Latest news with #monetaryPolicy
Times of Oman
4 hours ago
- Business
- Times of Oman
Global Pause: US, Taiwan and UAE keep interest rates unchanged
Taipei: The Central Bank of the Republic of China (Taiwan) on Thursday kept the key interest rates unchanged after a quarterly policymaking meeting, as reported by the Focus Taiwan. The decision to keep rate cuts unchanged marked the fifth consecutive quarter the central bank has left interest rates unchanged, as the market widely anticipated. This decision comes after the U.S. Federal Reserve made a similar decision overnight to maintain its monetary policy for the fourth policymaking meeting in a row. Additionally, other leading major economies, such as the UAE, also held interest rates steady after their policymaking meetings. Following Thursday's decision, the local discount rate will stay at 2 per cent, which is still the highest in 15 years -- the rate on accommodations with collateral remains at 2.375 per cent, and the rate on accommodations without collateral is 4.250 per cent. "Like the Fed, market analysts said, the central bank needs time to observe the potential impact resulting from the Trump administration's tariff policies," Focus Taiwan added. Analysts said the market remains alert over a possible spike in inflation and a slower global economy caused by higher tariffs. U.S. President Donald Trump first announced "reciprocal" tariffs on April 2 on countries with high trade surpluses with the United States. These included a 32 per cent import duty on goods from Taiwan, though Trump announced a 90-day pause a week later to allow negotiations for a lower levy. In addition, Trump has threatened to impose a tariff on semiconductors, which serve as the backbone of Taiwan's exports.
Japan Times
7 hours ago
- Business
- Japan Times
Oil, war and tariffs tear up global markets' central bank roadmap
Investor unease about an increasingly uncertain environment is rising, as Norway's shock rate cut on Thursday highlights how U.S. tariffs, Middle East conflict and a shaky dollar make global monetary policy and inflation even harder to predict. Norway's krone slid roughly 1% against the dollar and the euro in a sign of how unexpected the move was. And Switzerland, which cut borrowing costs to 0% on Thursday, confounded some expectations among traders for a return to negative rates in the deflation-hit nation, as its central bank warned of a cloudy global outlook. Just a day earlier, the U.S. Federal Reserve kept rates on hold, and chair Jerome Powell said "no one" had conviction on the rate path ahead. The conclusion for markets: monetary policy uncertainty is one more headwind to navigate against a backdrop of geopolitical and trade risks. Global stocks pulled away from recent peaks, a gauge of expected volatility in European equities touched a two-month high as stocks across the region fell and government bonds, usually geopolitical risk havens, sold off. "We're at a moment of considerable policy and macro uncertainty," said BlueBay chief investment officer at RBC Global Asset Management Mark Dowding. "We can't see a clear trend on interest rates," he added, which meant he was holding back from active market bets across the group's investment portfolios. Volatility was set to rise, some investors said, because a choppy dollar and oil prices whipped around by geopolitics meant that central banks were far less able to provide markets and investors a clear route map for the future. "You cannot just take your cues from the central banks anymore as they are facing a harder job of reading the economy, themselves," T.S. Lombard director of European and global macro Davide Oneglia said. Rate-cutting European central banks are not just diverging from the Fed, which is grappling with the inflationary risks of U.S. President Donald Trump's tariffs. They are also struggling to navigate a new era where the dollar, the lynchpin of world trade, commodity prices and asset valuations, has turned weaker and more volatile under trade war stress and government debt anxiety. "That's a massive, massive fundamental shift in global markets that everyone is trying to assess," Monex Europe head of Macro Research Nick Rees said. "All of those standard economic rules of thumb we use for forecasting are completely broken right now." The dollar is down almost 9% against other major currencies this year but has risen following the outbreak of a war between Israel and Iran. European Central Bank policymaker Francois Villeroy de Galhau said on Thursday the ECB might have to adapt its rate cut plans if oil price volatility was long-lasting. The new status quo in markets could well be an era of central bank surprises that create rapid shifts in the market narrative, asset pricing and volatility trends, analysts said. "We're getting into this next cycle in which variables are much more volatile, because, rather than (monetary policy) being just easily predictable, events just take over, and policy and human factors, as we now know with Donald Trump, play an important role," Oneglia said. Norway's surprise cut came because the krone was a "runaway top currency" of the trade-war era, added Societe Generale's head of FX strategy Kit Juckes. With investors chasing around the world to identify stores of wealth that are not the U.S. dollar, meanwhile, the Swiss franc has soared, cutting the costs of imports and pushing the economy into deflation. On Thursday, the franc rose against the dollar as traders saw the SNB's cut as too small to keep deflation at bay. Ninety One multi-asset head John Stopford said the hazard risk was rising for global stocks and that options products that aim to offer protection from incoming volatility looked fairly cheap. He was buying bonds issued in nations where inflation and rates could come down materially, such as New Zealand, but was negative on longer-dated U.S. Treasuries and German Bunds where economic uncertainty was higher and government borrowing was likely to rise. Global stocks remain almost 20% above their April trough, after investors relaxed about tariffs. Stopford said there was more to worry about in the short term. "The stock market feels like it's a thatched house in a hot country with a fire hazard risk, and people aren't charging much to insure the house," Stopford added.
Times
13 hours ago
- Business
- Times
Bank of England holds steady as divisions emerge over rates
The Bank of England missed the party on Thursday when it announced that interest rates would hold steady at 4.25 per cent. On a day littered with monetary policy announcements across Europe, it was the only major central bank to sit tight. Switzerland's central bank cut rates by a quarter point. Sweden's did the same, as did Norway's. In the UK, the monetary policy committee was not for turning and stuck to the script: markets expected rates to be held and the Bank of England duly delivered. However, that the committee voted 6-3 in favour of leaving rates unchanged did somewhat upset the apple cart. Analysts projected a 7-2 vote split. Dave Ramsden, a deputy governor, broke from the centre ground on the MPC and voted alongside Swati Dhingra and Alan Taylor — external committee members who have repeatedly voted for frequent and larger cuts — for a 0.25 percentage point reduction.
Fast Company
13 hours ago
- Business
- Fast Company
Forget chocolate! The world now envies Switzerland's zero interest rates
[Source Photo: Freepik ] BY Listen to this Article More info 0:00 / 2:17 The world envies Swiss chocolate, army knives, and now . . . interest rates? Swiss National Bank, Switzerland's central bank, moved interest rates to zero this week, a reduction of 25 basis points, and a notable detraction from other central banks around the world, such as the Federal Reserve in the U.S. and the Bank of England in the U.K. In a statement, the Swiss National Bank said that the move was made in relation to declining inflation worries—and that it's expecting the economies to buckle under the volatility created, in part, due to the Trump administration's trade policies. 'With today's easing of monetary policy, the SNB is countering the lower inflationary pressure. The SNB will continue to monitor the situation closely and adjust its monetary policy if necessary, to ensure that inflation remains within the range consistent with price stability over the medium term,' the statement read. 'The global economic outlook for the coming quarters has deteriorated due to the increase in trade tensions. In its baseline scenario, the SNB anticipates that growth in the global economy will weaken over the coming quarters. Inflation in the U.S. is likely to rise over the coming quarters. In Europe, by contrast, a further decrease in inflationary pressure is to be expected.' Meanwhile, in the U.S., the Federal Reserve's latest meeting wrapped up this week with no change in interest rates, despite pressure from the White House and others to lower them. Fed Chair Jerome Powell and other Fed governors have been reluctant to do so, as inflation data has still not gotten close enough to its 2% target, and employment data has remained positive. Across the Atlantic, however, another European country, Norway, also cut rates this week. And some experts think that the Swiss could go even further, instituting negative interest rates at some point this year. 'There are risks that the SNB will go further in the future if inflationary pressures don't start to increase, and the lowest the policy rate could go is -0.75%, the rate it reached in the 2010s,' Swiss National Bank's Chairman Martin Schlegel told CNBC on Thursday. 'But what I can say is that going negative, we would not take this decision lightly.' The final deadline for Fast Company's Next Big Things in Tech Awards is Friday, June 20, at 11:59 p.m. PT. Apply today. ABOUT THE AUTHOR Sam Becker is a freelance writer and journalist based near New York City. He is a native of the Pacific Northwest, and a graduate of Washington State University, and his work has appeared in and on Fortune, CNBC, TIME, and more. More
Yahoo
19 hours ago
- Business
- Yahoo
Fed holds main interest rate steady, expects two cuts later in 2025
This story was originally published on CFO Dive. To receive daily news and insights, subscribe to our free daily CFO Dive newsletter. The Federal Reserve on Wednesday held the benchmark interest rate at a range between 4.25% and 4.5% while reiterating that it expects to cut borrowing costs later this year by a total of 0.5 percentage point despite higher price pressures from tariffs. In a median projection, Fed officials estimated that their preferred measure of inflation — the personal consumption expenditures price index less volatile food and energy prices — will end the year at 3.1%, 0.3 percentage point higher than their March estimate and well above their 2% goal. They marked down their forecast for economic growth this year to 1.4% from 1.7% in March. 'Tariffs this year are likely to push up prices and weigh on economic activity,' Fed Chair Jerome Powell said during a press conference. He flagged the summer as the likely start of rising price pressures while emphasizing that the duration of higher, tariff-induced inflation is unclear. Policymakers have left borrowing costs unchanged this year as they balance signs of a softening labor market against concerns that the highest U.S. tariffs in decades will reverse a trend of cooling inflation. 'For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance,' Powell said after a two-day monetary policy meeting. The Fed under current conditions would usually lean toward easing monetary policy to fulfill its mandate of full employment. Recent data suggest a 'dovish' bias toward reducing rates may be in order: The four-week average of initial jobless claims rose last week from 240,750 to 245,500, the highest level since August 2023, the Labor Department said Wednesday. Indeed, Fed officials in their median projection forecast that unemployment by the end of this year will increase from 4.2% in May to 4.5%, 0.1 percentage point higher than their March forecast. At the same time, 10% baseline tariffs on goods from virtually all U.S. trade partners — along with the possibility of higher 'reciprocal' import duties — will probably stoke inflation in coming months and dim an otherwise bright inflation outlook, according to Fed officials and private sector economists. 'Every forecaster — every outside forecaster and the Fed — is saying that we expect a meaningful amount of inflation to arrive in coming months,' Powell said. The expectation for more stubborn price pressures cropped up in the median forecast by Fed officials. They raised their projection for the federal funds rate at the end of next year to 3.6% from 3.4% in March. They see the main rate by the end of 2027 at 3.4% rather than 3.1% as in their prior projection. Price pressures eased more than forecast in May as companies drew down inventories that they stockpiled before the imposition of tariffs rather than pass on the higher costs to consumers. The consumer price index, excluding volatile food and energy prices, rose 0.1% last month and 2.8% over 12 months, the Bureau of Labor Statistics said on June 11. The 12-month figure matches the rate in March and April and is the lowest annual gain in four years. 'Inflation has come down a great deal, but has been running somewhat above our 2% longer run objective,' Powell said, noting that the path of inflation is murky. 'The amount of the tariff effects, the size of the tariff effects, their duration and the time it will take are all highly uncertain,' he said. 'Many, many companies do expect to put all, or some, or all of the effect of tariffs through to the next person in the [supply] chain, and ultimately to the consumer,' he said. 'Each one of those is going to be trying not to be the one to pay for the tariff.' Consumer expectations for inflation, a gauge closely tracked by the Fed, have eased in recent weeks as U.S. trade tensions cooled. Long-run inflation expectations fell to 4.1% this month from 4.2% in May, the University of Michigan found in a survey released Friday, as inflation eased more than forecast. The survey was completed before conflict between Israel and Iran pushed up energy prices. Some engines of economic growth have recently shown signs of sputtering. Retail sales fell 0.9% last month after declining 0.1% in April, the Commerce Department said Tuesday. A 3.5% slump in spending at auto dealers accounted for much of the overall decline. Industrial production also shrunk more than expected last month, declining by 0.2% following a 0.1% increase in April, the Fed said Tuesday. The U.S. economy will likely slow to 1.3% growth this year as inflation persists above the Fed's 2% target, the National Association for Business Economics said Monday, citing a survey of forecasters. The economists' projection is gloomier than recent estimates by the World Bank and OECD, which forecast U.S. GDP growth this year of 1.4% and 1.6%, respectively. Almost four-out-of-five economists (78%) consider import duties the biggest risk to the economy during the next 12 months, followed by 7% who deem geopolitical conflicts as the top risk, NABE said. Like Powell, the central bank's Federal Open Market Committee holds a favorable view of the current state of the economy. 'Recent indicators suggest that economic activity has continued to expand at a solid pace,' the FOMC said in a statement. 'The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.' 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