The world is witnessing the launch of the monetary facilitation course led by emerging markets

[yota691]

The world is witnessing the launch of the monetary facilitation course led by emerging markets

27 July 2019 08:32 PM
From: Ahmed Shawky

Direct : It seems that the world is facing a huge wave of interest rate cuts this year, a marked shift towards monetary easing as a result of concerns about economic growth , raised by many commercial and geopolitical factors slowing.

Emerging markets have started a rate cut as central banks in developed economies are hinting at a softened monetary policy due to growth fears and slowing inflation.

The International Monetary Fund (IMF) confirmed these concerns over economic growth after a fourth cut in global GDP growth forecasts over the past nine months.

Deutsche Bank expects interest rate cuts worldwide, with a cautious approach from the ECB and the Federal Reserve.

Mubasher monitors central bank interest rate cuts around the world in the last three months.

In July, several emerging market countries cut interest rates.

Turkey saw the strongest rate cut after pressure from Turkish President Recep Tayyip Erdogan and the resignation of the former central bank governor. The central bank decided to cut interest rates sharply by 4.25 percent at once to 19.75 percent, well above estimates.

The Central Bank of Turkey said that recent data indicate the recovery of economic activity and there is an improvement in inflation expectations, noting that a change in the new data will be accompanied by a change in the position of monetary policy.

In Russia, the central bank decided to cut its key interest rate by about 25 basis points to 7.25 percent, according to forecasts.

The cut came as a result of less-than-expected growth of economic activity in Russia since the beginning of the year, as well as a decline in inflation.

The Russian central also pointed out that there are risks to economic growth with international trade restrictions and geopolitical factors.

For the first time since 2016, the central bank cut in South Korea interest rate by 0.25 percent to 1.5 percent.

South Korea cut interest rates as concerns over economic outlook prompted the central bank to cut growth estimates for the year to 2.2 percent from a previous forecast of 2.5 percent.

For Indonesia , the central bank decided to cut interest rates by 25 basis points to 5.75 percent for the first time in two years.

The rate cut came as economic growth slows as well as the central bank's hopes that the cut will help reduce the impact of the Sino-US trade war.

In South Africa , the central bank cut interest rates by 25 basis points to 6.5 percent.

Central African monetary policy makers agreed to cut interest rates with uncertainty about the African nation's economy, which shrank by 3.2 percent in the first quarter.

In order to support the economy, the Reserve Bank of Australia decided to cut the benchmark rate for the second meeting in a row by 25 basis points to 1 percent, the lowest level ever.

Australia's central bank said easing monetary policy would boost operating growth and provide greater confidence that inflation is consistent with the medium-term target.

For Ukraine, the central bank cut its benchmark interest rate for the second time this year by 50 basis points to 17 percent, more than analysts' estimates.

The rate cut came in the country, which is suffering from an economic crisis and is waiting for cash aid to be disbursed as inflation slows.

While the central bank in Serbia and Paraguay cut interest rates by 0.25 percent to 4.50 percent and 2.75 percent, respectively.

Last month, India's central bank cut its benchmark interest rate for the third time this year by 25 basis points to 5.75 percent.

The bank has decided to cut interest rates as economic growth slows and unemployment levels rise, noting that the cut will support efforts to boost overall demand and stimulate investment.

Chile's central bank cut interest rates by 50 basis points to 2.50 percent, while Iceland cut interest rates by 0.25 percent to 3.75 percent.

In May, the central bank in the Philippines adopted a soft monetary policy approach to cut interest rates by 25 basis points to 4.50 percent, the same decision as the central bank in Malaysia to raise interest rates to 3 percent.

The decision comes on the back of expectations that the rate of inflation will decline after the economy grew at the slowest pace in 4 years during the first quarter of this year.

A number of developing economies have seen interest rate cuts in recent months against the backdrop of the most favorable global monetary policy conditions: Angola, Azerbaijan, Costa Rica, El Salvador, Jamaica, Mozambique, Sri Lanka, Tajikistan, the Dominican Republic and Zambia.

Upcoming facilitation decisions

The Federal Reserve's decision next week is the most watched by global markets with widely expected to cut interest rates by 25 basis points to between 2 percent and 2.25 percent.

In its recent comments, the Fed has pointed to a cut in interest rates to curb slower inflation below the bank's 2 percent target, as well as fears of slowing economic growth.

Federal Reserve Chairman Alan Greenspan said the Fed should cut interest insurance without waiting for a disaster for the economy to act.

For the ECB , although it decided to hold the interest rate at its last meeting, it hinted at a rate cut and stimulus measures to counter the slowing inflation.

With fears of slowing growth, India's central bank is expected to cut interest rates to 5.5 percent at the next meeting on Aug. 7 after a three-year rate cut this year.

Brazil is also expected to cut rates for the first time in more than a year at the monetary policy meeting next week, according to Goldman Sachs forecasts.

 

[Charlie Echo]

One of the reasons why Trump and Congress were so quick to pass a debt ceiling deal last week is that had they failed to do so, with the Treasury's cash balance sliding precariously lower and expected to hit $0 by early September, there was a non-trivial chance the US could technically default by the time Congress came back from its August vacation.

Of course, that did not happen, a debt ceiling extension deal was reached, and as a result the Treasury is now free to start reloading its cash balance, and it plans on doing just that. On Monday, the Treasury Department announced its latest quarterly estimates of net marketable borrowing needs for the current (July – September 2019) and upcoming (October – December 2019) quarters. What it revealed was the following:

After borrowing just $40 billion in the past, April-June period, which left the Treasury with a quarter end cash balance of $264 billion, in the current quarter, the Treasury now expects Treasury issuance to explode higher, and borrow a whopping $433 billion in net marketable debt, a massive $274 billion higher - or more than doubling - its prior forecast announced in April 2019.

The reason for this debt issuance flurry? To rebuild the cash balance back to a level of $350 billion, which is where the Treasury expects its end-of-September cash balance to be, up from just $85 billion as of the April 29 forecast.

 

https://www.zerohedge.com/news/2019-07-29/us-treasury-now-expects-issue-over-800-billion-debt-two-quarters