massive losses, generates massive asset corrections, and that contaminates consumption, investment and employment – of course, that is a more difficult scenario.”

World markets are already suffering one of the biggest sell-offs in recent memory as heavyweight central banks like the U.S. Federal Reserve – and from next month the ECB – move away from record low rates and almost 15 years of back-to-back stimulus measures.

Global stocks are down 20% since January and some analysts calculate that U.S. Treasury bonds, the benchmark of world borrowing markets, could be having their biggest losing first half of a year since 1788.

CREDIBILITY

Carstens said the BIS’s own recent warnings about frothy asset prices meant the current correction was “not necessarily a complete surprise”. That there hadn’t been “major market disruptions” so far was also reassuring, he added.

Part of the BIS report published already last week said that the recent implosions in the cryptocurrency markets were an indication that long-warned-about dangers of decentralised digital money were now materialising.

Those collapses aren’t expected to cause a systemic crisis in the way that bad loans triggered the global financial crash. But Carstens stressed losses would be sizeable and that the opaque nature of the crypto universe fed uncertainty.

Returning to the macro economic picture, he added that the BIS didn’t currently expect a period of widespread stagflation to take hold.

He also said that though many global central banks and the BIS itself had significantly underestimated how quick global inflation has spiralled over the last six to 12 months, they weren’t about to lose hard-earned credibility overnight.

“Yes, you can argue a little bit here about an error of timing of certain actions and the responses of the central banks. But by and large, I think that the central banks have responded forcefully in a very agile fashion,” Carstens said.

“My sense is that central banks will prevail at the end of the day, and that would be good for their credibility.”


Source : Reuters

Chart: Switzerland Bond Yield Surges As Central Bank Raised Rate

Source : Bloomberg

Eurozone Interest Rates Set to Rise for First Time in 11 Years

The European Central Bank (ECB) has said it intends to raise interest rates for the first time in more than 11 years next month as it tries to control soaring inflation in the eurozone.

The ECB said it would raise its key interest rates by 0.25% in July, with further increases planned for later in the year.

The bank also intends to end its bond-buying stimulus programme on 1 July.

The latest eurozone inflation estimate was 8.1%, well above the ECB’s target.

“High inflation is a major challenge for all of us. The [ECB] governing council will make sure that inflation returns to its 2% target over the medium term,” the ECB said in a statement.

“It is not just a step, it is a journey,” ECB President Christine Lagarde said of the moves.

The ECB’s main policy interest rate is currently at -0.50% and it could be back at zero or above by the end of September, the bank said. The last time it raised interest rates in the eurozone was in 2011.

Inflation in May “again rose significantly” as energy and food prices surged, it added.

But it said inflationary pressures had “broadened and intensified, with prices for many goods and services increasing strongly”.

As a result, the bank has upped its estimate for annual inflation this year to 6.8%, before slowing to 3.5% in 2023 and 2.1% in 2024.

The ECB also cut its growth forecast for the eurozone from 3.7% to 2.8% for 2022, and from 2.8% to 2.1% for 2023.

Several other central banks have already started raising interest rates as they try to slow inflation that has been accelerating amid surging energy costs.

In the US, the Federal Reserve has now raised rates twice this year, while a series of moves by the Bank of England has now lifted UK rates to 1% – the highest level for 13 years.

Speaking at a news conference after the ECB’s decision, the bank’s president, Christine Lagarde, said inflation would remain “undesirably elevated for some time”.

Energy prices are up nearly 40% from a year earlier, she said, while food prices rose 7.5% in May, partly due to the impact of the war in Ukraine on food supplies.

“Do we expect that the July interest rate hike will have an immediate impact on inflation? The answer is no,” she said.

Seema Shah, chief strategist at Principal Global Investors, said: “With this inflation outlook and the unavoidable path for higher rates, the ECB is facing stagflation threats full-frontal.

“The strangling hold of desperately high living costs means that euro area growth will slow through the second half of this year, with recession increasingly likely – particularly now with sharp policy tightening in the near-term horizon.”


Source : BBC

Chart: Australia Central Bank Hiked Rate by 50 Points

The expected rate hike is 25 points.

Source : Bloomberg

央行出手稳预期 人民币汇率长期有支撑

记者: 向家莹 张莫 . . . . . . . . .

  人民币汇率连日回调。中国外汇交易中心4月25日公布数据显示,人民币中间价报6.4909,较前一交易日下调313个基点。而就在同一日晚间,中国人民银行宣布,自5月15日起,下调金融机构外汇存款准备金率1个百分点,即外汇存款准备金率由现行的9%下调至8%,释放出强烈的稳定汇率预期的信号。

  接受《经济参考报》记者采访的业内人士表示,人民币对美元汇率快速回调主要是受美联储释放持续加息信号、美元指数走强等因素影响。伴随货币当局出手,人民币汇率持续贬值可能性较小,经济基本面稳固也将给予人民币更多支撑,我国跨境资金流动将呈现合理均衡发展格局。

汇率阶段承压 央行下调外汇存准率

  受国际金融市场波动加剧、疫情扰动以及市场供求等多重因素共同影响,近期人民币汇率一改年初强势态势,中间价连续四个交易日走低,跌幅达1189基点。与此同时,Wind数据显示,4月18日至25日的5个交易日内,在岸、离岸人民币对美元大幅走低,其中离岸人民币对美元汇率短短5个交易日贬值超过3%。

  在此背景下,央行快速出手,将外汇存款准备金率由现行的9%下调至8%。对此,国家金融与发展实验室特聘研究员任涛表示,央行下调外汇存款准备金率,相当于向市场释放出更多的美元流动性,不仅有助于提升金融机构外汇资金运用能力,也有助于缓解近期不断超调的人民币汇率,向市场传递出稳预期的强烈纠偏信号。

  “此次针对外币降准是逆周期的重要举措之一,有助于改变近期一直处于单边贬值态势的人民币行情,减弱羊群效应的影响,让人民币走势更为理性,推动人民币汇率双向波动、外汇市场趋于平衡。”任涛进一步指出。

  分析人士普遍认为,近期人民币汇率快速回调受到内外多重因素的影响。在美元指数升破100且持续强势的背景下,此轮人民币对美元汇率较快回调,属于汇市正常波动。“没有只涨不跌的货币,汇率灵活性增加,有助于及时释放压力,避免预期积累。”中银证券全球首席经济学家管涛直言。

  整体来看,今年以来人民币走势依然稳健。外汇局数据显示,今年以来,截至4月21日,美元指数上涨4.2%,欧元、英镑、日元对美元贬值幅度都在4%-10%之间。在这种情况下,人民币对美元汇率交易价略贬1.2%。从多边汇率看,中国外汇交易中心的人民币汇率指数上涨了2.4%。因此可见,人民币稳健性仍然较好。

不会持续单边回调 汇率长期有支撑

  虽然人民币汇率阶段性承压,但展望未来,分析人士普遍预计,中长期来看,人民币汇率出现持续性单边回调的概率不大,随着政策逐渐主动发力、靠前发力,预计经济增速将逐渐企稳回升,经济基本面稳固将给予人民币更多支撑。

  国家外汇管理局副局长、新闻发言人王春英说,中国经济韧性比较强,长期向好的发展态势没有改变,国际收支结构稳健,经常账户保持合理规模顺差,人民币资产具有长期投资价值,这些都会为人民币汇率基本稳定提供根本支撑。

  中国银行研究院研究员王有鑫也表示,目前汇率的快速回调很大程度上受市场悲观情绪影响,预计随着市场压力的集中释放,市场情绪将逐渐平稳,人民币将回归有序、平稳波动。“我国经济基本面稳固将给予人民币更多支撑。反观美国,在美联储快速加息后,预计经济增长预期将逐渐回落,三季度前后中外经济增长态势和货币政策走势将出现此消彼长的动态变化,届时,人民币将得到更多支撑。”他说。

  管涛说,近期人民币下跌不是外资减持人民币资产的原因而是结果。只要疫情蔓延势头得到有效控制,或是防疫措施更加精准、科学,加上宏观政策靠前发力、适时加力,经济复苏前景明朗,市场信心恢复,外资随时都可能回来,人民币汇率也会重新得到支撑。

  “应该客观看待人民币汇率的近期走势,这是多重因素作用下的市场化结果和复杂经济金融形势下的自然反应,总体反映出中美两大经济体经济与政策层面的周期性差异,亦说明人民币汇率的自动调节器功能在内外均衡中得到了更为有效的发挥。”任涛也表示。

市场有韧性 跨境资金流动长期将合理均衡

  业内人士认为,人民币汇率阶段性走弱会在短期内加剧跨境资本流出压力,不过长期来看,我国跨境资金流动也将呈现合理均衡发展格局。

  《2021年第四季度中国货币政策执行报告》指出,发达经济体宏观政策总体退坡,不仅可能伴生资产价格震荡调整的金融风险,还会通过贸易往来、资本流动、金融市场等渠道对新兴经济体产生明显外溢效应。“对于一个经济体的国际收支和跨境资本流动来说,美联储加息的确是一个重要的外部影响变量,但是根本因素还是自身宏观基本面和市场基础。对中国来讲,近年来中国外汇市场韧性不断增强,有基础和有条件适应本轮美联储政策调整。”王春英表示。

  在任涛看来,汇率波动既是预期的结果,又会在一定程度上改变市场预期,人民币汇率阶段性走弱会在短期内加剧跨境资本流出压力,但人民币汇率的双向波动以及丰富的政策工具箱则有助于跨境资本流动中长期内保持在可控范围内。因此,虽然短期内未来人民币汇率双向波动与跨境资本双向流动的均衡可能会被打破,但中长期内保持平衡仍将是主流。

  王有鑫表示,考虑到我国通胀率较低,实际利率仍然明显高于国外,随着市场形势稳定,短期资金将再度流入增持人民币资产,这在过去几轮市场波动中已多次得到验证。此外,对于直接投资和贸易顺差等长期跨境资金来说,受汇率影响较小,人民币汇率的适度回调有利于提高出口企业竞争力,发挥汇率的国际收支自动稳定器和调节器功能。因此,目前市场需要更多耐心、需要更加稳定的预期,在短期波动之后,跨境资本流动仍将维持流入态势。


Source : 新华网

Charts: Effects of U.S. Fed’s QE on the Stock Market

Fed’QE vs. S&P 500


See large image . . . . . .

Fed Funds vs. Margin Debt


See large image . . . . . .

Fed Balance Sheet vs. 10-year Treasury Yield


See large image . . . . . .

Source : Real Investment Advice

What’s Behind the PBOC’s 1 Trillion Yuan Transfer

Ye Xie wrote . . . . . . . . .

The People’s Bank of China disclosed that it will transfer more than 1 trillion yuan ($158 billion) in profits to the government to help fund fiscal spending. The move has created confusion and debate among investors. Is this the Chinese version of QE or Modern Monetary Theory? Is it equivalent to a cut in the reserve requirement ratio? If so, does it reduce the need for more easing?

The reality is that it is more technical than substantial in terms of its impact on monetary and fiscal policies.

The PBOC said Tuesday it will transfer profits from income accumulated on its $3.2 trillion foreign-exchange reserves to the Ministry of Finance. The money will be used mainly on tax rebates for companies and to bolster the finances of local governments.

First: It’s NOT a new initiative. By law, the PBOC is required to turn over its profits to the government. The PBOC just chose to publicly disclose this routine operation, which was interrupted by the pandemic since 2020. In fact, it’s a common practice internationally. Last year, the Federal Reserve sent almost all of its net income of $107 billion — primarily derived from interest income on securities acquired through open-market operations — to the U.S. Treasury. The Bank of Mexico has done the same.

It’s NOT additional fiscal stimulus. The transfer is likely already factored into the proposed 2022 fiscal budget unveiled at the People’s National Congress over the weekend, according to economists at Nomura and Goldman Sachs. The move simply addressed the question of where the money will come from to support spending the government has proposed.

It’s NOT monetizing government debt. Unlike QE, the transfer itself doesn’t involve printing new money. It’s moving from one account (retained profits) at the PBOC to another (government deposits), without changing the size of its balance sheet.

Is it equivalent to a RRR cut? Not exactly. As mentioned above, the transfer itself doesn’t affect liquidity. Only when the money is spent by the government will it leak into the financial system, a similar effect to when the PBOC releases funds via a RRR cut. But even then, the impact is much more muted because the profits likely will be spread out over a 12-month period, rather than be a one-off. The money-multiple effect is also likely to be different. In other words, this move doesn’t reduce the need for RRR cuts. Economists at Goldman and Citigroup both expect further RRR and rate cuts in the first half of the year.

Will it affect the exchange rate? Most likely not. Given the PBOC probably doesn’t want further yuan appreciation, the transfer likely doesn’t involve the exchange of currencies, according to Nomura. Instead of selling foreign reserves, the profit transfer may come from the proceeds of interest payments to the PBoC by various borrowers, especially commercial banks, wrote Nomura’s economist Lu Ting and his colleagues.

All told, it sounds more like inside baseball than a game changer.


Source: ZeroHedge