Economy

Yi made the remarks ahead of an all-important Communist Party Congress on Sunday at a G20 finance minister and central bank governor meeting dated Oct. 13. The PBOC has increasingly relied on structural, or targeted policy tools, including low-cost loans, to support the slowing economy, as it faces limited room to cut interest rates for fear of fuelling capital flight and inflation.Yi said the PBOC will put emphasis on supporting infrastructure construction and quicken the pace to utilise loans to deliver home projects. He also said the central bank would support financial institutions to issue loans for equipment upgrade to key sectors, including manufacturing. The central bank said in late September that it had set up a relending facility worth more than 200 billion yuan ($27.6 billion) to help manufacturers and other companies upgrade their equipment. It also said Chinese local governments could relax the interest rate limit for commercial housing loans for first home buyers in some cities in phases. More

WASHINGTON (Reuters) -Japan’s currency intervention last month to stop a sharp slide in the yen was likely a “signaling action” to smooth volatility, though the impact of such moves tend to be short-lived, a senior International Monetary Fund official said on Thursday.Recent volatile market moves heighten the need for the Bank of Japan to maintain ultra-low interest rates and avoid making tweaks to yield curve control (YCC), Sanjaya Panth, deputy director for the IMF’s Asia and Pacific Department, told Reuters in an interview.”We think this is not a good time to change YCC. In a particularly volatile situation where markets are edgy and many things are happening, you want to offer continued commitment to monetary easing until inflation picks up durably,” Panth said.”It’s a very important signal the BOJ needs to provide. Tinkering with that right now may confuse markets. We don’t see room for that,” he said.Some investors speculate the BOJ could tweak YCC and allow Japanese yields to rise more to moderate the pace of yen falls.Japan spent roughly 2.8 trillion yen ($19 billion) intervening in the currency market last month to arrest sharp drops in the value of the yen, which were driven largely by the policy divergence between the U.S. central bank’s aggressive interest rate hikes and the BOJ’s resolve to keep monetary policy ultra-loose.Markets are focusing on whether Japan will step in again, as stronger-than-expected U.S. inflation data pushed the dollar to a fresh 32-year high against the yen of 147.665.Speaking in Washington, Japanese Finance Minister Shunichi Suzuki said on Thursday authorities were ready to take “appropriate action” against excessive volatility.Panth said Japanese authorities likely intervened last month with the view that the yen’s “pretty sharp” moves could dampen corporate investment and hurt consumer confidence.Although interest rate increases by the U.S. Federal Reserve and the European Central Bank remain key drivers of currency moves, authorities most likely saw the yen’s recent “particularly sharp moves” as driven by no new information of relevance, he said.”It was a fairly small amount given how liquid the market is,” Panth said, referring to the size of Japan’s intervention. “It seems more of a signaling action to smooth the market’s adjustment.””When there is intervention, it does slow down the pace of depreciation. We saw that in this round in September. When looked at historically, the impact of these kinds of interventions doesn’t last very long,” he said.Once welcomed as giving exports a boost, the weak yen has become a headache for Japanese policymakers by inflating the cost of importing already expensive fuel and food.”What is of relevance is the overall stance of monetary and fiscal policy, which remains appropriate. The intervention was a one-time event so far of relatively small magnitude in a deep market.”($1 = 147.0500 yen) More

The Monetary Authority of Singapore (MAS), at a scheduled policy meeting, said it will re-centre the mid-point of the exchange rate policy band known as the Nominal Effective Exchange Rate, or S$NEER. There will be no change to the slope and width of the band.The Singapore dollar was up about 0.3% to S$1.1429 per U.S. dollar after the policy decision. MAS has made two off-cycle tightening moves this year, in January and July, as inflation in the city-state remains elevated. This is the fifth round of tightening since last October.The MAS manages monetary policy through exchange rate settings, rather than interest rates, as trade flows dwarf its economy.It adjusts its policy via three levers: the slope, mid-point and width of the policy band, which let the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed band.Selena Ling, head of treasury research and strategy at OCBC, said the MAS move “suggests that there will be less concern about downside growth risks, which can taken care of through the upcoming budget.” She added that further tightening is possible at next April’s scheduled review. On Friday, the central bank said all the tightening moves so far will further reduce imported inflation but cautioned about persistent cost pressures.”The Singapore economy will grow at a slower pace in tandem with weakening global demand,” MAS said. “However, core inflation will stay elevated over the next few quarters, as imported inflation remains significant and a tight labour market supports strong wage increases,” it added in its statement.The core inflation rate — the central bank’s favoured price measure – rose to 5.1% in August on a year-on-year basis. It was 4.8% in July. MAS said core inflation is likely to stay at about 5% for the rest of 2022, and into early 2023.Gross domestic product (GDP) was up 4.4% in July-September on a year-on-year basis, according to advance estimates from the Ministry of Trade and Industry also released on Friday. On a quarter-on-quarter seasonally adjusted basis, GDP expanded 1.5% in July-September.”Q3 GDP obviously benefitted from domestic and border restrictions being eased,” said Song Seng Wun, an economist at CIMB Private Banking. More

WASHINGTON (Reuters) -Chad’s creditors on Thursday said they had agreed that the African country did not need debt relief at the moment given a surge in oil prices, but committed to reconvene if a financing gap was identified.In a statement released by the Paris Club of official creditors, Chad’s creditors said they were finalizing a memorandum of understanding on a deal, which marks the outcome under a debt treatment framework agreed by the Group of 20 major economies and the Paris Club in late 2020.Together with Ethiopia and Zambia, Chad was one of three initial countries to seek a debt restructuring under a G20 initiative, but progress has been glacial.The deal, first reported by Reuters, makes clear that Chad’s bilateral creditors – China, France, India and Saudi Arabia – would act to offer Chad debt relief if needed, a source familiar with the matter told Reuters.The agreement also includes Switzerland-based mining and commodity firm Glencore (OTC:GLNCY), a major creditor, which was seen as a “huge step,” said the source.Although Chad is currently benefiting from high oil prices, economists and experts say both government and private-sector creditors must be ready to act in case debt servicing conditions become more difficult for the country.That could happen in 2024, the source said, when Chad will face a high level of debt service payments.Chad’s creditor committee, co-chaired by France and Saudi Arabia, met virtually on September 13 and 27, together with staff from the International Monetary Fund and the World Bank.No debt relief from official bilateral creditors was currently needed given the surge in oil prices since the approval of an IMF lending program on Dec. 10, the committee said. However it agreed to reconvene if needed.”The creditor committee committed to reconvene and address the need for a debt treatment if a financing gap is identified,” it said, adding that Chadian authorities would be expected to seek comparable debt treatments from all private and other official bilateral creditors should one be needed.It also urged Glencore, Chad’s largest private external creditor, “to reaffirm its commitment to provide a debt treatment during the IMF program should a financing gap be identified” and to address the remaining debt vulnerabilities that result from its acceleration repayment mechanism.Chad’s finance minister welcomed the cooperation with the G20, Paris Club and IMF during a meeting of African finance ministers and Group of Seven officials on Wednesday, the source said.The source said discussions were continuing with Zambia, whose finance minister also participated in the G7 meeting with African finance ministers, an event coordinated by current G7 president Germany. More

The country’s seasonally adjusted unemployment rate rebounded to 2.8% in September from 2.5% in August, which was the lowest since the data series began in June 1999. However, it was still far below an average of 3.6% set in all of 2021.The employment rate edged down 0.1 percentage point to 62.2% in September from August after adjusting for seasonal factors, the Statistics Korea data showed.The country’s central bank has raised the policy interest rate by a combined 250 basis points since August last year, including a bigger-than-usual 50 basis-point hike on Wednesday, in its fight to rein in inflation.Bank of Korea Governor Rhee Chang-yong said after the rate decision on Wednesday that Asia’s fourth-largest economy has begun softening, although economists expect it to raise the rate further in the coming months. More

“Japan’s economy is emerging from the COVID-19 pandemic’s wounds but the pace of recovery is slow compared with countries like the United States,” Kuroda said in a news conference after the G20 finance leaders’ meeting in Washington.”It’s therefore necessary to keep supporting the economy” with ultra-loose monetary policy, he said. More

WASHINGTON (Reuters) – Most Asian central banks must tighten monetary policy further as rising commodity prices and their currencies’ depreciation, driven by steady U.S. interest rate hikes, push inflation above their targets, the International Monetary Fund said on Thursday.China and Japan are exceptions, where the economic recovery has been weaker, slack remains substantial and inflation has not risen as sharply as elsewhere, said Krishna Srinivasan, director of the IMF’s Asia and Pacific Department.Many Asian currencies depreciated “quite sharply” as U.S. monetary tightening led to widening interest rate differentials, helping push up import costs for the countries, he said.”While our baseline is for inflation to have peaked by end-year, large exchange-rate depreciations could lead to higher inflation and greater persistence, particularly if global interest rates rise more forcefully, and require faster monetary policy tightening in Asia,” Srinivasan said in a news conference during the IMF and World Bank annual meetings in Washington.Large currency depreciations and rising interest rates could also trigger financial stress in Asian countries with high debt, Srinivasan said.”Asia is now the largest debtor in the world besides being the biggest saver, and several countries are at high risk of debt distress,” he said.Most of the rise in Asia’s debt is concentrated in China, but also seen in other economies, Sanjaya Panth, deputy director of the IMF’s Asia and Pacific Department, told Reuters in an interview on Thursday.”Some form of market stress cannot be ruled out. But the relatively strong position of many economies gives us comfort,” he said, pointing to their low levels of external debt, higher reserves and resilient financial systems. More

By Balazs Koranyi and Francesco CanepaWASHINGTON/FRANKFURT (Reuters) – European Central Bank policymakers discussed earlier this month a detailed timeline for running down a 3.3 trillion euro bond portfolio and envisioned the start of quantitative tightening sometime in the second quarter of 2023, sources told Reuters.The ECB could already tweak its language on reinvestments at its October meeting and then could provide a detailed plan possibly in December but more likely in February, according to three sources who spoke on condition of anonymity. The central bank is sitting on 3.3 trillion euros of debt in its Asset Purchase Programme and has so far said that all cash maturing in this scheme would be reinvested for an extended period of time beyond the first interest rate hike.But the rate hikes already have started and the benchmark rate could hit 2% by the end of the year, so reinvestments will also need to come to a close. A seminar presentation at the central bank’s Cyprus meeting in early October saw an end to full reinvestments in the second quarter of next year, with some policymakers mentioning earlier dates and others advocating June.An ECB spokesman declined to comment. The debt pile would be run down by not reinvesting all the cash from maturing debt rather than outright sales and the ECB would aim to exercise widespread flexibility in how this would be done.Policymakers agreed that markets were tense now so there was no sense in testing investors with a premature reinvestment plan. Recent turmoil in Britain, which forced the Bank of England into the market, also spooked some policymakers and strengthened the case for caution. Policy hawks, normally advocates of tighter policy, also appeared to be on board with this plan, the sources said, as they are prioritising rate hikes and saw the balance sheet question as a secondary issue.Some fear that if a reduction in the balance sheet started soon, that would serve as an argument for a slowdown in rate hikes. But they see rates as a more powerful policy channel.No decision on this timeline has been taken and the sources said there could be changes. The discussions were in an early stage and the presentation was not a policy proposal.The sources added that the discussion did not impact the ECB’s 1.7 trillion euro Pandemic Emergency Purchase Programme. Reinvestments in this programme are set to run through 2024 and policymakers are not keen at all to make a change. (This story has been corrected to fix figure in the first paragraph to trillion from billion) More