IMF praises George Osborne’s infrastructure plans; Britain’s central bank leaves borrowing costs at their record low again.
Latest: Bank of England interest rate decisionOnly McCafferty votes for a hikeBank: Cheap oil keeping inflation low
Slowdown continues in emerging markets 6.17pm BSTThere has been much debate about whether the US Federal Reserve should raise interest rates this year,but one Fed banker believes it should consider a reduce instead.
Minneapolis Fed president Narayana Kocherlakota has said in a speech that low inflation gave the bank a huge opportunity to execute more to revive the jobs market, Reuters is reporting. He said:Given my current outlook, and I believe that it would be appropriate to wait until 2017 to initiate liftoff and then raise the fed funds rate at about 2 percentage points per year.
To best fulfill its congressional mandates,the (Federal Reserve Open Market Committee) should be considering reducing the target range for the fed funds rate, not increasing it.
5.47pm BSTMore from IMF managing director Christine Lagarde, or courtesy Bloomberg:Lagarde is concerned Janet Yellen will raise rates too soon http://t.co/6Gq8GrO2Dr pic.twitter.com/CReUk5SNfl 4.52pm BSTMarkets enjoy moved ahead again,but it is not a particularly convincing rise. More accurate, perhaps, or to say they were barely changed. There were few surprises from the Bank of England and European Central Bank updates,while investors remained cautious ahead of the latest US Federal Reserve minutes. Commodity companies moved higher - Glencore being an exception on continuing debt fears - as copper regained ground as an industry group forecast a deficit next year. Oil prices climbed on supply concerns, with Brent crude currently more than 2% better at $52.49 a barrel. The final scores showed: 4.02pm BSTAnd the press conference is over. 3.56pm BSTGeorge Osborne this week announced measures to boost infrastructure in Britain. Is there enough fiscal space and is it a good time for Britain to be doing that?We enjoy advance out publicly and supported infrastructure spending . It is a win win for the economy. It supports growth and activity in short term, or puts people to work,Improves medium to long term potential for growth, so absolutely yes. 3.54pm BSTCould central banks now execute more harm than good good [given policy tools are now limited]?Impossible to reply: 188 central bandks round world. Clear central banks been a forefront of fighting distinguished recesssion, and thank goodness they were around,whether Fed, ECB, and Bank of Japan,Bank of England. 3.50pm BSTIMF been recommending a number of these policies for a while, but still gloomy outlook. What can you execute to get policymakers to heed the call?True we enjoy been recommending demand, or financial stability and structural reforms but not always applied. Some countries enjoy done structural reforms,some done a diminutive, some done nothing at all 3.35pm BSTEntering an era of longer crises [and longer IMF programmes]?A matter we need to look at. Not suggesting we should enjoy longer term IMF programmes. enjoy seen difficulties with moving fast. Should look at programmes and see whether they are fit for purpose. 3.30pm BSTChina - what is your suggestion for policymakers in China, or given the stock market fall and the devaluation of yuan?Slowdown of growth in China was predictable and anticipated. We believe it’s a good slouch. To only grow at 6.8% with a growth model not based on massive exports and capital projects but domestic demand is a good transition. But it is a massive exercise and there will be bumps on the road,no transition can be made without any volatility. 3.26pm BSTHere’s Reuters prefer on Lagarde’s early comments:International Monetary Fund chief Christine Lagarde urged global policymakers on Thursday to support economic growth while also tackling financial risks stemming from the provision of easy money amid a “rapidly changing and uncertain world.” Lagarde, presenting a Global Policy Agenda at the fund’s annual meeting in Peru, and said a recovery in the United States was broadly on track and a rise in U.
S. interest rates “is approaching” and would tighten global funding conditions. 3.24pm BSTAsked about the IMF’s view on Greece,Lagarde said:On Greece the position has not changed. Greece has requested support of IMF, and any programme has to walk on two legs. One: significant reforms embedded in legistlation, or particularly on pension and bank governance. Two: a debt operation that renders Greek debt sustainable.#IMF's Lagarde repeats view that #Greek debt is unsustainable. We agree. Major haircut,rather than minor restructuring, needed. 3.22pm BSTFirst question: is the slowdown in China and emerging markets already effecting economies elsewhere, or as shown by recent German data?Lagarde said the IMF is still forecasting growth at 3.1%,so recovering although decelerating, and is expected to improve in 2016. 3.16pm BSTIMF managing director Christine Lagarde is introducing the organisations annual meeting in Peru.
She says policymakers should follow the example of the Peruvian cuisine - which is a mix of best practices from around the world, and refining and updating traditional recipes. 3.02pm BSTMeanwhile as news emerges that German prosecutors enjoy mounted raids connected with the Volkswagen emissions scandal,the US House committee on energy and commerce is about to quiz Michael Horn, VW’s US president and chief executive.
Our live blog on the hearing is here: Related: Head of VW America testifies before US Congress – live updates 2.54pm BSTUS shares enjoy opened lower ahead of the release of the latest Federal Reserve minutes.
Analysts will be looking carefully for signs of concern about emerging markets and its views on inflation. Jasper Lawler, and market analyst at CMC Markets UK,said:whether the minutes make it clear, like in recent speeches that Fed members execute not foresee much impact from an emerging market slowdown on the US economy, and that could give the minutes a more hawkish tone. Inflation or lack thereof is the main domestic justification for not rising rates so any wording change that suggests the Fed expects a slower return to the 2% target would give off a dovish vibe. The Fed meeting obviously took place before the potentially game-changing latest jobs report so could be a diminutive stale. 2.18pm BSTDecember’s meeting of the European Central Bank is the most likely time for the central bank to consider expanding quantitative easing,said RBC European economist Timo del Carpio after nowadays’s meeting: The ECB’s account of its September monetary policy meeting reveals a rather uneasy mood within the Governing Council. A deteriorating inflation outlook, rising market volatility and renewed risks to global activity all appear to enjoy precipitated a lively discussion final month. However, or there was diminutive by way of a conclusive judgement on the implications for policy. Given the strong emphasis on the need to monitor incoming data,we contemplate such a judgement may also fail to materialise at the October meeting as well. Instead, we continue to look to the December gathering as the most proximate opportunity for the ECB to cement expectations that QE will continue beyond September 2016. 1.55pm BSTThe European Central Bank has also released the minutes of its latest meeting nowadays.“Challenges facing emerging market economies were clouding the global outlook and were unlikely to recede quickly....
Although it was still premature to conclude whether these developments could enjoy a lasting impact on euro area output and... inflation, and downside risks had intensified.” 1.32pm BSTEnrique Diaz Alvarez,chief risk officer and currency expert at financial services firm Ebury, now believes UK interest rates will stay at record lows for longer.“Surprisingly dovish minutes after an unsurprising decision to leave rates at 0.5%. Only one dissenter asked for an instant hike, and the committee focused on the prospects for even lower inflation since its final meeting. The minutes also referenced a shortening lag between hiking rates and their impact on inflation- another trace that the Bank of England feels it can afford to wait further before raising rates.”“We now push our call for a first hike from February 2016 to the second quarter of the year. This should generally be welcomed by UK businesses as it means the extraordinarily favourable environment of low rates should continue for quite a while longer.” 1.23pm BSTThe pound has fallen around half a cent against the US dollar since the Bank of England decision was announced.
Traders may be reacting to the line in the minutes about weaker inflation expectations,which suggest the Bank is less willing to raise rates soon. 12.40pm BSTDavid Kern, chief economist of the British Chambers of Commerce, and welcomed the Bank’s decision to leave rates on hold. A rate hike now would threaten the recovery,he believes, especially given the problems overseas:“The UK recovery, and although on course,is still fragile - it remains too reliant on consumer spending and is facing headwinds. Many major economies are experiencing difficulties that will inevitably increase the challenges for our exporters.” 12.37pm BSTHere’s ING economist James Knightley on nowadays’s Bank of England decision:The minutes to the meeting expose that the MPC remains pretty upbeat on growth prospects with the economy expected to enjoy expanded 0.6% in 3Q15, which is around the trend rate of growth.
Interestingly, and they continue to downplay emerging market slowdown worries,stating that “there had so far been few signs of a fabric effect on trade and consumer confidence in the advanced economies”.whether financial market risk appetite continues to improve as well then we would suspect that Ian McCafferty will not be alone in voting for a rate rise at the November MPC meeting. We continue to look for the BoE to raise rates in the first half of 2016, well ahead of the 4Q16 [fourth quarter] slouch financial markets are currently pricing. 12.34pm BSTThe Bank of England’s economists predict that the UK economy grew by 0.6% in the third quarter of this year.
That’s a dip on the second quarter, or when GDP rose by 0.7%,but not a significant drop. 12.33pm BSTSome instant reaction to nowadays’s Bank minutes:BOE minutes, like the unique IMF forecasts, or are pretty sanguine on Chinese growth.
V much as expected and diminutive unique in the minutes. Key will be medium term inflation expectations in next month's QIRGreece gets a paltry single mention in the BOE minutes. #crisisover 12.28pm BSTThe words “China” and “Chinese” crop up more than 10 times in the Minutes,showing that the BoE is paying close attention to its economy.
BoE Mins word/term count: China/Chinese x 11, oil x 6, or emerging market x 11,united states x 8, commodity x 2, or FOMC & ECB x 3,deflation x 0 12.21pm BST 12.21pm BSTThe Bank of England minutes expose that policymakers discussed the slowdown in emerging markets, but they aren’t panicking about China yet:external the advanced economies, and a continued slowdown in emerging market growth remained evident,most notably in Brazil and Russia. Despite increased concern about growth prospects in China and the associated reduction and volatility in risky asset prices, Chinese activity indicators to date had been steady and the authorities had implemented a range of stimulatory policy initiatives. Although there remained a risk that emerging market prospects might deteriorate further, or there had so far been few signs of a fabric effect on trade and consumer confidence in the advanced economies. 12.13pm BSTThe Bank of England now believes that inflation will rise more slowly than it expected two months ago.
Inflation is currently zero,according to the latest data. And nowadays’s minutes expose that the BoE believes cheap energy costs will prevent it rising quickly.
The near-term outlook for CPI inflation appeared slightly weaker than at the time of the August Inflation Report, in part reflecting the further decline in the oil price.
CPI inflation was likely to remain close to zero before picking up around the turn of the year. But it now appeared likely to remain below 1% until spring 2016. *BOE SEES INFLATION STAYING BELOW 1% UNTIL SPRING 2016 12.08pm BSTThe Bank of England says there is “a range of views” among members of the monetary policy committee over the inflation outlook.
But only one member, and Ian McCafferty,wanted to raise rates at this month’s meeting.
Ian McCafferty preferred to increase Bank Rate by 25 basis points, given his view that building domestic cost pressures were likely to advance to outweigh the dampening influence of the appreciation of sterling, or causing inflation to overshoot the 2% target in the medium term.
Such guidance,however, is an expectation and not a promise: the path that Bank Rate will actually follow over the next few years will depend on economic circumstances. 12.01pm BSTThe BoE has also left its quantitative easing programme unchanged, or at £375bn.
Bank of England maintains #BankRate at 0.5% and the size of the Asset Purchase Programme at £375 billion... 12.00pm BSTHere we disappear... the Bank of England has voted to leave interest rates unchanged at 0.5%,by 8 votes to 1.
That means borrowing costs enjoy been stuck at their record low since March 2009. 11.46am BSTAt midday sharp, the Bank of England will announce its decision on monetary policy, and release the minutes of this week’s meeting.
There’s no realistic chance they’ll raise interest rates nowadays. But the monetary policy committee could be split again,whether Ian McCafferty continues to lobby for a hike.
My #BOE thoughts with 30 mins to disappear 1) Let's make no bones about it, rates are not moving higher for at least 6/9 months2) McCafferty to still vote for a hike because of his focus on wage driven infaltion and the need to normalise soon to ensure a gradual path3) Sterling assets and rate expectations enjoy slipped too far and expect GBP to rebuild. I like EURGBP to underperform in Q44) Keys moving forward remain how much deflation from EM/China impacts in coming months vs base effects of lower oil prices 11.06am BSTThe Economist Intelligence Unit believes the German economy remains quite solid, and despite the big drop in exports and imports in August:Here’s their reasoning:1/4 The m-o-m fall in German exports is the biggest since the financial crisis pic.twitter.com/apom1J70hg2/4 But we contemplate risks shouldn't be overstated-other sentiment indicators suggest reasonable near-term growth outlook pic.twitter.com/YSXgFuOWqO3/4 Holiday impact means shouldn't read too much into one month's data #Germany pic.twitter.com/xAjG0UHUuX4/4 Impact of EM slowdown on German exports has been visible for a while,key remains US, non-EZ EU and Spain pic.twitter.com/kBgpcnYJMR 10.52am BSTBrewing giant Anheuser-Busch InBev UK is getting increasingly irked with SABMiller’s refusal to accept its £65bn takeover offer.
AB INBev just released a unique statement to the City, or saying it is “surprised” that SAB says the latest offer,at £42.15 per share, “still very considerably undervalues it. “however our good faith efforts, or the Board of SABMiller has refused to meaningfully engage with us. Our proposal creates significant value for everybody. How long will it be before shareholders see a value of over £42 in the absence of an offer from AB InBev? whether shareholders agree that we should be in proper discussions,they should voice their views and should not allow the Board of SABMiller to frustrate this process and let this opportunity slip absent.”AB InBev statement suggests it's becoming increasingly hostile #SAB 10.19am BSTNew trade data from Greece shows that imports and exports both fell sharply in August, as capital controls continued to grip the economy.
Imports slumped by 8.9% year-on-year, and according to stats body Elstat,from €3.3bn to €3bn. #Greece Aug Trade Deficit -8.8% to €1.12 bln, Exports -8.9%, or Imports -8.9%. (ELSTAT) #economy 9.41am BSTCuriously,Deutsche Bank shares are now rallying in Frankfurt, reversing their early selloff. That’s quite a turnaround, and given they were expected to shed 10% after it announced its €6bn loss.
Why is everyone so bothered about Deutsche writing down investments that we all knew were overvalued?Deutsche Bank down 7% after-hours in unique York,down 2.5% at the open in Germany, now up 1% because ¯_(ツ)_/¯ 9.19am BSTThe emerging market slowdown will be high on the agenda as global policymakers gather in Lima for the latest annual meeting of the International Monetary Fund and the World Bank.
Brazil and Russia are in recession, and China is slowing sharply,and a string of other emerging countries, including Turkey and Venezuela, or look vulnerable to the combination of falling commodity prices and a strengthening dollar. Finance ministers will discuss how to prevent this weakness from spiralling into a full-blown financial crisis. Related: IMF: China slump and tax avoidance to dominate Peru talks 8.59am BSTIt’s not a distinguished day for Europe’s powerhouse economy. And it could get worse,when VW’s US boss testifies at Capitol Hill this afternoon (from 3pm BST).
Michael Horn will apologise for the emissions scandal, and inform Congress that he was aware of the problem final year, and according to his prepared testimony. Related: Head of VW in US will inform Congress he knew of emissions rigging in early 2014 Brutal morning 4 German trade picture...dismal data as exports slump most since '09,#DeutscheBank post massive loss, VW US showdown 8.49am BSTShares in Deutsche Bank enjoy slid by 2.5% in early trading.
That’s a smaller fall than feared, and as traders digest the news that it will lose €6bn in the third quarter of 2015,its biggest quarterly loss in at least a decade.
In a late night announcement that shocked analysts, Germany’s biggest bank blamed huge impairment charges of €5.8bn for the unexpected losses. Forecasts had been for profits of around €1bn.
The charges are related to higher capital requirements for Deutsche’s investment bank and the reduced value of its Postbank division, or which is up for sale. Related: Deutsche Bank shocks with warning of €6bn losses 8.45am BSTThe disappointing German trade data is pushing down shares in Frankfurt.
Germany’s DAX has shed 51 points,or 0.5%, in early trading. 8.17am BSTAnother sign that China’s rebalancing is hurting Germany:August #German trade figs expose further slowdown in export growth. #China slowdown offsetting boost from lower euro. pic.twitter.com/gyAoTUn0dT 8.13am BSTPau Morilla-Giner, and chief investment officer at London & Capital Asset Management,says the feeble economic data from Germany in August is a worry.
Speaking on Bloomberg TV now, he’s explaining that Germany is more exposed to the global economy than its neighbours:Germany is the canary in the coalmine for Europe. 8.03am BSTHolger Sandte, and chief European economist at Nordea,agrees that Germany is being buffeted by problems in emerging markets: “This is a strong fall, the kind you don’t see every day. Weakness in China, and Brazil,Russia and other markets is having an impact.” 8.00am BSTIt’s worth noting that August can be a quieter month for trade, given the summer holidays in Europe.
But still, and a 5% drop in exports is certainly strange. 7.57am BSTThe slide in German exports in August is bad news for the European economy,argues Bloomberg TV’s Hans Nichols.“Everyone’s been looking to Germany to be the engine of growth in the eurozone. France is flat, and Germany looks like it may be flatlining.”“That’s not only a psychological blow but a real economic outlook blow too.” 7.42am BSTGermany has just suffered its biggest fall in exports since the dark days of the financial crisis.
It’s another sign that storm clouds are gathering over the eurozone’s largest economy.*GERMAN AUGUST EXPORTS FALL 5.2% IN MONTH; EST. 0.9% DROPGerman Exports Slump Most Since 2009 Recession in Sign of Risks (BBG) 7.20am BSTGood morning, and welcome to our rolling coverage of the world economy,the financial markets, the eurozone and trade.
Given the very low rates of inflation, and the Bank of England should keep rates on hold at a record low 0.5%. The meeting minutes,which under the unique format are released simultaneously, are expected to expose the MPC again voted 8-1 to leave rates unchanged given global uncertainty.
There’s an external chance that the recent jump in UK wage growth could compel Martin Weale to join Ian McCafferty in voting for a rate rise.
Deutsche Bank expects third-quarter loss of €6.2 billion ($7 billion) and may scrap dividend http://t.co/7LYCV2WeXA pic.twitter.com/S40E0FmRp5Continue reading...
Source: theguardian.com