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Fed needs faster taper, more rapid liftoff in interest rates – Waller

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Fed needs faster taper, more rapid liftoff in interest rates - Waller
© Reuters. FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis

(Reuters) – The Federal Reserve should stand ready to increase the pace of its reduction in bond purchases and raise interest rates from their near zero level sooner than it currently expects due to persistently high inflation and the strength of job gains, Fed Governor Christopher Waller said on Friday.

“The rapid improvement in the labor market and the deteriorating inflation data have pushed me towards favoring a faster pace of tapering and a more rapid removal of accommodation in 2022,” Waller said in prepared remarks delivered at the Center for Financial Stability in New York.

The central bank began earlier this week to reduce its asset purchase program, through which it was buying $120 billion in bonds a month as part of emergency measures to help nurse the economy through the pandemic.

It expects to taper those purchases to zero by June of next year. Policymakers have indicated they will begin to raise interest rates from their current level near zero only once that is completed.

But an inflation rate at a 30-year high and a quickening pace of job gains has given almost all Fed policymakers pause, with Waller and St. Louis Fed President James Bullard most vocal in pushing for an accelerated timeline.

The tension comes as President Joe Biden nears a decision on whether to keep Jerome Powell as Fed chair for another term, or to elevate Governor Lael Brainard to the position.

Waller gave short thrift to others on the rate-setting committee who continue to argue for patience given high inflation is expected to be transitory, even if it persists longer than thought.

“All shocks tend to be transitory and fade away; by this logic the Fed should never respond to any shocks, but sometimes it does, as it should… appropriate monetary policy responds to these inflation movements,” Waller said.

Bullard said earlier this week that he is in favor of speeding up the taper, ending purchases as of March, to allow more wiggle room on when the interest rate liftoff can occur.

Even those policymakers more sanguine up until now about the persistently high levels of inflation increasingly acknowledge an interest rate rise in 2022 is more likely than they had previously said.

Waller acknowledged that he had also been caught off guard by the “large and persistent” effects supply constraints caused by the pandemic were having on the economy, with inflation pressures becoming more widespread and set to last longer into 2022 than he expected.

Waller also repeated his view that the Fed’s balance sheet should eventually be reduced, arguing in favor of a gradual and predictable roll-off of securities similar to last time.

The Fed next meets Dec. 14-15.

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Economy

South Korean exports dropped 14% in November, the highest in 2.5 years

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exports South Korea

South Korea’s exports fell 14 percent year-on-year to $51.91 billion in November, preliminary data from the Ministry of Commerce, Industry and Energy showed. The November drop was the biggest in 2.5 years since May 2020 and was caused both by the deteriorating global economy, which even a Google price chart showed, and a truckers’ strike in the country.

South Korea exports 2022 – reasons for the drop

Exports fell for the second month in a row. Analysts on average expected an 11% decline, according to Trading Economics. Respondents to MarketWatch predicted a 10.5% decline.

Shipments of semiconductor products overseas, the country’s top export item, fell 29.8%; petrochemicals fell 26.5% and steel exports fell 10.6%. Meanwhile, exports of automobiles jumped 31% and petroleum products 26%.

Exports to China, South Korea’s largest trading partner, fell by 25.5%, and to Asian countries – by 13.9%. Below, supplies to the USA grew by 8% and to the European Union – by 0.1%.

In January-November exports rose by 7.8% on the same period last year and reached a record $629.1 billion.

South Korean imports rose 2.7% to $59.2 billion in November, marking the 23rd consecutive month of gains, but the current rate of growth is the lowest since November 2020. Experts had predicted an increase of only 0.2%.

South Korea’s trade deficit last month was $7.01 billion, compared with a surplus of $2,973 billion a year earlier.

The negative balance was recorded for the eighth month in a row. As a result, by the end of 2022, the country may record a foreign trade deficit for the first time since the financial crisis in 2008.

Earlier we reported that the UN estimates the cost of humanitarian aid in 2023 at a record $51 billion.

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Economy

The UN estimates humanitarian aid costs in 2023 at a record $51 billion because of an impending humanitarian crisis

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a humanitarian crisis

Joint humanitarian operations will require a record $51.5 billion in 2023 to address urgent problems.

The UN Office for the OCHA estimates that 339 million people will need urgent aid in 2023. At the same time, OCHA called on donor countries to provide funds for assistance in 2023 to the 230 million people most in need, living in 68 countries.

Griffiths explained that aid is needed not only for people experiencing conflicts and disease outbreaks. but also for those suffering the effects of climate change, such as people in peninsular Somalia facing drought and those in Pakistan experiencing severe flooding. For the first time, the growing humanitarian crisis has brought the number of displaced people worldwide to the 100 million mark. Also worsening an already bad situation is the worldwide coronavirus pandemic, which affects the poor. Note that the general economic crisis has begun to negatively affect even the Netflix price chart.

Earlier we reported that house prices in the UK fell by 1.4% in November.

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Economy

Average house prices in the UK fell 1.4% in November

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average house prices in the uk

Average house prices in the UK fell 1.4% in the previous month in November to 263,788 thousand pounds (about $319,000), according to the British mortgage company Nationwide Building Society.

The decline was recorded at the end of the second consecutive month and was the most significant in almost 2.5 years – since June 2020. Analysts on average had forecast a decline of only 0.3%, according to Trading Economics.

Are house prices in the UK going to fall even more?

Residential real estate prices in November compared to the same month last year increased by 4.4%. At the same time, experts expected a larger increase of 5.8%. The growth rate slowed down significantly compared with 7.2% in October. Because of the difficult economic situation, British investors are investing in other instruments. The Microsoft price chart, for example, is showing potential for growth, so many are interested in the U.S. stock market. 

“The market looks set to remain under pressure in the coming quarters. Inflation will remain high for some time, and interest rates are likely to continue to rise,” believes Nationwide Senior Economist Robert Gardner. – The outlook is unclear, and much will depend on how the overall economy behaves, but a relatively soft landing is still possible.”

Earlier we reported that Sanctions Circumvention was included in the EU’s list of criminal offenses.

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