Economy

ECB’s Makhlouf suggests further rate hikes may be near limit

Published

5 months ago

November 24, 2023

ECB's Makhlouf suggests further rate hikes may be near limit

Gabriel Makhlouf, the Central Bank of Ireland’s chief, has indicated that the European Central Bank (ECB) may be approaching the limit of its interest rate increases, despite acknowledging the possibility of further hikes to achieve the 2% inflation target. The ECB’s cautious approach comes amid persistent above-target inflation rates and October’s decision to maintain policy rates, reflecting ongoing concerns about core inflation remaining high.

Makhlouf’s remarks follow a period of heightened attention on inflation and interest rates, with initial rate increases starting in mid-2022. The ECB has been closely monitoring the situation since June’s review, noting that while inflation has slightly receded across various economies, it remains above the ECB’s desired level. The full impact on borrower finances and broader economic demand is still being assessed, with early signs of stress appearing in some lending areas as borrowing costs rise.

In Ireland, many mortgage holders are shielded from immediate effects due to fixed-rate contracts, which adds to the uncertainty of future impacts. Despite economic slowdowns caused by prevailing conditions, growth continues within the Irish economy through modified domestic demand. The resilience of Irish households and businesses is bolstered by strong labor markets and substantial balance sheets.

Commercial real estate is feeling the pinch from both cyclical factors such as rising interest rates and structural trends like the shift towards remote working, which has reduced office space demands.

Both Makhlouf and ECB President Christine Lagarde have deemed discussions about a potential rate cut premature. This stance challenges market expectations that have bet on a rate cut as early as April. Lagarde has projected no imminent rate reductions for “the next couple of quarters,” signaling that the ECB will maintain its data-driven decision-making process while adapting to global economic shifts that influence financial stability outlooks.

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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.