Jordan needs to hasten structural economic reforms to bolster growth beyond the current 2-3% average and to generate the jobs required to reduce unemployment, according to the International Monetary Fund (IMF), which added that high and increasing unemployment means 2.6% growth rate forecast for this year is insufficient to improve living standards. Some 22.9% of Jordanians are jobless, while the country has a population of almost 11 million and an annual population growth of about 2%. IMF official Ron Van Rooden said prudent monetary and fiscal policies have enabled Jordan to maintain macroeconomic stability.
Gold may seem appealing for investors worried about market volatility and inflation, but it carries risks, according to investment specialist Ken Fisher. In an opinion piece for The Globe and Mail, he noted annualised gains of 5% in US dollars since 1974, compared with 9.2% for Canadian stocks and 11.9% for the S&P 500. Gold’s long-term performance is also inconsistent, with some spells of “profitless periods”, leaving investors “frustrated” when they sell low. Even gold stocks, which add capitalism’s allure, are more volatile than broad markets, Fisher said.
Central banks globally have been accused of failing to spot the degree to which inflation rates would rise and stick, despite record monetary and fiscal support. Almost all rate-setters failed to foresee inflation rising and then overestimated the pace of decline. Advanced economies are experiencing the most vigorous and enduring outbreak of inflation in a generation. The Bank of England is currently holding a “Festival of Mistakes” to celebrate lessons learnt from financial disasters of the past, instead of what some suggest should be more recent errors. Central bankers failing to identify soaring inflation have not only left themselves risking financial instability due to being forced to raise rates faster than is usual but threatened the credibility of institutions that rely on trust to steer the economy toward sustainable growth.
Australia's unemployment rate increased to 3.7% in April, up 0.1 percentage points, which could lead to the Reserve Bank reconsidering another interest rate rise next month. The numbers are higher than the RBA's forecast of 3.6% for June and come as the Australian Bureau of Statistics reports a 2.6% increase in monthly hours worked over the last six months. Job market conditions are expected to soften throughout the year, but the rise in hours worked could indicate that the demand for labour is still high, says Oxford Economics Australia. Wage growth has also remained consistent with inflation reaching 7% at the turn of the year.
Japan's stronger-than-expected economic growth in the first quarter of this year could lead to a gradual unwinding of the Bank of Japan's unconventional policies, implemented over the past 20 years. Though new central bank governor Kazua Ueda has commissioned a review of the bank's policies, it remains to be seen whether he will be successful in unwinding policies under pressure from global monetary tightening by other advanced economies. The possible disinvestment of decades-long trends could lead to a rapid appreciation of the yen, blunting Japan’s competitiveness and disrupting the bond and currency markets of other Western countries in which Japan's funds have been invested.
National Australia Bank's CEO, Ross McEwan, believes the Reserve Bank of Australia will have to raise interest rates again to fight the threat of inflation, despite the increased pressure the move could place on borrowers. McEwan has noted the Reserve Bank's challenge to determine how to slow quarterly inflation without hurting customers, especially as just 30% of Australian households have mortgages.
Russia's central bank has said it is essential to continue anchoring inflation expectations at a low level and has praised the effectiveness of its inflation-targeting regime in limiting the impact of shocks. It warned that supply shocks, which could occur more frequently as Western sanctions and structural transformation further impact the Russian economy, must be mitigated. Russia's annual inflation target is 4%, which the central bank believes will be achieved by 2024 following last year's double-digit price rises. However, despite gradually easing inflation pressures, households' inflationary expectations for the year ahead in Russia remained elevated at 10.4% in April.
Bank of Israel to raise rates 25 bps next week, may be last in cycle - Reuters poll
Reuters
23-05-18 11:38
Israel's central bank is expected to raise short-term interest rates next week by another quarter-point to a more than 16-year high. The move is expected to cap an aggressive tightening cycle aimed at battling persistent inflation. All 15 economists polled by Reuters predicted a 25 basis points hike to 4.75%, which would be the highest the rate has been since late 2006. Israel's annual inflation rate stayed at 5% in April, which is higher than official annual targets of 1-3%.
Walmart has emerged as the winner amid inflation concerns, with customers favouring the retailer for groceries but cutting back on non-essential goods at rival chains. Walmart posted strong earnings and raised its outlook for 2023 after sales at stores open for at least a year rose 7.4% in its last quarter compared with the same period last year, while its operating income increased 17.3%. Walmart raised its sales forecast for the next quarter and full-year, citing low double-digit growth in grocery sales, as wealthier shoppers opt for private-label products, and food prices have risen. However, sales of discretionary goods including electronics, clothing and home goods were sluggish.
The bond market is approaching a turning point and is offering opportunities to investors following a difficult 2018, stakeholders have said. Investors have suggested that in 2019 higher yields will provide a tailwind for those in the industry and benefit over bonds and shares, while rising default risks make high yield bonds a risk this year. For investors seeking options that lock in income with minimal default risk, longer-terms deals issued by blue chip US and European companies offer, respectively, more than 5% and 8% interest rates.
The London interbank offered rate (LIBOR), which for four decades was the dominant benchmark for determining global interest rates, is set to be replaced by a number of locally-based indices. The move comes after LIBOR hit the headlines in 2012 amid a scandal surrounding rate-fixing. While the benchmarks replacing LIBOR are theoretically seen as more suited to today's finance industry, their incorporation has been difficult, with contracts on hundreds of trillions of dollars having to be renegotiated.
Gold is emerging as the top investment choice for professionals and retail investors as they consider what to do in the event of a US default. Analysts at RBC Capital have indicated that “gold looks like one of the few likely candidates that would bear the burden of resulting market flows from default anxiety.” Data from the World Gold Council shows that central bank purchases of gold hit a record high in Q1 2022, while LBMA-accredited precious metals refiners have reported seeing far higher volumes than usual of large bars. Other investments suggested include the yen, the Swiss franc, and high-quality international equities.
James Bullard, the president of the Federal Reserve Bank of St Louis, has backed further increases in US interest rates to forestall inflation. Bullard, one of the US central bank’s leading “hawks”, said that lifting interest rates again after 10 rate hikes since last year would act as “insurance” against price rises. His views contrast with Fed chair Jay Powell's recent stance, with other policymakers calling for a more cautious through to monetary policy.
Former Bank of England Chief Economist Andy Haldane has warned that the UK risks recession if the central bank continues to push ahead with interest rate hikes. Urging the bank to pause its current run of increases in borrowing costs, Haldane added that more interest rate hikes would pose significant risk to the economy. He also criticised both Labour and Conservative parties for a lack of ambition, saying the UK could borrow and spend more given a benign economic environment.
Analysts have expressed surprise at the recent 2% bounce in the US dollar, given that greenback was widely expected to continue its decline. The general consensus was that cooler inflation and potential interest rate slowdowns would make for a lower US currency. Analysts have put the bump down to increased safe-haven demand revolving around worries about US debt ceiling negotiations, the vulnerability of US banks and uncertainty over the global economy's outlook. Traders currently expect the US Federal Reserve to cut interest rates significantly later this year due to a falling economy, something which Alvin Tan, head of Asia FX strategy at analysts RBC Capital Markets, doubts will happen, stating there is "a chance that US interest rates could grind higher." The net short bets of hedge funds and other speculators against the dollar amounts to $14.56bn, the largest position since mid-2021, which Chester Ntonifor, FX strategist at BCA Research, suggested rendered a potential rebound.
The Federal Reserve is divided over how to control high inflation as interest rate worries continue to plague the economy. Lorie Logan, president of the Federal Reserve Bank of Dallas, warned that inflation still posed a threat, suggesting that the chances of a rate increase when the next policymaker meeting is held was far from certain. Furthermore, measures of underlying inflation pressures are showing less improvement, with core inflation measuring 5.5% over April and March, while it has not fallen at all since January. However, not every Fed official agrees that rate hikes should continue, with some suggesting the need for an extended pause in the policy. They argue that giving the increases the chance to exert their full effect will boost growth without risking inflation. Chair Jerome Powell is to speak at a Federal Reserve economics conference on Friday, but it is not known whether he will address the Fed’s possible next moves.
Japan's core consumer prices rose 3.4% in April from a year earlier as price hikes broadened, challenging the central bank's view that inflation will slow back below its 2% target later this year. The increase in the core consumer price index (CPI), which excludes fresh food but includes energy items, matched a median market forecast for a 3.4% gain and accelerated from a 3.1% rise in March. Analysts suggest that heightened price pressures may keep inflation above the Bank of Japan's 2% target longer than expected, which could impact the central bank’s policy and strategy.
Bank of Canada Governor Tiff Macklem has said that Canadians should not expect interest rates to drop back to the very low levels seen over the past decade. Macklem stressed that the era of historically low borrowing costs that followed the 2008/09 financial crisis is a thing of the past and that the surge in inflation over the past two years, followed by the central bank’s recent rate-hike campaign, have put the economy on a path on which borrowing costs are to be persistently higher. His comments suggest that the bank is prepared for an extended battle to combat inflation.
The Canadian housing market owes its recovery to the country's economic strength and surging employment rates. However, the rise of regional prices could soon trigger new stress tests and alter the outlook for first-time buyers, explains Robert McLister in the Globe and Mail. While there is a three-in-four likelihood that the Bank of Canada will increase the prime rate again by 6 September, McLister argues that the central bank may hold off on further hikes despite the inflation-fuelling economic growth, as tens of thousands of Canadians risk plunging further into debt.
Consumer confidence in the UK has reached its highest level in 15 months, according to a survey by market research firm GfK. The company's confidence index, which rose from -30 in April to -27 in May, reached its highest level since February 2022 and has increased for four consecutive months. Inflation remained at double digits, however, despite the upbeat outlook and the cost of food and drink soared to levels not seen since 1977. The Bank of England has responded to persistent inflation rises by lifting borrowing costs at 12 consecutive meetings since late 2021, resulting in the Bank Rate now standing at 4.5%.
