Aurelia Butler

Other central banks have already started the rates liftoff, and even dovish ones are starting to unwind the stimulus unleashed to protect their economies from the COVID-19 pandemic.Here’s a look at where policymakers stand on the path out of pandemic-era stimulus, in order of how hawkish they appear: (Graphic: Central bank balance sheets, https://fingfx.thomsonreuters.com/gfx/mkt/klvyknowjvg/theme1612.PNG) 1) NORWAY Norway’s central bank cemented its position as the most aggressive rate-setter in the developed world, raising rates in December after starting to tighten policy in September. The bank last month took rates to 0.5% and at its January meeting it flagged a March rate hike. (Graphic: New Zealand, Norway lead way with rate hikes among developed economies, https://fingfx.thomsonreuters.com/gfx/mkt/mopanqrdzva/CBANKS1712.PNG) 2) NEW ZEALAND New Zealand hiked rates in November for a second time to 0.75% and forecast they would reach 2.5% by 2023. Annual consumer inflation hit a three-decade high in the fourth quarter, cementing expectations policy will be tightened at the Feb 23 central bank meeting.3) BRITAIN The Bank of England is expected to hike rates next week, after surprising markets with a rate rise in December.Explaining its 15-bps hike to 0.25%, the BoE said inflation was likely to hit 6% in April – triple its target – and that more rate rises would probably be needed.Markets price in a 90% chance of a Feb rate hike and anticipate four 25 basis-point rises by end-2022. (Graphic: UK inflation, https://fingfx.thomsonreuters.com/gfx/mkt/zdvxoaooopx/uk%20inflation%20chart.PNG) 4) UNITED STATES The Federal Reserve on Wednesday signalled its intent to raise interest rates in March and reaffirmed plans to end its bond purchases that month in what U.S. central bank chief Jerome Powell pledged will be a sustained battle to tame inflation.The possibility the Fed could move even more aggressively has unnerved Wall Street, putting the S&P 500 index on track for its biggest monthly drop since March 2020. Deutsche Bank (DE:DBKGn) expects the Fed to raise interest rates at every meeting from March to June and then revert to a quarterly tightening cycle from September, amounting to five hikes this year. Nomura, meanwhile, predicts a 50-bps move in March. (Graphic: UST yield spread, https://fingfx.thomsonreuters.com/gfx/mkt/gkplgjmrrvb/UST%20yield%20spread.JPG) 5) CANADA The Bank of Canada on Wednesday surprised some by opting not to raise the 0.25% interest rate but Governor Tiff Macklem said the bank was on “a rising path”. https://www.reuters.com/business/finance/hike-or-not-its-toss-up-ahead-bank-canada-rate-decision-2022-01-26December inflation at 4.8% was the highest since 1991 and well above the bank’s 1%-3% control range. Markets are pricing a 90% chance of a hike to 0.50% in March 2, and at least five increases this year.6) AUSTRALIAWith the hottest consumer inflation since 2014 and strongest labour market since 2008, the Reserve Bank of Australia will face immense pressure at next week’s meeting to abandon its dovish stance. It has already moved toward unwinding pandemic stimulus by ditching an ultra-low bond yield target and has opened the door for a 2023 rate hike, versus a previous forecast of 2024.But while Governor Philip Lowe has said a 2022 rate hike is unlikely a Reuters poll of analysts forecast the RBA to hike rates in November and end QE next week.7) SWEDEN Sweden has ended pandemic-era lending facilities but has pencilled in a rate hike only for late 2024.Headline inflation in December was 4.1% versus the 2% target. The December surge was due mainly to electricity prices and overall price pressures remain modest, central bank Governor Stefan Ingves said earlier this month. 8) EURO ZONE The European Central Bank is on a very different path to most peers.It said last month it would end its 1.85 trillion euro pandemic emergency asset-buying scheme by end-March.While inflation is at a record high 5%, the ECB expects inflation to retreat and says a rate rise this year is unlikely. However, it has promised copious support via its long-running Asset Purchase Programme and signalled a very gradual exit from years of ultra-easy policy. (Graphic: Life after PEPP looms in the euro area, https://fingfx.thomsonreuters.com/gfx/mkt/byprjqabjpe/ECB1712.PNG) 9) JAPANThe Bank of Japan has taken tentative steps to unwind stimulus, pledging to slow purchases of corporate bonds and commercial paper to pre-pandemic levels from April. This month, it raised inflation forecasts but quashed speculation it may soon signal a shift in its decade-old stimulus experiment, saying it was in no rush to change ultra-loose monetary policy. 10) SWITZERLAND The Swiss National Bank remains at the dovish end of the central bank spectrum, despite higher inflation and says its loose stance was appropriate. However, faced with a property boom, it told lenders this week to hold additional capital amounting to 2.5% of risk-weighted positions that are backed by residential real estate. More

“In Amsterdam as in all other major cities around Europe, there’s enormous growth in all these different companies that deliver your groceries within 10 minutes,” said a spokesperson for city councillor Marieke van Doornick, who proposed the ban. However, “with those companies there are also coming a growing number of complaints from the direct neighbourhood.”The spokesperson cited noise and scooter traffic arriving and leaving buildings, and the appearance of the stores, which are used for delivery only and not open to the public – and often have darkened windows to signal that.The spokesperson said the city aimed to agree rules over the coming year that would determine where dark stores are allowed.As of Jan. 14, there were 31 such stores in operation, almost all of which opened during the COVID-19 pandemic, the spokesperson said, adding: “There are probably more, it’s going really fast.”Flink, with 10 dark stores in Amsterdam, said the company had planned to open more and was disappointed by the decision.”We have fantastic feedback from our customers,” it said in a statement, adding that in addition to grocery delivery it also distributed products made by local businesses.Berlin-based Gorillas said in a reaction that it had been in talks with the city council and was surprised and disappointed by the decision.”In just a year of operations in Amsterdam, we have built meaningful relationships with local partners and customers and created hundreds of economic opportunities,” it said. Turkey’s Getir said the decision “undeniably has a large impact on our employees and the large number of customers who use our service on a daily basis.”It said it was still evaluating the decision and how to react. More

In a research note, the investment bank’s economists predicted the debt-to-gross domestic product ratio should decline 7 percentage points in 2022, after reaching the highest level since World War Two during the pandemic. Real growth will contribute about 6 percentage points and inflation a similar percentage, offset by interest expenses and primary deficit spending.”Our expectation for fiscal spending in 2022 and 2023 are much more moderate, especially after the failure of the large-scale Build Back Better spending program to pass last year. For 2022, we expect a deficit of 4.1%, and 4.0% for 2023, closely in line with the pre-Covid decade average,” the note said. The economists said interest rate levels and net interest expenses are more important in determining the state of public finances than debt-to-GDP. Interest rates are expected to stay relatively low even if the Federal Reserve tightening, expected to start in March, shifts them marginally higher.The U.S. Commerce Department said Thursday that the economy notched its strongest growth in nearly four decades in 2021 after the government pumped trillions of dollars in COVID-19 relief. The economy grew 5.7% in 2021, the strongest since 1984, the government said in a report showing GDP increased at a 6.9% annualized rate in the fourth quarter, following the third quarter’s 2.3% pace. Growth is 3.1% above its pre-pandemic level. More

OTTAWA (Reuters) – The Bank of Canada’s decision to delay a rate hike for five more weeks will add fuel to Canada’s scorching housing market as buyers scramble to clinch deals before borrowing costs rise, realtors said.The Bank of Canada held its overnight rate at a record low 0.25% on Wednesday, but warned multiple increases would be coming soon. The U.S. Federal Reserve separately also said it would start hiking soon.”Any hint of interest rate increases, any hint that it’s about to go up, makes people nervous,” said Lisa Bednarski, a Toronto real estate agent. “They want to buy before their buying power diminishes.”Canada’s housing market has been on tear throughout much of the pandemic, with prices up 39% nationwide from February 2020 to December 2021. In November and December alone, home prices jumped 4.5%, compared with a 3.7% gain in all of 2019. (Graphic: Canadian housing prices, https://graphics.reuters.com/CANADA-CENBANK/HOUSING2/zjpqkakagpx/chart.png) Forecasts are mixed for 2022, with the Royal Bank of Canada seeing home prices up 3% this year and brokerage Royal LePage forecasting a 10.5% gain.While the early rush was mostly end users seeking out larger properties with space for offices, gyms and living, by mid-2021 investors had taken hold of the market, according to agents. A recent Bank of Canada study found investors now account for more than 20% of home purchases.Supply, meanwhile, has reached historic lows, realtors say. With few options on the market, many end users are holding back – especially current owners who already have a foothold in the market, said real estate agent Peter Kiriazopoulos. Investors are another story.”My investor clients – they’re not too picky,” said Kiriazopoulos, who sells in Toronto’s suburbs. “They just want to move so they can close at a lower interest rate.”Right now, a typical Toronto area home may have 15 buyers putting in offers. A hike would have cut that by a third, said mortgage broker Ron Butler. Instead, all those bidders will be ready with their best offer for another five weeks, he said. “It is a little sprinkle of lighter fluid,” said Butler. “In the psychology of the public, it’s a moment of relief.”(Graphic: Canada’s home price changes vs interest rates, https://graphics.reuters.com/CANADA-CENBANK/HOUSING/zgpomjmjrpd/chart.png) The Bank of Canada acknowledged low interest rates play a role in home-price escalation, along with increased investor interest, but suggested the solution was outside their policy mandate.”The bank’s view is that the most important thing that will restore balance to the housing market in Canada is an increase in supply,” Senior Deputy Governor Carolyn Rogers (NYSE:ROG) told reporters on Wednesday. “Supply has not kept pace with demand.”But some economists disagree. Derek Holt, head of capital markets economics with Scotiabank, expects prices to surge again over the next few weeks until the Bank hikes, likely on March 2.”The Bank of Canada seems to be dramatically downplaying the role of easy money as a contributor to hot housing markets,” Holt said. ($1 = 1.2710 Canadian dollars) More