US deleveraging continues
The latest flow of funds data show that, while the pace of private deleveraging may be slowing down a little, the process continues. Diverting part of their income to reduce leverage slows the speed at which companies and consumers can increase their consumption and investment. Read more
Bank rates in Viet Nam have risen from 14 to 18 per cent in a few days, prompting the central bank to set up an investigation, and order banks to apply “reasonable interest rates”. Since then two key banks, Techcombank and Seabank, have cut their rates to about 14 per cent.
In what appears to be a bidding war for depositors, banks run the risk of destabilising the economy. There are reports of people queueing to withdraw their savings so they can reinvest at higher rates. Some state banks have warned that they will have to take “necessary measures to retain clients” if the rate war were to begin again.
Savers need high rates to compensate for high inflation. An official from the State Bank of VietNam said depositor rates would need to be about 13 per cent. But borrowers have more to lose in the immediate future: consumers and businesses might find themselves unable to refinance, leading to a cash crunch in the broader economy.
Bank rates started rising after Read more
Here’s Nomura on what it calls signs of ‘postmodern monetary policy’ in emerging Europe and the Middle East. It’s a very apt phrase describing the confusion in some central bank quarters. And it looks very familiar:
On balance, we see EEMEA central banks erring on the side of loose policy, even at the expense of higher inflation. Where there is concern about capital inflows, various policy tools are being used to decrease the carry appeal while not easing monetary conditions as much as rate cuts (or postponed hikes)…
Turkey‘s recent 400bp cut in the borrowing rate (and leaving the lending rate unchanged), while at the same time raising reserve requirements is one of the best examples of this creative policy in practice. Israel‘s efforts to ensure that implied forward rates remain at least 100bp below policy rates, or the Central Bank of Romania‘s operations in the basis swap market to minimise speculative capital flows are others. Meanwhile, the South African Reserve Bank appears to be maintaining an easing bias, despite real rates approaching negative territory, as it attempts to balance its concerns about the strength of the currency with stimulus being provided via looser fiscal policy. And in Hungary, the need for risk premia to secure inflation expectations against government policy changes is now leading to rate hikes, where none would have been expected otherwise…
The base rate remains at 0.5 per cent, and the stock of assets purchased stays at £200bn. As expected.
Lower-than-expected growth in Brazil and New Zealand have prompted their central banks to maintain rates; in South Korea, “greatly decreased” inflation motivated the hold decision, in spite of a “continued upward trend” in growth.
Brazil’s monetary policy committee, Copom, kept the Selic rate at 10.75 per cent, hinting that a rate cut might have been on the cards were it not for recent macroprudential policies, whose effects on monetary conditions were yet to be seen. Read more
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Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
