ECB could hike rates or pause at next meeting: Lagarde

FRANKFURT — The European Central Bank could hike interest rates again or pause at its next meeting and any decision will depend on the latest data, president Christine Lagarde has said.

The central bank for the 20 countries that use the euro lifted borrowing costs for the ninth consecutive time Thursday as it fights stubbornly high inflation.

But in comments after the meeting, Lagarde fueled expectations the ECB may finally pause its historic hiking campaign soon, saying she had an open mind about future decisions.

In an interview with French daily Le Figaro published Sunday, she stressed no decision had yet been made about what the ECB will do at its next meeting on September 14.

"I hear some people say that the final rate hike will take place in September," she said.

"There could be a further hike of the policy rate or perhaps a pause. A pause, whenever it occurs, in September or later, would not necessarily be definitive.

"Inflation must return durably to its target."

Decisions would be based on the latest economic and financial data, she said.

The ECB is due to release its latest forecasts, including for eurozone growth and inflation, at the September meeting.

Inflation has been slowing but still came in at 5.5 percent in June -- well above the ECB's two-percent target.

But there have been growing concerns about the impact of rate hikes after the eurozone slipped into recession around the turn of the year, with the economy shrinking for two straight quarters.

But Lagarde said second-quarter economic growth data for Germany, France and Spain, released Friday, were "quite encouraging".

The French and Spanish economies both grew more than expected. The German economy -- Europe's biggest -- stagnated, despite expectations for a slight rebound.

She also shrugged off criticism coming from leaders of some countries, such as Italy, about the rate increases.

"As a central banker you need to have a thick skin," she said.

"And it's essential to keep sight of the objective of lowering inflation and to be as clear as possible about the tools deployed and the intended results."

Agence France-Presse

Most Fed officials say slower rate hike pace appropriate 'soon'

WASHINGTON –– A majority of US Federal Reserve policymakers found that a slower pace of interest rate hikes would "likely soon be appropriate," the central bank said Wednesday.

The Fed has embarked on an aggressive path to cool demand and bring down prices as inflation in the world's biggest economy surged to the highest level in decades, raising the benchmark borrowing rate 6 times this year.

With inflation hovering around 7.7 percent, the latest policy meeting in early November produced a fourth consecutive three-quarter point interest rate hike, a major rise.

This brings the rate to a range between 3.75 and 4 percent, the highest since January 2008.

But "a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate," according to minutes of the November meeting released Wednesday.

"A slower pace in these circumstances would better allow the committee to assess progress toward its goals of maximum employment and price stability," the minutes said.

Participants of the meeting noted that it would take time for the full effects of policy to be realized, and a few found that easing the pace of interest rate hikes could lower risks of instability in the financial system.

In a sign of diverging opinions, some cautioned the impact of rate hikes could "exceed what was required" to bring down inflation.

FEW SIGNS OF ABATING

But policymakers agreed at the meeting earlier this month that inflation was "unacceptably high" and well above the longer-run goal of 2 percent.

Annual consumer inflation came in at 7.7 percent in October, down from a blistering high 9.1 percent in June but still underscoring a heightened cost of living.

With surging consumer prices showing "little sign thus far of abating," some officials found that policy might have to be tightened more than anticipated.

They maintained that a period of slower growth would help reduce inflationary pressures.

Despite signs of slowing activity as the Fed's rate hikes trickled through the economy, officials saw that the labor market remained tight, with elevated wage growth.

New home sales posted a surprise increase last month as well, while demand for big-ticket American-made goods picked up more than expected, data released on Wednesday showed.

"Policy makers appear set to slow the pace of rate hikes," said economist Ryan Sweet of Oxford Economics.

But he noted that the Fed's path toward a soft landing is increasingly narrow, adding that the Fed's staff economists see "the odds of a US recession in the next year as basically a coin flip."

A growing number of voices, including some Fed officials, have advocated for smaller steps in the coming months.

Last week, Federal Reserve Governor Christopher Waller said signs of easing inflation pressures and a slowing US economy could allow the central bank to dial back its pace of rate hikes.

Fed Vice Chair Lael Brainard also said last week that it would likely be "appropriate soon" for the Fed to slow the pace of rate increases, adding that it would take time for tightening so far to flow through to the economy.

Agence France-Presse 

Australia hikes interest rates for first time since 2010

SYDNEY - Australia's central bank raised interest rates for the first time in more than a decade on Tuesday, a pre-election hike designed to curb soaring consumer prices.

The Reserve Bank of Australia raised the main lending rate by 25 basis points to 0.35 percent, the first increase since November 2010. 

Ending record-low rates, the bank cited inflation levels that had "picked up more quickly, and to a higher level, than was expected". 

The move thrusts the bank to the centre of a fierce political debate about the health of Australia's economy just weeks before the May 21 elections. 

The opposition Labor party has seized on the prospect of a rate rise as evidence of a weakening economy and the conservative government's economic maladministration.

Prime Minister Scott Morrison, who is trailing in the polls, has insisted inflation is a result of worldwide trends, including the war in Ukraine. 

The annual inflation rate is currently at 5.1 percent. 

Like consumers around the world, Australians have been hit by soaring prices for food and fuels. 

But house prices have been rising for years even as wages have stagnated. Sydney and Melbourne are among the world's most expensive cities in the world to live. 

The rate rise is expected to be the first of several, which could have serious implications for Australia's once-perennially growing economy.

Higher interest rates will spell higher borrowing costs for millions of already heavily indebted Australians, in a country where real estate market speculation at times appears to be a national pastime.

Interest rates of two percent would cost the average homeowner about US$362 a month, according to financial services website RateCity.com.au. 

"That's going to be a lot for many borrowers to swallow, particularly anyone already struggling to make the monthly budget add up," said RateCity's Sally Tindall.

Australia's vast resource wealth has for decades provided insulation from global financial headwinds and underpinned high standards of living.

The country is among the world's largest producers and exporters of iron ore, gas and coal. 

But there are growing concerns that the "lucky country's" run of good fortune may be coming to an end. 

In early 2020 the economy fell into recession for the first time in almost three decades, largely because of devastating bushfires and the start of the Covid-19 pandemic. 

Climate-fuelled floods, bushfires and droughts are proving increasingly costly.

This year's east coast floods cost an estimated Aus$3.35 billion (US$2.4 billion) in insured losses, making it the costliest flood in Australia's history, according to the Insurance Council of Australia.

Agence France-Presse

Oil prices jump, stocks mixed with spotlight on surging inflation

LONDON - Oil prices rallied Wednesday, adding to soaring inflation concerns, while stock markets diverged.

Crude futures jumped 2.5 percent with Brent North Sea headed towards $120 per barrel.

Russian Deputy Prime Minister Alexander Novak on Wednesday warned that a ban on Russian oil and gas imports over the Ukraine war would drive the world's energy markets to a "collapse". 

"It is absolutely obvious that without Russian hydrocarbons, if sanctions are introduced, there will be a collapse of the oil and gas markets," Novak told Russia's lower house State Duma as reported by Russian news agencies.

"The rise in energy prices may be unpredictable," Novak added. 

On stock markets, London's benchmark FTSE 100 index was up after official data showed UK annual inflation had surged to 6.2 percent last month, the highest level in 30 years. 

While inflation increases company costs it can boost their revenues by sizeable amounts. 

The British data were published ahead of a UK budget update Wednesday that could ease a cost-of-living crisis for millions of Britons as inflation rockets worldwide largely owing to soaring energy prices. 

"Today's data confirm a worsening squeeze on consumer incomes," said Yael Selfin, chief economist at KPMG UK.

"These price rises were dominated by increases in energy, and we expect further rises this year as global energy, food, and other commodities markets are impacted by Russia's invasion of Ukraine."

Elsewhere, eurozone stock markets fell Wednesday after Asia's top indices closed higher.

Wall Street had rallied Tuesday on optimism that the Federal Reserve's plan to hike interest rates would help to bring inflation under control.

While there remains plenty of concern about the war in Ukraine, analysts said some confidence had seeped back into trading floors as investors bet on consumer resilience and economies continue to reopen.

Federal Reserve boss Jerome Powell this week said that the US central bank was prepared to act more aggressively on lifting borrowing costs should American inflation -- already at a 40-year high -- not fall quickly enough.

Officials lifted US rates last week by a quarter of a point but some have advocated bigger increases, a view Powell suggested he was open to believing that the world's biggest economy was strong enough to withstand such a move.

Agence France-Presse

Interest Rates: APR vs. APY (and why it Matters)

When comparing interest rates that a bank offers on a mortgage, home equity line of credit, car loan, credit card, certificate of deposit, or savings account, it’s important to know exactly what rate you are looking at.

Even a 0.5% difference in interest rate could cost you hundreds or thousands of dollars when compounded over years.

This post will serve as a quick primer on interest rate terminology and calculations.






What is Annual Percentage Rate (APR)

Annual percentage yield, or APY, is the effective interest rate, with compounding factored in. For that reason, it is also referred to as the effective APR, or EAR.

Banking institutions have deposit products that compound over various periods – daily, weekly, monthly, annually, etc. They are required to express interest rates in the form of APY, or EAR, so that you can compare rates between institutions.

It is essentially the real rate you are are effectively receiving or paying, when compounding is factored in.

How to Calculate APR and APY
APR = Periodic rate x number of periods in a year

For example, a credit card with a 1% monthly interest rate would have a 12% APR (1% x 12 = 12%)

APY = (1 + nominal APR/n)^n – 1

    n = the  number of compounding periods per year.
    nominal APR is expressed in decimal format (i.e. 12% = 0.12)

For example, a credit card with a 12% APR, compounded monthly, would have an EAR equal to 12.68%. The equation would be (1 + .12/12)^12 – 1 = .1268 = 12.68%

If the credit line compounded daily, the EAR equation would be (1 + .12/365)^365 – 1 = .1274 = 12.74%

Why APY is Important

In any borrowing or investment scenario that involves compounding and/or fees, you want to know what the EAR (APY) is.

In a mortgage or loan scenario, you’ll want to know what the EAR is after closing or other fees are factored in.

In a credit card scenario, companies will often quote you a nominal APR (annual percentage rate). However, since your balance compounds monthly, you do not end up paying the nominal APR. Due to the compounding, your EAR will be higher.

Knowing EAR allows you to compare apples to apples and make precise calculations.

APR vs. APY Discussion:

Do you ever feel like you were misled by a bank or credit card company when only being presented with APR vs. APY?

source: 20somethingfinance.com

Obama attracts youth with student loans

US President Barak Obama is depicting Republicans as obstacles to an affordable college education in a move to energise young voters.

He will outline his stance in detail on university campuses this week in states crucial to his re-election.

Obama says it's a question of values, warning America can't afford to let America become a country where a shrinking number of people do really well while a growing number of people struggle to get by.

Obama wants Congress to extend a law that cut interest rates on a popular federal loan program for low- and middle-income undergraduates.

If the law expires, the rates will double on July 1, from 3.4 per cent to 6.8 per cent.

source: http://www.skynews.com.au/world/article.aspx?id=742222&vId=

ECB loans out €529.5 billion to European banks

NEW YORK (CNNMoney) -- The European Central Bank announced Wednesday that banks borrowed €529.5 billion, or $712.4 billion, under a highly-anticipated lending program aimed at preventing a credit crunch in Europe.

In its second long-term refinancing operation (LTRO), the ECB offered banks unlimited three-year loans at interest rates as low as 1%. The ECB allotted nearly €500 billion in the first round of the operation in December.

The borrowing was a bit more than expected, as banks were expected to have taken up roughly €500 billion, although estimates ranged from €300 billion to €1 trillion.

"It was exactly the right amount," said Tobias Blattner, eurozone economist for Daiwa Capital Markets. "It was not too high so as to raise concern about the health of banks' balance sheets, but at the same time it was not too low to raise concerns about the ability of banks to continue to purchase the bonds of fiscally stressed countries."

Source: http://money.cnn.com/2012/02/29/markets/ecb_bank_loans/index.htm?hpt=hp_t3