Aurelia Butler

KOFU/TOKYO (Reuters) -Bank of Japan Deputy Governor Ryozo Himino on Wednesday reiterated the central bank’s stance that it would continue to raise interest rates if inflation stayed on course, while also closely monitoring financial market conditions.His comments echo those from Governor Kazuo Ueda last week, who suggested that recent market volatility would not derail its long-term rate hike plans.The central bank would, however, first need to monitor financial markets with the “utmost vigilance” as they remain unstable, Himino said in a press conference after he met business leaders in the central Japanese city of Kofu.The BOJ will examine the impact of recent market volatility, the interest rate hike in July and the course of the U.S. economy on its economic and price outlook, he said.”There is no change to our stance that we would adjust monetary easing if economic activity and prices are likely to meet projections,” he said.The BOJ surprised markets in July by raising interest rates to a 15-year high and signalling its readiness to hike borrowing costs further on growing prospects that inflation would durably hit its 2% target.The BOJ’s hawkish tone led the battered yen to soar and Tokyo stocks to plunge in their biggest single-day rout since 1987’s Black Monday sell-off though markets have since stabilised.Ueda was summoned in parliament last week to explain the July decision. Speaking to lawmakers, he reaffirmed his resolve to raise interest rates if inflation stayed on course to sustainably hit the BOJ’s 2% target.A poll by Reuters showed a majority of economists expect the BOJ to hike rates again this year, but more see the chance of it happening in December rather than October.Prior to the press conference, Himino in a speech to business leaders expressed confidence in the outlook for the Japanese economy.”I believe that the baseline scenario for the future remains that growth and inflation will develop in line with the BOJ’s outlook,” he said, according to the text posted on the central bank’s website.He pointed out that the yen’s recent rebound may alleviate the pain of rising import costs and profit squeeze many small and medium-sized firms currently face.While the stronger yen could pressure profits at export-oriented companies, there is not a wide gap between current yen rates and the rates assumed in their business plans, he said.Stock price volatility “need not affect business sentiment too much” as Japanese firms have transformed themselves and formed competitive edges, he added.Private consumption, previously a weak spot of the economy, will be underpinned by wage growth and moderating inflation, although the BOJ needs to be mindful of risks that inflation will not moderate and continue to push down real wages, he said. More

ORLANDO, Florida (Reuters) -Jerome Powell’s Jackson Hole speech has turned Sept. 6 and Sept. 18 into the two most important dates for U.S. monetary policy in years, as events on both days center on the Fed’s new guiding light: the unemployment rate.    The first marks the release of the August non-farm payrolls report, and the second will see the Fed’s much-anticipated interest rate decision and, just as crucially, its updated Summary of Economic Projections (SEP).    The Fed will almost certainly cut rates on Sept. 18, as Powell signaled at Jackson Hole and as other officials have effectively confirmed since. The only questions now are whether the easing cycle starts with a 25- or 50-basis-point cut, and how much policy is loosened in the coming months. After these two pivotal days in September, investors should have their answers.DUAL PIVOTS    Powell essentially made two pivots in Jackson Hole. The first, as expected, is his clear signaling that a rate cut is forthcoming. The second, perhaps less anticipated, is his equally clear emphasis that unemployment, not inflation, is now the number one determinant of upcoming policy decisions.     Powell’s warning that the Fed does “not seek or welcome further cooling in labor market conditions” basically means the current unemployment rate of 4.3% – which is still fairly low by historical standards – is now a “line in the sand” that, if crossed, will likely trigger a policy response.”The unemployment rate is now around 90% of the Fed’s dual mandate, inflation is about 10%,” said John Silvia, founder of Dynamic Economic Strategy, adding that Powell’s pivot to unemployment from inflation is remarkable considering the economy isn’t in recession. ALL EYES ON SEPTEMBER    Of course, there’s more than one way of measuring the strength or otherwise of the labor market and, by extension, the economy. They include nominal job growth, the ebb and flow of the labor force, and one of the Fed’s favorites since the COVID-19 pandemic: the JOLTS estimates of outsized quits and job openings.    But for the public, markets at large and politicians, the unemployment rate offers the clearest picture of how well the labor market is holding up. This figure is doubly important now the U.S. presidential election is in full swing.The unemployment rate rose two-tenths of a percentage point in July to 4.3%, the highest level since October 2021. It triggered the so-called Sahm rule, which states that a 0.5-percentage point rise in the three-month average unemployment rate from the low of the past year typically signals recession. While economist Claudia Sahm, the rule’s creator, has poured cold water on claims that recession is now inevitable, she does note that the rise in unemployment is concerning. When it comes to rising unemployment, momentum typically cannot be slowed easily, much less reversed quickly.    What’s more, the current unemployment rate is now above Fed officials’ median long-term projection of 4.2%, published in the June SEP. And since the Fed began including median projections in its quarterly SEPs in 2015, major policy shifts have always coincided with the two crossing over.     This happened in late 2016 when the Fed started raising rates in earnest, in early 2020 when the pandemic prompted rates to be cut to zero, and in early 2022 when the Fed began its last hiking cycle.So that’s why it’s so significant that both the unemployment rate and the Fed’s long-term outlook will be updated within days of each other. Changes in either will go a long way in determining the Fed’s path for the rest of this year and early 2025.ROCKY OR SOFT LANDING?Traders expect 100 basis points of easing by year end, and at least another 100 bps next year. And even though futures markets are still betting on the Fed delivering a quarter-point cut in September, the probability of a half-point move has a one-in-three chance. So what happens if we see another solid rise in the unemployment rate on Sept. 6? This could seal the deal for a 50-basis-point cut on Sept. 18 and boost the case for similarly bold moves in the coming months.      A cutting cycle of that size and speed wouldn’t be easy for the Fed to navigate or communicate. Just as importantly, it will likely only occur if the U.S. truly is in the early stages of a recession, blowing apart the market’s “soft landing” narrative once and for all.    (The opinions expressed here are those of the author, a columnist for Reuters.)(By Jamie McGeeverEditing by Helen Popper) More

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At a bank event, Haddad said he made the suggestion to President Luiz Inacio Lula da Silva after discussing the issue with current central bank governor Roberto Campos Neto.The finance chief added that Lula has the information needed to finalize his pick to lead the South American nation’s monetary authority, but that no date has been set for the announcement.Brazil’s government initially planned to disclose the nomination in August in time for a Senate confirmation hearing in early September, but the idea has faced resistance from senators.Gabriel Galipolo, the central bank’s current monetary policy director, is widely seen as Campos Neto’s likely successor. More

Kyiv will also temporarily suspend payments for loans from Cargill Financial Services International, Inc, starting from Sept. 3, and on government-guaranteed bonds of Ukrainian power firm Ukrenergo starting from Nov. 9, according to the document. The GDP warrants and private debt obligations are not part of the country’s sovereign restructuring deal that the government of the war-torn country is expected to finalise any time now.With the Russian war in Ukraine now in its third year, the Kyiv government relies heavily on foreign financial aid to be able to finance its social and humanitarian payments. The bulk of Ukraine’s state revenues goes to defence efforts.The GDP warrant, an instrument linked to the country’s economic output growth was created during Ukraine’s 2015 debt restructuring in the wake of Russia’s annexation of Crimea as a sweetener to creditors. JPMorgan calculates that Ukraine owes $2.6 billion on this instrument.About $700 million is owed to U.S. agribusiness giant Cargill and the state grid company Ukrenergo has a government guarantee on a $830 million note. More