Economy

Argentine peso steady after devaluation as central bank tightens control

Published

9 months ago

August 16, 2023

Argentine peso steady after devaluation as central bank tightens control

By Jorge Otaola

BUENOS AIRES (Reuters) – Argentina’s peso was flat on Tuesday at 350 per dollar after the central bank guided a sharp devaluation a day earlier in the wake of a primary election upset and said it would fix the FX rate until the general election in October.

Argentina devalued the currency by nearly 18% on Monday while the benchmark interest rate was hiked sharply to 118% after a shock win by radical libertarian Javier Milei in a primary vote sparked a market sell-off of the peso and bonds.

The central bank also tightened controls on access to the popular MEP parallel currency market, one of many unofficial routes to access dollars which have flourished amid tight capital controls restricting access to the official FX market.

The primary was a huge shake-up in a ballot that acts as a dress rehearsal for the national election in October. Markets had been betting on a strong performance by more moderate candidates. Some investors noted that regardless of the ultimate winner, the balance of power looks likely to shift to the right.

Milei, a rock-singing economist who wants to shutter the central bank and dollarize the economy, has ridden a wave of voter anger at inflation near 116% and rising poverty.

“Milei’s personality produces fear and the markets look at that,” said economist Orlando Ferreres. “There is a bit of panic given that the official devaluation was a surprise.”

Argentina’s peso has been weak for years, with only capital controls putting the brakes on its decline against the dollar. The government had long looked to avoid a sharp correction in the official rate, though had let it steadily weaken.

On Tuesday, sovereign bonds dipped by an average of some 2.3% after falling on Monday, though the local S&P Merval stock exchange, often used as a hedge against inflation, was again up. The black market peso, often called the “blue”, fell 3.5% to a record low 710 per dollar.

“The market knows that, with these results, anything can happen and with this ‘black swan’ it has to rearrange itself with an eye on the dollar,” said economist Fausto Spotorno.

Milei, who got 30% of the vote in open primary elections on Sunday, will face the Peronist coalition led by Economy Minister Sergio Massa, which received 27%, and the conservative opposition bloc of Patricia Bullrich, which won 28%.

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

4 months ago

December 26, 2023

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.

The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.

Economy

China identifies second set of projects in $140 billion spending plan

Published

4 months ago

December 25, 2023

China identifies second set of projects in $140 billion spending plan

© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo

SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.

With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.

The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.

China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.

The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.

“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.

The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.

($1 = 7.1315 renminbi)

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

4 months ago

December 25, 2023

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.