Posts Tagged inflation
The Stupidity of Hope: Greece Is Still Going to Default
Posted by Oksana Grebenjuk in Favourites, Trading Markets on Июнь 2nd, 2011
Keeping in mind that the words “hope” and “Greece” should almost never be used in the same sentence, here would be the one exception: Let’s “hope” markets aren’t rallying on “hope” for “Greece.”
Hope, apparently, does spring eternal, however, and it seems as though despite all the evidence to the contrary, there are still people out there with money to spend who believe that Greece can be rescued yet from its seemingly intractable fiscal position.
How else to explain Monday’s surge in the euro and drop in the US dollar, which had been rallying on well-placed hopes that the periphery of Europe was sliding further into the debt abyss and ready to implode?
Irrationality, we now can conclude, comes in many forms. The latest form is in some weakly substantiated murmurs out of Germany that the core of the core of euro zone nations might be softening its stance towards a Greek bailout and is ready to ease its demands that the nation speed up its ultimately unavoidable debt restructuring.
Despite compelling evidence that Germany is in no political position to turn suddenly benevolent towards its free-spending weak sister to the south, the rally was on. Read the rest of this entry »
Why inflation hurts more than it did 30 years ago
Posted by Oksana Grebenjuk in Budget on Март 21st, 2011
Inflation spooked the nation in the early 1980s. It surged and kept rising until it topped 13 percent. These days, inflation is much lower. Yet to many Americans, it feels worse now. And for a good reason: Their income has been even flatter than inflation.
Back in the ‘80’s, the money people made typically more than made up for high inflation. In 1981, banks would pay nearly 16 percent on a six-month CD. And workers typically got pay raises to match their higher living costs. No more.
Over the 12 months that ended in February, consumer prices increased just 2.1 percent. Yet wages for many people have risen even less — if they’re not actually frozen. Social Security recipients have gone two straight years with no increase in benefits. Money market rates? You need a magnifying glass to find them.
That’s why even moderate inflation hurts more now. And it’s why if food and gas prices lift inflation even slightly above current rates, consumer spending could weaken and slow the economy.
Consumer inflation did pick up in February, rising 0.5 percent, because of costlier food and gas. Still, looked at over the past 12 months, price increases have remained low. Problem is, these days any inflation tends to hurt. Read the rest of this entry »
Chinese police face down Middle East-style protests
Posted by Oksana Grebenjuk in Trading Markets on Февраль 28th, 2011
Police and security officials displayed a massive show of force here and in other Chinese cities Sunday, trying to snuff out any hint of protests modeled on the uprisings in the Middle East. In Shanghai, several hundred people trying to gather were dispersed with a water truck.
Premier Wen Jiabao, meanwhile, used a morning Internet chat to promise to purge senior officials who are corrupt and to rein in inflation and rising home prices, directly addressing some of the most common grievances of ordinary Chinese.
Since the January uprising in Tunisia spurred similar anti-government protests across the Middle East and North Africa, threatening long-entrenched authoritarian regimes, China’s Communist rulers have reacted nervously, with both defensive and aggressive tactics.
Officials have used state-run media outlets to dismiss any comparisons with China while at the same time stepping up public comments on the need to address «social conflict» and to tackle problems such as the growing income disparity between the rich and poor. They have also detained a number of activists and human rights lawyers, blocked Internet search terms considered sensitive, such as «Egypt,» «Tunisia» and even U.S. Ambassador Jon Huntsman Jr.’s Chinese name. And they have issued warnings to foreign journalists to be mindful of reporting restrictions. Read the rest of this entry »
Despite the party, global policymakers poles apart
Posted by Oksana Grebenjuk in Currency on Февраль 7th, 2011
Even after their annual Alpine get-together, global policymakers cannot agree which of the risks facing the world economy are most pressing let alone decide how to tackle them.
While there was broad agreement that the worst of the euro zone debt crisis has passed, countless panel discussions and bilateral meetings at the World Economic Forum in Davos did little to narrow differences of opinion over the threat of inflation to the global recovery and the imbalances associated with deficits and exchange rates.
The financial crisis forced policymakers to look into the abyss and work together to prevent the global economy going into meltdown. The recovery is seeing countries operating more independently.
«At the early stages of the financial crisis, at G20 level, there was a lot of talk of coordination … I think now everybody is going their own way,» Turkish Finance Minister Mehmet Simsek said during one of the Forum’s panel discussions.
«That’s an issue, that’s a problem,» he said. «Global imbalances are there, probably to grow.»
Turkey is one of a growing number of emerging market nations that have acted to stem «hot money» inflows destabilising their economies. Asian and Latin American nations have done the same, pointing the finger at the United States for flooding the world economy with newly-printed money. Read the rest of this entry »
German 2-Year Yield Rises to More Than 12-Month High on ECB Rate-Rise Bets
Posted by Oksana Grebenjuk in Fund Markets on Февраль 4th, 2011
German two-year government note yields jumped to the highest in more than a year this week on speculation the European Central Bank may act to stem inflation.
ECB President Jean-Claude Trichet said on Jan. 26 that policy makers will do “what is necessary” to keep inflation in check. German consumer-price growth accelerated to the highest level since October 2008. Irish bonds slid before a vote on the budget tomorrow. The debut auction of the European Financial Stability Facility drew bids for almost nine times the securities on offer.
The increase in the German note yield “was driven by fears of tighter monetary policy,” said Patrick Jacq, a senior fixed- income strategist at BNP Paribas SA in Paris. “This is clear when you look at the evolution of the curve. We have hawkish rhetoric coming in from the ECB so it makes sense to be short at the short end.”
The two-year note fell for a fourth straight week, pushing the yield eight basis points higher to 1.37 percent as of 5:27 p.m. in London. It earlier reached 1.43 percent, the highest since Jan. 4. The 10-year yield fell two basis points to end the week at 3.16 percent. Read the rest of this entry »
Trichet Says Inflation Risks May Rise in Medium Term
Posted by Oksana Grebenjuk in Budget, Favourites on Январь 17th, 2011
European Central Bank President Jean-Claude Trichet comments on monetary policy, inflation and growth in the economy of the 17 nations sharing the euro. He spoke at a press conference in Frankfurt today after the ECB kept its key interest rate at a record low of 1 percent.
On today’s rate decision: “Based on its regular economic and monetary analyses, the Governing Council confirmed that the current key ECB interest rates are still remain appropriate. It therefore decided to leave them unchanged.
“Taking into account all the new information and analyses which have become available since our meeting of 2 December 2010, we see evidence of short-term upward pressure on overall inflation, mainly owing to energy prices, but this has not so far affected our assessment that price developments will remain in line with price stability over the policy-relevant medium- term horizon. At the same time, very close monitoring is warranted.
“Overall, the current monetary-policy stance remains accommodative. The stance, the provision of liquidity and the allotment modes will be adjusted as appropriate, taking into account the fact that all the non-standard measures taken during the period of acute financial-market tensions are, by construction, temporary in nature. Accordingly, the Governing Council will continue to monitor all developments over the period ahead very closely. Read the rest of this entry »
Our Picks For Inflation Protection
Posted by Oksana Grebenjuk in Business, Favourites on Декабрь 15th, 2010
If there’s a small silver lining amid the current economic malaise, it’s that inflation has been pretty muted.
But investors ignore inflation at their own peril. Even if massive amounts of government stimulus don’t prompt inflation, there’s still the possibility of price spikes here in the United States as a result of still-red-hot economic growth in emerging markets. Widespread rising prices, in turn, could amount to erosion in the purchasing power of any assets you’ve managed to save or invest. By the time you start tapping your portfolio to meet your income needs, those dollars could be worth a lot more than they are right now.
That’s why it’s so important to ensure that your portfolio is adequately protected against inflation. Some inflation-fighting vehicles have explicit protection against rising prices, such as Treasury Inflation-Protected Securities. Others, such as stocks, protect against inflation indirectly.
Here’s an overview of the key vehicles with inflation-fighting attributes, as well as some of Morningstar’s top picks within those groups.
Inflation-Protected Bonds Read the rest of this entry »
Ghana 2011 budget uses tax hikes to fund spending
Posted by Oksana Grebenjuk in Trading Markets on Ноябрь 30th, 2010
Ghana predicted economic growth would double to 12.3 percent in 2011 as its first oil arrived and announced a series of tax hikes aimed at financing heavy new infrastructure spending.
Unveiling next year’s budget to parliament, Finance Minister Kwabena Duffuor pledged to narrow the fiscal deficit from 9.7 percent this year to 7.5 percent in 2011, and foresaw inflation falling steadily through to 2012, when Ghana goes to the polls.
Urging Ghana to avoid the fate of other nations that saw oil finds undermine other sectors in their economies, Duffuor warned that hydrocarbon revenues would not be enough in themselves to transform a country still marked by widespread poverty.
«We must continue to focus our attention on the non-oil sector of the economy, particularly agriculture, small, medium and micro enterprises, mining and manufacturing sectors, which, hitherto, have been the backbone of the economy,» he said of cocoa’s traditional cocoa, gold and other industries.
Duffuor forecast 2011 growth at 12.3 percent compared to 5.9 percent this year. Annual inflation, which has fallen sharply over the year to stand at 9.38 percent in October, would fall to 8.5 percent by December 2011 and 7.0 percent in 2012, he said.
«The new budget is sensible and realistic,» said Lisa Lewin at London-based Business Monitor International. Read the rest of this entry »
Hard for Fed policy to lower unemployment
Posted by Oksana Grebenjuk in Budget on Ноябрь 29th, 2010
The Federal Reserve might risk higher inflation if it focuses on efforts to bring down unemployment, Richmond Fed President Jeffrey Lacker said. In a speech that hinted at his scepticism of the Fed’s latest efforts to stimulate the economy, Lacker, a vocal inflation hawk, said monetary policy can lower joblessness only temporarily.
«Trying to keep unemployment permanently lower than it otherwise would be … is a recipe for continually accelerated inflation,» he said, pointing to the inflation experience of the 1960s and 1970s as a cautionary tale.
With the jobless rate currently stuck at 9.6 percent and inflation running below the Fed’s implicit target of 2 percent or a bit below, the Federal Reserve this month announced it would buy an additional $600 billion in Treasury securities.
The measure, which comes as official interest rates are already effectively zero, is aimed at lowering borrowing costs and spurring lending, and hopefully to boost hiring in the process. However Lacker, who is not a voter this year on the Fed’s policy-setting Federal Open Market Committee, appeared suspicious of the policy. Read the rest of this entry »
IMF: HK economic growth robust, but risks remain
Posted by Oksana Grebenjuk in Trading Markets on Ноябрь 23rd, 2010
Hong Kong’s economic growth is likely to reach 6.75 percent this year and moderate to 5-5.5 percent in 2011, the International Monetary Fund (IMF) said on Wednesday.
«The Hong Kong economy is now back onto a robust growth trajectory with the key sources of demand firing on all cylinders,» the IMF said. «Net exports have been buoyed by vigorous growth in the Mainland and the ongoing global recovery. Investment has benefited from the implementation of various multi-year public infrastructure projects and private investment in machinery and equipment has picked up. At the same time, consumption bounced back as labor market conditions improved and confidence returned.»
Hong Kong Financial Secretary John Tsang welcomed the IMF’s positive outlook for the SAR, noting «the continued broad-based recovery of the economy shows Hong Kong has weathered the global financial storm well».
However, the IMF also pointed out that Hong Kong now faces a very different set of challenges from those of the past two years.
«As the output gap closes, inflationary pressures are likely to rise in both factor and product markets,» it said. «At the same time, strong domestic growth prospects and abundant global liquidity have the potential to attract further capital inflows. Finally, accommodative monetary conditions imported from abroad-combined with tight domestic supply conditions for new housing units-are already fueling property price inflation. Read the rest of this entry »
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