Aurelia Butler

TOKYO (Reuters) -The Bank of Japan is set to maintain its massive stimulus on Friday and focus on risks to a fragile economic recovery from the Ukraine crisis, reinforcing expectations it will remain an outlier amid a global shift towards tighter monetary policy.While inflation is seen approaching or even exceeding its 2% target in coming months, the BOJ is in no mood to withdraw stimulus as it sees the recent energy-driven price rise as transitory and a possible threat to an economy only just recovering from the coronavirus pandemic.BOJ Governor Haruhiko Kuroda is likely to stress his resolve to sustain huge monetary support until the rise in inflation is accompanied by strong wage growth.”I don’t think Japan is in a condition where inflation stably hits 2%, even when the impact of cellphone fee cuts taper off and energy prices rise further,” Kuroda told parliament on Thursday.Japan’s core consumer prices rose 0.6% in February from a year earlier, data showed on Friday, below the BOJ’s target but marking the fastest pace in two years in a sign of growing inflationary pressure from higher energy costs.At a two-day meeting ending on Friday, the BOJ is widely expected to maintain its short-term rate target at -0.1% and that for the 10-year bond yield around 0%.The BOJ’s dovish tone would be in stark contrast with the U.S. Federal Reserve, which raised interest rates on Wednesday for the first time since 2018 and laid out plans for aggressive tightening to combat surging inflation.The Bank of England followed suit on Thursday with a third consecutive meeting of rate hikes to stop fast-rising inflation becoming entrenched.With supply disruptions and COVID-19 curbs having hobbled growth in the current quarter, the BOJ may offer a bleaker view on the economy than in January – when it said there were “clearer signs of pick-up.”In a sign of the pain rising fuel costs is already inflicting on households, consumer inflation data showed energy and electricity bills both shooting up by around 20% in February from year-before levels, the fastest pace since 1981.But the central bank is expected to roughly maintain its projection of a moderate economic recovery, as policymakers prefer to wait for more clarity on how the war in Ukraine could affect the global growth outlook, analysts say. More

WASHINGTON (Reuters) -U.S. Senate Banking Committee Chairman Sherrod Brown and other Senate Democrats have asked government regulators to examine Wells Fargo (NYSE:WFC)’s mortgage refinancing policies to ensure they do not discriminate against minority borrowers.In letters to the Department of Housing and Urban Development and the Consumer Financial Protection Bureau, the lawmakers said the government should ensure Wells Fargo is complying with fair lending laws after a recent analysis found the bank approved less than half of mortgage refinancing applications from Black borrowers, while signing off on 72% of such requests from white applicants.”The stark racial disparity in refinance approval rates at Wells Fargo raises questions about whether its mortgage systems and processes comply with all federal fair housing and fair lending laws and regulations,” the group, which included influential Senators Dick Durbin and Elizabeth Warren, wrote.The lawmakers said borrowers denied refinancing may have missed out on an opportunity to take advantage of record-low mortgage rates, leading to higher costs that could span decades, now that the Federal Reserve has begun to raise interest rates for the first time since 2018.The letter references a Bloomberg News analysis that found Wells Fargo lagged its counterparts in approving refinancing applications from minority borrowers.In addition to finding that the bank approved less than half of all refinancing applications from Black borrowers, the analysis found that just 53% of Hispanic applicants were approved in 2020. The average approval rate among all other lenders for Black and Hispanic applicants came in at 71% and 79%, respectively, according to Bloomberg’s analysis.A Wells Fargo spokesperson said in response to the letter that the bank complies with the law and works closely with regulators on “our shared goal of decreasing the homeownership gap.” The bank previously told Bloomberg its own internal review determined the discrepancy was due to additional credit factors. More

Dollar stores have had a good pandemic. Mass job cuts and shrinking household income during the early stages of the crisis boosted demand for lower-priced groceries and household supplies. The shops continue to flourish, even as the economy recovers. With inflation running at its highest level in four decades, consumers are pinching their pennies and turning to discount stores to stretch their budgets.Dollar General is among those betting that consumers’ appetite for cheaper goods will remain strong. The company, which already operates 18,130 stores across the US, plans to open another 1,110 locations in the coming months. It forecasts net sales to grow 10 per cent this year and earnings per share to be up between 12 and 14 per cent.New store openings and planned share buybacks help. But simply put, it pays to cater to lower income Americans. Dollar General customers tend to live in rural areas and have an annual household income of $40,000 or less. Rising food prices and job losses have hit this demographic the hardest. Despite the recent sell-off, Dollar General shares are still up 16 per cent over the past 12 months. It remains decent value at 20 times forward earnings. Walmart trades on a multiple of over 21 times, despite boasting a much lower ebitda margin.The $34bn in sales Dollar General pulled in last year was about 23 per cent higher than its pre-pandemic levels. Still, the discounter is not immune to supply chain woes and cost inflation, which reduced both margins and net profits last year. Mitigation came from opening in remote areas and keeping stores thinly staffed. The company also keeps prices low, partly by selling in smaller quantities. Customers end up paying more on a unit basis. Strategies such as a push into healthcare and the introduction of a higher margin format called Popshelf look smart. The pandemic has reshaped the US economy and widened the gap between the richest and poorest Americans. Dollar General is well placed to cash in on this growing income divide. More

LONDON (Reuters) -Investors scaled back their expectations for future Bank of England interest rate rises this year, sending British bond prices sharply higher, after the BoE hiked again on Thursday but softened its language about further tightening. The BoE has now raised interest rates at three successive meetings, taking Bank Rate back to its pre-pandemic level of 0.75%. On Thursday it changed its guidance to suggest further tightening “might” be needed, however, rather than being “likely” as in February.While surging commodity prices fuelled by Russia’s invasion of Ukraine are likely to cause inflation to peak higher than previously expected, it also increases the risk of an economic downturn, the BoE said.Unlike in February, none of the nine Monetary Policy Committee members voted for a 50 basis point increase, and Deputy Governor Jon Cunliffe opposed any change.”The BoE still signals hikes ahead but also more caution,” Bank of America (NYSE:BAC) economist Robert Wood and bond strategist Agne Stengeryte wrote in a note to clients.The BoE’s message appeared calibrated to eliminate market bets that the central bank would raise rates by half a percentage point at a future meeting, they said. Last month four out of nine policymakers voted for such a move to tame inflation expectations, bigger than any rate increase by the British central bank since it gained operational independence in 1997.Interest rate sensitive two-year gilt yields struck a one-month high of 1.472% moments before the BoE decision but later slumped by 20 basis points. At 1659 GMT the two-year yield was 10 basis points lower from Wednesday’s close at 1.29%.The intra-day fall was one of the biggest in two-year yields after any BoE decision. There were larger drops in November, when many investors had expected the BoE to start tightening policy, and in March 2020 when it announced an emergency 200 billion pounds of bond purchases as the COVID-19 pandemic began.Benchmark 10-year gilt yields were 6 basis points down on the day at 1.57%.Financial markets see a 91% chance that the BoE will raise rates to 1% at its next meeting in May – when inflation is set to reach 8% – and a 73% chance that they will reach 2% by the end of the year.Before the meeting, markets had fully priced in rates of 1% in May and 2% in December, with a 50 basis point rate rise priced in for some point in the next three months.Pantheon Macroeconomics’ Samuel Tombs said the repricing of market interest rate expectations for the next six months was sharper than any in more than a decade except that in the wake of November’s surprise decision. More