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Despite Banking turmoil in US, Interest rates Hikes

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The US central bank has raised interest rates again, despite fears that the move could add to financial turmoil after a string of bank failures.

The Federal Reserve increased its key rate by 0.25 percentage points, calling the banking system “sound and resilient”.

But it also warned that fallout from the bank failures may hurt economic growth in the months ahead.

The Fed has been raising borrowing costs in a bid to stabilize prices.

But the sharp increase in interest rates since last year has led to strains in the banking system.

Two US banks – Silicon Valley Bank and Signature Bank – collapsed this month, buckling in part due to problems caused by higher interest rates.

There are concerns about the value of bonds held by banks as rising interest rates may make those bonds less valuable.

Banks tend to hold large portfolios of bonds and as a result, are sitting on significant potential losses. Falls in the value of bonds held by banks are not necessarily a problem unless they are forced to sell them.

Authorities around the world have said they do not think the failures threaten widespread financial stability and need to distract from efforts to bring inflation under control.

Last week, the European Central Bank raised its key interest rate by 0.5 percentage points.

The Bank of England is due to make its own interest rate decision on Thursday, a day after official figures showed that inflation unexpectedly shot up in February to 10.4 percent.

Federal Reserve chairman Jerome Powell said the Fed remained focused on its inflation fight. He described Silicon Valley bank as an “outlier” in an otherwise strong financial system.

But he acknowledged that the recent turmoil was likely to drag on growth, with the full impact still unclear.

 

Economic impact

Forecasts released by the bank show officials expect the economy to grow just 0.4 percent this year and 1.2 percent in 2024, a sharp slowdown from the norm – and less than officials projected in December.

The announcement from the Fed also toned down earlier statements which had said “ongoing” increases in interest rates would be needed in the months ahead.

Instead, the Fed said: “Some additional policy firming may be appropriate”.

The moves “signal clearly that the Fed is nervous”, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Wednesday’s rate rise is the ninth in a row by the Fed. It lifts its key interest rate to 4.75%-5%, up from near zero a year ago – the highest level since 2007.

Higher interest rates mean the cost to buy a home, borrow to expand a business or take on other debt goes up.

By making such activity more expensive, the Fed expects demand to fall, cooling prices.

That has started to happen in the US housing market, where purchases have slowed sharply over the last year and the median sales price in February was lower than it was a year ago – the first such decline in more than a decade.

But overall the economy has held up better than expected and prices continue to climb faster than the 2% rate considered healthy.

Inflation, the rate at which prices climb, jumped 6% in the 12 months to February. The cost of some items, including food and airfare, is surging even faster.

Before the bank failures, Mr. Powell had warned that officials might need to push interest rates higher than expected to bring the situation under control.

The bank projections show policymakers expect inflation to fall this year – but less than expected a few months ago.

Still, they forecast interest rates of roughly 5.1% at the end of 2023 – unchanged since December – implying the Fed is poised to stop raising rates soon.

Mr Powell described the effect of the recent turmoil as the “equivalent of a rate hike”.

He said the Fed may be able to raise its key rate less aggressively, if the turmoil in the financial system prompts banks to limit lending, and the economy to slow more quickly.

But he repeated that the Fed would not shy away from its inflation fight.

“We have to bring down inflation down to 2%,” he said. “There are real costs to bringing it down to 2% but the costs of failing are much higher.”

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Trump shot in right ear at rally, shooter dead

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Donald Trump was shot in the right ear during a campaign rally on Saturday, sparking panic in the crowd and spattering the Republican presidential candidate’s blood across his face, before he emerged and pumped his fist in the air appearing to mouth the words “Fight! Fight! Fight!”

The shooter was dead, one rally attendee was killed and two other spectators were injured, the Secret Service said in a statement.

“I was shot with a bullet that pierced the upper part of my right ear,” Trump said on his Truth Social platform. “Much bleeding took place.”

As the shots rang out, Trump grabbed his right ear with his right hand, then brought his hand down to look at it before dropping to his knees behind the podium before Secret Service agents swarmed and covered him. He emerged about a minute later, his red “Make America Great Again” hat knocked off and could be heard saying “wait, wait,” before agents ushered him into a waiting vehicle.

The Secret Service and the former president’s campaign said Trump was safe following the shooting in Butler, Pennsylvania, about 30 miles (50 km) north of Pittsburgh.

The shooter’s identity and motive were not immediately clear. Leading Republicans and Democrats quickly condemned the violence.

The shots appeared to come from outside the area secured by the Secret Service, the agency said.

An audience member was also dead, and another person was in critical condition, a Washington Post reporter said on social media, citing the Butler County district attorney.

The shooting occurred less than four months before the Nov. 5 election, when Trump faces an election rematch with Democratic President Joe Biden.

“President Trump thanks law enforcement and first responders for their quick action during this heinous act. He is fine and is being checked out at a local medical facility. More details will follow,” spokesperson Steven Cheung said in a statement.

Trump had just started his speech when gunshots erupted and Trump and other rally attendees hit the deck. Secret Service agents swarmed around him and Trump disappeared behind the podium for about one minute before he was rushed to the waiting vehicle.

Trump and Biden are locked in a close election rematch, with most opinion polls including those by Reuters/Ipsos showing the two evenly matched.

Biden said in a statement: “There’s no place for this kind of violence in America. We must unite as one nation to condemn it.”

Ron Moose, a Trump supporter who was in the crowd, described the chaos: “I heard about four shots and I saw the crowd go down and then Trump ducked also real quick. Then the Secret Service all jumped and protected him as soon as they could. We are talking within a second they were all protecting him.”

Moose said he then saw a man running and being chased by officers in military uniforms. He said he heard additional shots, but was unsure who fired them. He noted that by then snipers had set up on the roof of a warehouse behind the stage.

The BBC interviewed a man who described himself as an eyewitness, saying he saw a man armed with a rifle crawling up a roof near the event. The person, who the BBC did not identify, said he and the people he was with started pointing at the man, trying to alert security.

“I am thinking to myself, why is Trump still speaking. Why have they not pulled him off stage,” said the man, who was wearing a red Trump hat. “Next thing you know, five shots rang out.”

REPUBLICANS, DEMOCRATS DECRY VIOLENCE

Trump is due to receive his party’s formal nomination at the Republican National Convention, which kicks off in Milwaukee on Monday.

“This horrific act of political violence at a peaceful campaign rally has no place in this country and should be unanimously and forcefully condemned,” Republican House Speaker Mike Johnson said on social media.

Democratic Senate Majority Leader Chuck Schumer said he was horrified by what happened and was relieved Trump was safe. “Political violence has no place in our country,” he said.

A Secret Service spokesperson said on social media: “The Secret Service has implemented protective measures and the former president is safe … This is now an active Secret Service investigation and further information will be released when available.”

CNN reported that Trump was injured, but gave no other details. It was not clear how or what injuries he may have sustained.

The venue was abandoned with chairs knocked over and yellow police tape around the stage. A helicopter flew above and law enforcement officers walked through the area, the video feed showed. Armed law enforcement officers were also seen on a roof near the stage where Trump was standing.

Biden’s campaign was working to pause its television ads and halting all other outbound communication, a campaign official said on Saturday.

Trump, who served as president from 2017-2021, easily bested his rivals for the Republican nomination early in the campaign and has largely unified around him the party that had briefly wavered in support after his supporters attacked the U.S. Capitol on Jan. 6, 2021, attempting to overturn his 2020 election defeat.

The businessman and former reality television star entered the year facing a raft of legal worries, including four separate criminal prosecutions. He was found guilty in late May of trying to cover up hush money payments to a porn star, but the other three prosecutions he faces — including two for his attempts to overturn his defeat — have been ground to a halt by various factors including a Supreme Court decision early this month that found him to be partly immune to prosecution.

Biden spoke to Trump after rally shooting: White House

US President Joe Biden has spoken to his election rival Donald Trump, a White House official said, after the Republican was injured in an apparent assassination attempt at a campaign event in Pennsylvania.

“This evening, President Biden spoke to former President Trump,” the official said, adding that the US incumbent would receive an updated briefing from law enforcement officials on the incident on Sunday morning.

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Asian markets track Wall St records after Powell hints at rate cut

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Asian stocks on Thursday tagged along with a Wall Street rally that saw another round of record highs as bets on a September interest rate hike surged following comments by Federal Reserve boss Jerome Powell.

The advances also saw Hong Kong and Shanghai push higher after struggling in recent weeks over worries about the Chinese economy, with investors awaiting a key Communist Party meeting next week.

On a second day of testimony to lawmakers, Powell said decision-makers would not wait until inflation had hit the bank’s two percent target before loosening monetary policy, adding: “If you waited that long, you’ve probably waited too long.”

His remarks came before the release of the latest consumer price index reading on Thursday, which is expected to show a further slowdown.

Traders ramped up bets on the Fed reducing borrowing costs in two months’ time, with analysts saying Powell was telegraphing to markets that the decision had been made.
The comments soothed recent fears among investors that officials might keep rates at their two-decade high for some time owing to a still strong labour market and inflation staying stubbornly above two percent.

The S&P 500 ended with a sixth straight record, while the Nasdaq also finished at an all-time peak.

And the upbeat mood filtered through to Asia, where Hong Kong jumped more than one percent, while Tokyo, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei, Manila and Wellington also rose.

Eyes are also turning to the start of China’s Third Plenum gathering on Monday, where top officials including President Xi Jinping are expected to discuss ways to kickstart the world’s number two economy in the face of an ongoing property crisis and geopolitical issues.

However, while there is hope for some sort of major policy announcement, commentators remain cautious.

Andrew Batson, of Beijing-based consultancy Gavekal Dragonomics, told AFP he did not expect a “fundamental departure from the course Xi has already laid out”, in which technological self-sufficiency and national security outweigh economic growth.

Nomura’s Ting Lu added that the meeting was “intended to generate and discuss big, long-term ideas and structural reforms instead of making short-term policy adjustments”.

Economic growth in the first quarter of the year came in above forecasts and is tipped to top the government’s five percent goal for April-June, but the meeting comes amid ongoing concerns that officials are not providing enough support.

Taylor Nugent at National Australia Bank warned: “Further monetary policy easing is constrained by a reluctance to allow further depreciation in the renminbi, and expectations are low for any big policy shift at the Third Plenum.”

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 0.8 percent at 42,179.84 (break)

Hong Kong – Hang Seng Index: UP 1.3 percent at 17,697.76

Shanghai – Composite: UP 0.8 percent at 2,962.89

Euro/dollar: UP at $1.0840 from $1.0833 on Wednesday

Pound/dollar: UP at $1.2862 from $1.2848

Dollar/yen: DOWN at 161.58 yen from 161.71 yen

Euro/pound: DOWN at 84.27 pence from 84.29 pence

West Texas Intermediate: UP 0.8 percent at $82.79 per barrel

Brent North Sea Crude: UP 0.9 percent at $85.81 per barrel

New York – Dow: UP 1.1 percent at 39,721.36 (close)

London – FTSE 100: UP 0.7 percent at 8,193.51 (close)

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Bangladesh, China Sign 21 Instruments, Announce 7 Projects to Strengthen Ties on Diverse Fronts

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7 projects announced:

  • China-Bangladesh Free Trade Agreement
  • China-Bangladesh Bilateral Investment Treaty
  • Digital Connectivity project
  • Double Pipe Line project
  • Rajshahi WASA Surface Water Treatment Plant
  • MoU between Shandong Agricultural University and Bangabandhu Sheikh Mujibur Rahman Agricultural University, Gazipur.
  • Luban Workshop in Bangladesh

Bangladesh and China signed 21 instruments today (10 July), including three renewed Memorandums of Understanding (MoUs), and announced seven additional projects to elevate their relationship from a “strategic partnership” to a “comprehensive strategic cooperative partnership.”

The instruments were inked in the presence of Bangladesh Prime Minister Sheikh Hasina and her Chinese counterpart Li Qiang after the delegation-level talks between the two countries at the Great Hall of the People, Beijing.

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Earlier, the Bangladesh prime minister was accorded a red-carpet reception as she reached the Great Hall of the People to have a bilateral meeting with her Chinese counterpart Li Qiang.

On her arrival at the premises of the Great Hall of the People, the prime minister was received by the Chinese premier.

The bilateral talks mainly featured Rohingya issue, business, trade and commerce, investments, and bilateral relations alongside various regional and international matters.

After the delegation-level meeting, the Bangladesh prime minister along with her Chinese counterpart witnessed the exchange of the documents.

The instruments on cooperation in the economic and banking sector, trade and investment, digital economy, infrastructure development, assistance in disaster management, construction of 6th and 9th Bangladesh-China friendship bridges, export of agricultural products from Bangladesh and people to people connectivity were signed.

Among the instruments, Bangladesh Sangbad Sangstha (BSS) Managing Director and Chief Editor Abul Kalam Azad signed a MoU with the China Media Group (CMG) and an Agreement with the Xinhua News Agency.

The signed instruments are:

1. The MoU on Strengthening Investment Cooperation in the Digital Economy.

2. The MoU on Banking and Insurance Regulatory between China National Financial Regulatory Administration (NFRA) and Bangladesh Bank.

3. A Protocol of Phytosanitary Requirements Export of Fresh Mangoes from Bangladesh to China.

4. The MoU on Exchange and Cooperation in the field of Economic Development Policy.

5. The MoU on Trade and Investment Cooperation.

6. The MoU on Strengthening Digital Economy Cooperation.

7. Signing of Minutes of Discussions on the Feasibility Study of the China-aid National Emergency Operation Center in Bangladesh Project.

8. Exchange the Letter on the China-aid 6th Bangladesh-China Friendship Bridge Renovation Project.

9. Exchange the Letters on the Feasibility Study of China-aid Construction of Nateshwar Archaeological Site Park in Bangladesh Project.

10. Exchange the Letters on the China-aid 9th Bangladesh-China Friendship Bridge Project.

11. The MoU on Strengthening the Cooperation in Medical Care and Public Health.

12. The MoU on Strengthening the Infrastructure Cooperation.

13. The MoU on Cooperation on Green and Low-Carbon Development.

14. Renewing the MoU on Provision of Hydrological Information of the Yaluzangbu/ Brahmaputra River in Flood Season by China to Bangladesh.

15. The MoU between National Radio and Television Administration and the Ministry of Information and Broadcasting of Bangladesh.

16. The MoU between the China Media Group (CMG) and Bangladesh Sangbad Sangstha (BSS).

17. The MoU between the China Media Group (CMG) and BTV.

18. An Agreement between the Xinhua News Agency and BSS.

19. An Agreement between the Xinhua News Agency and BTV.

20. Renewing the MoU between the Ministry of Education of China and the Ministry of Education of Bangladesh.

21. The MoU Regarding Public-Private Partnership for Sustainable Infrastructure Development.

7 announced projects are:

1. Announcement of the Conclusion of Joint Feasibility Study on China-Bangladesh Free Trade Agreement.

2. Announcing the commencement of negotiation on the Optimization of China-Bangladesh Bilateral Investment Treaty.

3. Announcing the completion of the Modernization of Telecommunication Network for Digital Connectivity project.

4. Announcing the completion of trial run of the Single Point Mooring with Double Pipe Line project.

5. Announcing the commencement of Rajshahi WASA Surface Water Treatment Plant.

6. Signing the MoU between Shandong Agricultural University and Bangabandhu Sheikh Mujibur Rahman Agricultural University, Gazipur.

7. Announcing the construction of Luban Workshop in Bangladesh.

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