Bank of England hikes 2014 growth forecast

Bank of England hikes 2014 growth forecast

 

By Roland JACKSON (AFP)

 

London — The Bank of England ramped up its 2014 economic growth forecast on Wednesday as Britain's recovery picks up speed, and vowed to keep interest rates low after tweaking its guidance.

 

Gross domestic product (GDP) was set to grow by 3.4 percent this year, the central bank said in its latest quarterly report.

 

That was up sharply from an earlier estimate of 2.8 percent given in November.

 

"The recovery has gained momentum. Output is growing at the fastest rate since 2007, works are being created at the quickest pace since records began, and after four years above target the inflation rate is back at 2.0 percent," governor Mark Carney said.

 

Carney took charge of the BoE last August and launched the forward guidance policy, under which the BoE had stated that it will not raise record-low interest rates until the unemployment rate falls to at least 7.0 percent.

 

However, the bank forecast on Wednesday that the unemployment rate -- which has fallen more sharply than expected amid the strengthening recovery -- would hit 7.0-percent in the coming months.

 

As a result, the BoE added it would look at a "broad range of indicators" at that point, in order to assess the health of the labour market and establish whether borrowing costs should rise.

 

Under the latest guidance, the bank will seek to absorb all the spare capacity in the economy over the next two to three years to allow a full recovery.

 

When interest rates do begin to increase, it will be a gradual and limited process, according to the BoE.

 

The central bank also pledged to maintain its £375-billion ($620-billion, 456-billion-euro) bond-buying stimulus programme, known as quantitative easing, until at least the first rate hike.

 

Interest rates have stood at a record low level of 0.50 percent since March 2009, when it also launched the vast QE stimulus to aid growth.

 

The bank meanwhile predicted fourth-quarter GDP growth would be revised to 0.9 percent, from 0.7 percent.

 

It also expected the economy would grow by a robust 0.8 percent in the current first quarter.

 

"Forward guidance is working," Carney told journalists.

 

"Expected interest rates have remained low even as the economy has recovered strongly.

 

"Uncertainty about interest rates has fallen. Most importantly, UK businesses have understood the message."

 

Canadian national Carney was last month forced to dampen talk of a rate rise any time soon, following news that the unemployment rate fell faster than expected to 7.1 percent, a near five-year low point.

 

The bank stressed on Wednesday that borrowing costs "may need to remain at low levels for some time to come" as Britain grapples with the ongoing legacy of the financial crisis and other economic headwinds.

 

"If and when the time comes that the economy can sustain higher interest rates, bank rate is expected to rise only gradually," Carney said.

 

"For a sustained and balanced recovery, the degree of stimulus will need to remain exceptional for some time."

 

The BoE also predicted that 12-month inflation would remain at, or slightly below the bank's official 2.0-percent target, over the forecast period.

 

The economy expanded at the fastest rate last year since before the global financial crisis, growing by 1.9 percent in 2013.

 

That was the fastest pace since 2007.

 

"Despite the very sharp and unexpected fall in unemployment, the MPC still sees plenty of slack in the economy that must be used up before raising bank rate," noted HSBC economist Simon Wells.

 

"Phase two of forward guidance offered no new targets or thresholds, but by arguing that there is a lot of spare capacity and with inflation projected to be below target 2-3 years ahead, governor Carney wanted to send a signal that rates are not moving soon."

 

Copyright © 2014 AFP. All rights reserved.

 

(Agence France-Presse, 13 Thursday February 2014 The Roman)

 

 

ECB holds key rate steady at 0.25 %

ECB holds key rate steady at 0.25 %

 

Frankfurt (AFP)

 

The European Central Bank held its key interest rates steady as largely expected on Thursday.

 

The ECB left its central "refi" or refinancing rate unchanged at 0.25 percent at its monthly policy meeting, it said in a statement.

 

The central bank also held its other two key rates -- the marginal lending rate and the deposit rate -- unchanged at 0.75 percent and zero percent respectively.

 

There had been speculation that the central bank could ease monetary conditions in the 18 countries that share the euro after area-wide inflation came in lower than expected last month.

 

The ECB surprised the markets with a quarter-point rate cut in November.

 

ECB President Mario Draghi was scheduled to explain the reasoning behind the latest decision at a news conference.

 

(Agence France-Presse, 6 Thursday February 2014 The Roman)

 

Yellen inherits US Federal Reserve chairman as Bernanke departs

Yellen inherits US Federal Reserve chairman as Bernanke departs

 

Washington (AFP)

 

Respected economist Ms. Janet Yellen was sworn in Monday as the first woman chair of the Federal Reserve, taking on the burden of winding down the Federal Reserve's stimulus without spurring more turmoil.

 

Ms. Janet Yellen inherits the mantle of the world's most powerful central banker from Ben Bernanke, who guided the US and the global financial system through its deepest crisis since the 1930s during his eight years in the job.

 

Nominated to the job last October by President Barack Obama, she will serve a four-year term concurrent to her ongoing 14 year term on the Federal Reserve's board of governors.

 

The respected economist has worked closely with Bernanke during her three-plus years as Federal Reserve vice-chair, and is not expected to depart from his policies aimed at helping lower still-high unemployment levels as long as inflation remains tamed.

 

Janet Yellen, 67, has served in a number of positions in the Federal Reserve, including head of its San Francisco branch, and also has held academic positions at Harvard University and University of California at Berkeley.

 

She is married to economics Nobel prize winner George Akerlof.

 

Bernanke will return to academia, meanwhile, including joining the washington-based think tank the Brookings Institution as a resident fellow.

 

"He will be a major contributor to the task of understanding the momentous events of the past eight years and crafting imaginative, pragmatic strategies to ensure the stability of the national and global economy," said Brookings president Strobe Talbott.

 

(Agence France-Presse, 3 Monday February 2014 The Roman)

Janet Yellen sworn in as first woman US Federal Reserve chairman

Janet Yellen sworn in as first woman US Federal Reserve chairman

 

[caption id="attachment_11763" align="alignnone" width="722"] (Federal Reserve Vice Chairman Janet Yellen (right) is sworn as Federal Reserve Chairman by Federal Reserve Board Governor Daniel Tarullo at the Federal Reserve Building, on 3 Monday February 2014 The Roman in Washington, DC. Ms Janet Yellen was sworn in on Monday to a term as chairman of the United States central bank, the Federal Reserve said in a statement. (Photo - AFP))[/caption]

 

WASHINGTON (Reuters) - Ms Janet Yellen was sworn in on Monday to a term as chairman of the United States central bank, the Federal Reserve said in a statement.

 

Ms Yellen succeeds Ben Bernanke to become the first woman to head the Federal Reserve.

 

Her term as chairman ends February 3, 2018.

 

The oath was administered by Governor Daniel Tarullo, the Federal Reserve said.

 

(The Straits Times, 3 Monday February 2014 The Roman)

Australian central bank holds rates at 2.5% as mining boom unwinds

Australian central bank holds rates at 2.5% as mining boom unwinds

 

SYDNEY (AFP) - Australia's central bank held its cash rate steady at a record low of 2.5 per cent and hinted at a prolonged pause, saying a period of interest rate stability was prudent as the mining boom unwinds.

 

Reserve Bank of Australia (RBA) governor Glenn Stevens said the board decided to leave interest rates on hold for a fifth consecutive month, as expected by analysts.

 

Despite inflation coming in at a stronger-than-expected 0.8 per cent in the final three months of last year, indicating a pick-up in consumer spending, Mr Stevens said growth and labour market prospects remained shaky as Australia's decade-long Asia mining investment boom began to decline.

 

"Information becoming available over the summer suggests slightly firmer consumer demand and foreshadows a solid expansion in housing construction.

 

Some indicators of business conditions and confidence have shown improvement," he said.

 

(The Strait Times, 4 Tuesday February 2014 The Roman)

 

Tunisia trims 2014 growth forecast to 3.8%

Tunisia trims 2014 growth forecast to 3.8%

 

[caption id="attachment_11721" align="alignnone" width="400"] (Tunisia’s central bank cut its growth forecast for 2014 to 3.8 percent, down from 4 percent. (File photo: Reuters))[/caption]

 

Tunisia's economy will expand less quickly than hoped this year, the central bank said on Thursday, cutting its growth forecast to 3.8 percent from 4 percent.

 

The economy grew by 3 percent last year.

 

The bank did not say why it was trimming its forecast, which came against a background of turmoil in many emerging economies as the U.S. Federal Reserve scales back its monetary stimulus.

 

The bank said the budget deficit was 8.3 percent of gross domestic product in 2013.

 

Under pressure from international lenders to cut subsidies, the government hopes to reduce it to 6.5 percent this year, according to the 2014 budget.

 

Three years after toppling their autocratic leader Zine El-Abidine Ben Ali in an uprising that inspired other 'Arab Spring' revolts, Tunisia is progressing toward full democracy after approving a new constitution this week.

 

A new caretaker government has taken over to run the country until new elections later this year.

 

But despite political progress, high living costs and a lack of economic opportunities are still the main concerns for many Tunisians.

 

The International Monetary Fund on Wednesday approved a $507 million loan tranche for the North African country, the second part of a $1.5 billion credit agreed at the start of 2013.

 

The central bank said foreign currency reserves stood at11.230bn Tunisian dinars ($6.98bn) by Jan. 28, equal to 102 days of import cover, compared to 106 days a month earlier.

 

(Reuters, Tunis)

 

(Al Arabiya News, 30 Thursday January 2014 The Roman)

 

 

Russia economy chief says dire 2013 was 'low point'

Russia economy chief says dire 2013 was 'low point'

 

Moscow (AFP)

 

Russia's economy chief said on Friday that the country had survived the worst of its sharp growth slowdown and was now on the path toward a cautious recovery.

 

But new data revision showed the $1.9-trillion (1.4-trillion-euro) economy expanding by an even worse than expected 1.3 percent in 2013 -- the second-worst performance of Vladimir Putin's 14 years in power and just a quarter of the Kremlin's target.

 

And a precipitous ruble selloff that has sliced seven percent off the currency's value this month and showed few signs of halting on Friday put Putin under still further pressure despite the upbeat forecast.

 

Economy Minister Alexei Ulyukayev rallied to Putin's relief by proclaiming the worst phase of Russia's growth slump over now that agriculture and industry were both picking up steam.

 

"It seems to me that we passed the low point somewhere around the third quarter of 2013," Ulyukayev told a ministerial meeting.

 

Russia's economy grew by 3.4 percent in 2012 and had been clipping along at a seven-percent pace during Putin's first two terms as Kremlin chief between 2000 and 2008.

 

Fitch Ratings on Friday attributed the downshift to a "decline in investment and the inventory cycle" and forecast an expansion rate of 2.0 percent this year -- below the world average and lagging most other big emerging market states.

 

Investor mistrust of Russia's economic reform efforts contributed to the ruble being swept up in a selloff of emerging market currencies at the end of last week.

 

The Russian currency -- subject of two devastating post-Soviet devaluations that forced many to question the wisdom of market economics -- was trading down 0.3 percent against the euro at 47.60 rubles and not far off its historic low.

 

The dollar was worth 35.25 rubles -- up 0.7 percent and once again approaching a five-year high it had set on Wednesday.

 

Russia's Central Bank this year reduced its market interventions as it proceeds with the planned introduction of a fully-convertible ruble exchange rate by the start of 2015.

 

Its First Deputy Chairwoman Ksenia Yudayeva gave the Moscow market a further fright on Wednesday by telling The Wall Street Journal that stress tests showed Russian banks being able handle a 30-percent ruble decline.

 

"Politically, devaluation is an understandable move," said Moscow's Higher School of Economics professor Nikolai Petrov.

 

"We have a large budget deficit (of 0.5 percent of gross domestic product) and there are not enough funds to fulfil Putin's election promises of 2012," Petrov told AFP.

 

"The government consciously took this step."

 

Capital flight risk

 

But economists attribute at least some of the ruble's troubles to a deteriorating current account balance that is being hurt by a steady outflow of foreign investor cash.

 

Capital flight reached $63 billion (46.5 billion euros) in 2013 and the government had hoped to see the figure shrink to $25 billion this year.

 

Yet First Deputy Economy Minister Andrei Klepach said that investors' recent turn against emerging markets could result in up to $35 billion leaving Russia in the first three months of the year alone.

 

He added that recent ruble weakness may translate into more expensive imports that push inflation above its annual target rate of 4.8 percent.

 

The delicate balancing act between a loosening of ruble controls and the fight against nagging inflation prompted the Central Bank Chairwoman Elvira Nabiullina to stress on Thursday that the ruble free-float plan "did not provide for a complete end to intervention."

 

The comment suggests that some authorities are alarmed by the pace of the ruble's deterioration and are now prepared to pursue currency support measures for longer than planned.

 

"The Central Bank appears to be increasingly concerned about the extent of the recent fall," Capital Economics said in a research note.

 

The London-based consultancy estimated that the Central Bank had bought about $5 billion (3.7 billion euros) worth of rubles on the Moscow Exchange in January -- a fraction of the $40 billion a month it was selling during the worst of Russia's 2008-2009 financial crisis.

 

"With some $500 billion in (gold and hard currency) reserves, it can stomach intervention on this scale for some time," Capital Economics said.

 

(Agence France-Presse, 31 Friday January 2014 The Roman)

 

Jordan’s Arab Bank 2013 net profit up 43 percent

Jordan’s Arab Bank 2013 net profit up 43 percent

 

Jordan’s largest lender, Arab Bank Group, posted a 43 percent rise in 2013 net profit to $501.9 million on the back of higher revenues, with its chairman saying a conservative policy eased the impact of political upheaval across the region.

 

Chairman Sabih al-Masri said in a statement the bank, one of the Middle East’s major financial institutions, saw deposits increase by $1.5 billion to $34.4 billion against $32.9 billion at the end of 2012.

 

“This was in spite of the challenging environment in the region with the solid growth in operating income reflecting prudent and conservative policies the bank preserved and the strategy it pursued,” Masri said.

 

Arab Bank, which has a $45.6 billion balance sheet spread across 30 countries and five continents, has seen a slowdown in profit growth in recent years as it put aside provisions to cover non-performing loans by businesses reeling from the global downturn.

 

Bankers say the wave of political unrest across the region since 2011 would continue to affect the bank’s business in 2014, but a diversified portfolio would help reduce risks.

 

(Reuters, Amman, 25 Saturday January 2014 The Roman)

(Al Arabiya News, 25 Saturday January 2014 The Roman)

 

Bank of Cyprus unfreezes 950 mn euros in CDs

Bank of Cyprus unfreezes 950 mn euros in CDs

 

Nicosia (AFP)

 

Bank of Cyprus, the island's largest lender, released 950 million euros ($1.29 billion) in six-month certificates of deposit it had locked in following a haircut on savings during a March bailout of the economy.

 

The CDs, due to mature on Friday, had been blocked as part of the bank's recapitalisation process under the deal.

 

"The bank's improved liquidity position and stabilising sign of its deposit base witnessed in the last few months are the decisive reasons for the release of deposits," BoC said, noting that it could have renewed the CDs automatically if it had chosen to do so.

 

"Through its decision the bank's management recognises the improving trust and confidence toward the bank by its customers and meets the expectations of the general public to enhance liquidity in the economy."

 

BoC said it acted after consulting the central bank and finance ministry, who issued a joint statement welcoming the decision as a sign of stability and a move to strengthen trust in the troubled banking sector.

 

Cyprus agreed in March to a 10-billion-euro rescue package with the European Commission, European Central Bank and International Monetary Fund to bail out its troubled economy and oversized banking system.

 

The deal included the closure of the island's second-largest bank, Laiki, and a 47.5 percent "haircut" on deposits above 100,000 euros at BoC.

 

BoC posted a 1.94 billion euro net loss in the first nine months of 2013, the most recent period for which data are available.

 

(Agence France-Presse, 30 Thursday January 2014 The Roman)

Tokyo stocks fall more than 3% after Fed taper move

Tokyo stocks fall more than 3% after Fed taper move

 

Tokyo (AFP) -x

 

Tokyo stocks plunged more than 3.0 percent on Thursday following a tumble in New York on worries over turbulence in emerging markets and the US central bank's decision to cut stimulus spending.

 

The Nikkei-225 index, which soared 2.70 percent on Wednesday, lost 3.22 percent, or 495.16 points, to 14,888.75 in early trade.

 

(Agence France-Presse, 30 Thursday January 2014 The Roman)

 

Britain posts fastest annual growth

Britain posts fastest annual growth



London (AFP)



Britain's economy grew at the fastest rate last year since before the financial crisis but output dipped in the final quarter of 2013, official data showed on Tuesday.



Gross domestic product expanded by 1.9 percent in 2013, the biggest expansion since 2007, the Office for National Statistics (ONS) said in a statement.



GDP had grown by only 0.1 percent in 2012, while the IMF recently said it expected the British economy to grow by 2.4 percent this year.



Economic output meanwhile grew by 0.7 percent between October and December last year compared with the third quarter of 2013, when GDP increased by 0.8 percent, the ONS added.



Chancellor of the Exchequer George Osborne said that overall, Tuesday's data was "more evidence that our long term economic plan is working".



He added in a statement: "But the job is not done, and it is clear that the biggest risk now to the recovery would be abandoning the plan that's delivering jobs and a brighter economic future."



Prime Minister David Cameron's coalition government has embarked on a massive austerity drive since coming to power in 2010, two years after the start of the financial crisis, in a bid to bring down a record deficit inherited from the previous Labour administration.



The fourth-quarter slowdown meanwhile took the shine off Britain's recent recovery.



"The 0.7-percent rise in UK GDP in the fourth quarter is a touch disappointing given the recent strength of the business surveys," said Martin Beck, economist at Capital Economics research group.



"But it still takes full-year growth in 2013 to 1.9 percent, the best performance since 2007 and possibly the strongest growth in the G7", which comprises also the United States, Germany and Japan.



In the fourth quarter, Britain achieved increases in output from the industrial and services sectors, while construction fell, according to the ONS data.



The slowdown could meanwhile dampen expectations of the Bank of England raising its main interest rate this year, analysts said on Tuesday.



Bank of England chief Mark Carney last week played down speculation that its key rate was due to rise from a record-low British level of 0.50 percent following a shock fall in unemployment.



The possibility of a rise in the bank's key rate rose after official data showed that British unemployment fell to 7.1 percent, just above the 7.0 percent threshold that Carney set as a potential trigger for a tightening of monetary policy.



(Agence France-Presse, 28 Tuesday January 2014 The Roman)

Russian ruble hits historic low against euro

Russian ruble hits historic low against euro

 

Moscow (AFP)

 

The Russian ruble hit a record low against the euro on Friday and was at its weakest point against the dollar for nearly four years as it continued a weeks-long slide.

 

The euro broke through its record strong point of 47.25 against the troubled Russian currency in late afternoon trading and stood at 47.26 rubles at 3:20 pm (1120 GMT).

 

The ruble's previously low against the single European currency came in the worst months of Russia's financial crisis in early 2009.

 

The dollar had also gained more than 0.7 percent against the Russian currency and was trading at 34.50 rubles on the Moscow Exchange.

 

The Russian currency in the past four weeks has lost about five percent of its value against a basket of euros and dollars the Central Bank uses to set its policies.

 

Traders said the selling accelerated after Economy Minister Alexei Ulyukayev was quoted as saying on Thursday that the ruble was more likely to weaken than strengthen in the coming weeks.

 

Finance Minister Anton Siluanov told Moscow Echo radio on Friday that he "sees no problem" with the current ruble exchange rate.

 

"This is the policy of the Central Bank and the financial authorities -- to make the exchange rate more flexible," Siluanov said.

 

The Central Bank intend to introduce a fully floating exchange rate by the start of next year.

 

It eliminated some of its support measures for the ruble earlier this month.

 

(Agence France-Presse, 24 Friday January 2014 The Roman)