Economy
U.S. Fed to consider interest rate increase in september 2022
The Federal Open Market Committee (FOMC) of the US Federal Reserve will meet on September 20-21 to consider further FED interest rate increases, which are at their highest level since 2018 at 2.25-2.5%.
Most analysts expect the Fed leadership to take new steps to tighten monetary policy, predicting interest rate increases in September 2022 by 75 basis points to 3-3.25%, following similar decisions in July and June. The key argument in favor of this is high rates of consumer price growth in the U.S. at 8.3% in August, while the head of the Federal Reserve System, Jerome Powell maintained the target inflation rate of 2%.
At the same time, the experts of the Japanese financial corporation Nomura Holdings do not rule out the possibility of raising the discount rate by 100 basis points at once.
“Materializing upward inflation risks are likely to lead to a 100bp Fed rate hike at the September FOMC meeting, against our previous estimate of 75bp,” reads the published Nomura analyst forecast.
An increase of 1 percentage point would increase the interest rate to 3.25-3.5%, which would be the highest value since the financial crisis of 2008.
The Fed previously went for such a one-time rate hike just seven times between 1978 and 1981 as part of measures to combat inflation in the U.S., which exceeded 14% annualized during 1980, according to CFRA Research.
According to market participants, such decisions by the U.S. monetary authorities would adversely affect the U.S. stock market. Such measures could lead to the transition of the U.S. economy into a full-fledged recession. U.S. GDP has already been declining for two quarters in a row: by 0.6% year-over-year (if GDP had been growing at the same rate for four quarters in a row) in the second quarter and by 1.6% in the first quarter.
Earlier we reported that a recession in Europe could occur with an 80% probability next year.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
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.
© 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)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
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.
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