JACKSON HOLE, Wyo. (Reuters) - It's a maxim for private investors: Don't fight the Fed. The lesson may apply to central banks in developing nations as well, according to new research presented on Friday that concluded using monetary policy to fight a currency war may ultimately lead to self-inflicted wounds. For developing nations at least, when a central bank like the Fed acts and global capital flows shift, the interest rates needed to keep the local currency from changing value are likely to throw monetary policy out of line with what the local economy needs. Borrowing costs at that point become either too tight and court a slowdown, or too loose and court inflation or excessive borrowing.
The bulk of currency trading is done in a small number of currencies. Here are some of the most tradable currencies.
This weekend's Barron's offers ways to prepare portfolios to ride out the next decade. "How to Prepare Your Portfolio for the Worst When the Worst Is a Real Possibility" by Reshma Kapadia shows how financial advisors are beginning to prepare for some bad, but not unthinkable, "doomsday" scenarios. Should Microsoft Corporation (NASDAQ: MSFT) be in your doomsday portfolio?
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Bundesbank President Jens Weidmann warned that a deteriorating economy shouldn’t spark “panic,” barely three weeks before the European Central Bank decides on further stimulus.While Germany in particular was experiencing an economic slowdown, it was wrong to think monetary policy was the appropriate reaction, Weidmann said in an interview with Frankfurter Allgemeine Sonntagszeitung. A recession would require a fiscal response from the government, but there was currently no reason for a major economic stimulus, he said.“We should neither end up with action for action’s sake, nor in pessimism,” said Weidmann, adding that Germany came from a long upswing with record employment. “I call for special caution with government bond purchases because they threaten to blur the line between monetary policy and fiscal policy.”ECB Governing Council member Olli Rehn told the Wall Street Journal last week that it would be important to “come up with a significant and impactful policy package in September.” The governor of Finland’s central bank argued that when working with financial markets, it’s “often better to overshoot than undershoot.” Some banks expect the ECB to announce a rate cut, plus the resumption of quantitative easing and so-called tiering to reduce the cost of negative rates on bank deposits.Germany’s central bank chief said that at some point interest rate cuts would no longer be effective.“The lower the interest rates, the stronger the incentive to hold cash,” Weidmann told the newspaper. “However, we have not reached this point in my view.”He also said there is “some leeway” for buying bonds, but cautioned against questioning the limits set by the ECB Governing Council.To contact the reporter on this story: Alexander Kell in Frankfurt at email@example.comTo contact the editors responsible for this story: Lukas Strobl at firstname.lastname@example.org, Dylan Griffiths, Vernon WesselsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Central bankers have limited ability to cushion the global economy from the headwinds of mounting political uncertainty, said Reserve Bank of Australia Governor Philip Lowe.“We are experiencing a period of major political shocks,” Lowe said Saturday at the Kansas City Fed’s retreat in Jackson Hole, Wyoming, citing developments in the U.S., Brexit, Hong Kong, Italy and elsewhere. “Political shocks are turning into economic shocks.”The annual retreat takes place against a tense global economic backdrop, with investors nervous about the risks of recession stemming from President Donald Trump’s escalating trade war with China.U.S. stocks fell sharply on Friday after Trump threatened, and later delivered, higher tariffs on China. Lowe said that the public shouldn’t count on central bankers to bail them out if politicians keep turning up the heat.“Monetary policy cannot deliver medium-term growth,” Lowe said. “We risk just pushing up asset prices.”Lowe said that infrastructure investment and structural reform in economies around the world would have much greater impact than cutting interest rates. But politicians are reluctant to act, he said.Ending the political uncertainty would also bring benefits, he said. “With these three levers stuck, the challenge we face is monetary policy is carrying too much of a burden.”To contact the reporters on this story: Michael McKee in Jackson Hole, Wyoming at email@example.com;Rich Miller in Jackson Hole, Wyoming at firstname.lastname@example.orgTo contact the editors responsible for this story: Alister Bull at email@example.com, Ros KrasnyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Saudi Arabia's oil and gas exports exceeded $190 billion and made up 65% of the country's $295 billion exports in 2018. Consequently, it is the most dependent on oil and natural gas revenues among the world's top 30 exporting counties. If Saudi Arabia is taken out of the list, given its level of dependency on petroleum exports, Turkey, whose exports consists of highly diversified commodities, rises up to 30th on the list. For the U.S., ranked second in the list, the share of oil and natural gas is just $80 billion in its total exports worth $1.66 trillion. Similarly, 12th-placed Canada's petroleum exports are worth $80 billion in its total $451 billion in exports. Russia ranks 14th with its total
Caption Close WASHINGTON (AP) — As global leaders gather on two continents to take account of a darkening economic outlook, this is the picture they face: Factories are slumping, many businesses are paralyzed, global growth is sputtering and the world's two mightiest economies are in the grip of a dangerous trade war. Barely a year after most of the world's major countries were enjoying an unusual moment of shared prosperity, the global economy may be at risk of returning to the rut it tumbled into after the financial crisis of 2007-2009. Worse, solutions seem far from obvious. Central banks can't just slash interest rates. Rates are already ultra-low. And even if they did, the central banks
Canadians last heard the Bank of Canada's take on the economy in the early days of summer — and the timing of its next update has the potential to tinge political debate during the federal election campaign. The Bank of Canada's most-recent message underlined the resilience of the domestic economy, and it appeared in no rush to move its policy even as other central banks were poised to lower rates to respond to the already dimming international outlook. Scotiabank chief economist Jean-Francois Perrault predicts the Bank of Canada will take out insurance against potential damage by cutting rates this fall — and perhaps as early as Sept. 4 — because external risks have intensified since July. Perrault says a rate reduction at the start of the federal election — or even the appearance of the bank tilting towards the possibility of a cut — could force political parties on the campaign trail to explain how they would react if things get worse.
LOUISVILLE, Ky. (AP) — The CEO, president and chairman of Central Bank has purchased the Kentucky State Fair's Grand Champion Ham for $1 million. The Courier Journal reports Luther Deaton's winning bid is enough to buy several luxury cars, but doesn't break the record of the most paid for a champion ham. Last year's ham sold for $2.8 million and was paid for by Central Bank and Dr. Mark Lynn. Deaton says the purchase is less about the ham and more about giving back to the community. The annual breakfast and auction by the Kentucky Farm Bureau has raised about $13 million for charity since it started in 1964. Blake Penn, of Penn's Country Hams, produced the grand ham, which was presented at the
(Bloomberg Opinion) -- The U.S. Federal Reserve has developed a pretty poor track record for meeting its inflation and employment goals. If it wants to do a better job, it should follow Canada’s example and set some deadlines.More than four decades ago, Congress mandated that the Fed’s monetary policy pursue two objectives: price stability and maximum employment. In January 2012, the central bank clarified the former by adopting a 2% target for its preferred measure of inflation (the price index for personal consumption expenditures). For more than seven years, it has systematically undershot that goal.Why the poor performance? One explanation is the lack of a time constraint. The Fed says that it intends to hit 2% only in the longer run – which could mean one year, 10 years or even longer. Officials intentionally leave the period vague, presumably so that they can always claim to be on the path to (eventual!) success. Yet the uncertainty also leaves markets, the public and even policy makers guessing about the role the target plays in the central bank’s regular interest-rate decisions. This undermines its relevance for understanding how inflation will move in the short and medium term.The time horizon matters even more for employment. Consider what happened in mid-2013, when the Fed triggered a bond market rout by announcing its intention to remove stimulus by cutting back on its securities purchases. This tightening of monetary policy was possible because most (actually 16 out of 19)(1) policy makers agreed that it would be appropriate to allow the unemployment rate to remain elevated for more than 30 months.Imagine what would have happened if the Fed had faced, say, a 24-month deadline to bring unemployment down to its long-run level. Policy makers couldn’t have started tightening when they did. As a result, households would have expected unemployment to fall more rapidly – and would generally have had more confidence in its propensity to do so in any recession. That confidence would, in and of itself, support demand and lead to a faster recovery.Now is an opportune time for the Fed to reconsider its time constraints. The central bank happens to be in the middle of an extended review of its long-term policy framework, with an eye toward enhancing its effectiveness in the next recession.Every CEO knows that goals without deadlines are unlikely to have much effect on decisions or expectations. That’s true about monetary policy, too. The Bank of Canada has adopted a time horizon of 18 to 24 months to fulfill its mandate, allowing for occasional deviations in unusual circumstances. The Fed should do the same.(1) See page 5 of https://www.federalreserve.gov/monetarypolicy/files/FOMC20130619SEPcompilation.pdf.To contact the author of this story: Narayana Kocherlakota at firstname.lastname@example.orgTo contact the editor responsible for this story: Mark Whitehouse at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Narayana Kocherlakota is a Bloomberg Opinion columnist. He is a professor of economics at the University of Rochester and was president of the Federal Reserve Bank of Minneapolis from 2009 to 2015.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Sri Lanka cut interest rates for a second time this year, a day after Indonesia did the same, as central banks in the region move to cushion their economies against a global slowdown and trade tensions.The Central Bank of Sri Lanka lowered its benchmark standing lending facility rate to 8% from 8.5% on Friday, in line with the forecasts of four of the nine economists surveyed by Bloomberg. The rest predicted no change.Policy makers across the region from New Zealand to India have cut rates this year amid a more dovish U.S. Federal Reserve and rising global risks. Indonesia’s central bank unexpectedly cut interest rates Thursday to help cushion its economy against the worsening global environment.Sri Lanka inflation slowed to 3.3% in July -- the lowest level this year and well below the central bank’s desired range of 4%-6% -- giving policy makers room to focus on spurring growth after terrorist attacks in April hit the tourism industry. The central bank sees gross domestic growth in 2019 at 3.1%, a slight improvement from its forecast last month, when it lowered the reading to 3% from around 4%.“Even last year we had muted growth, but our room to maneuver or move to a more accommodative monetary policy was constrained significantly by capital outflows," Governor Indrajit Coomaraswamy said in an interview with Bloomberg Television. “That constraint has now been taken away” as central banks in major economies and emerging markets turn more dovish.Policy makers also cut the standing deposit facility rate on Friday to 7% from 7.5%. Both key interest rates were lowered by 50 basis points each in May.The rupee was little changed after the decision, after falling 0.4% to 179.50 on Thursday -- poised for its biggest weekly decline since November.“We think this will probably mark the last cut this year” for Sri Lanka, said Alex Holmes, an economist at Capital Economics Ltd. in Singapore. “While the bank will be keen to support the economy, the need to prop up the currency will limit the scope for further loosening.”(Updates with governor’s comments in fifth paragraph.)\--With assistance from Manish Modi, Rishaad Salamat, Juliette Saly and Adrian Wong.To contact the reporters on this story: Anusha Ondaatjie in Colombo at firstname.lastname@example.org;Karthikeyan Sundaram in New Delhi at email@example.comTo contact the editors responsible for this story: Nasreen Seria at firstname.lastname@example.org, Michael S. ArnoldFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The National Bank of Rwanda (NBR) is looking at other countries, specifically Canada, the Netherlands, and Singapore’s central bank digital currency research.
Investing.com - Bitcoin gained on Friday in Asia. Japanese crypto exchange Coincheck made headlines today as the company said it is considering launching an initial exchange offering (IEO).
Minerd, who oversees more than $240 billion in assets under management, said his firm is responding by reducing exposure to corporate credit. Minerd said the central bank's actions helped drive the technology bubble that burst in 2000.