To Wall Street's delight, Federal Reserve Chairman Ben Bernanke signalled once more that the Fed will keep interest rates at very low levels for some time to come in congressional testimony on Thursday. Bernanke said there will come a time when the Fed will need to tighten its unprecedentedly easy money policies and said the Fed has the tools to do so. But he made clear he is no hurry to raise rates. (Xinhua)
US initial jobless claims dropped 14,000 to 442,000 in the week ended March 20. The level was just below the 450,000 level expected by the market. The 4-week moving average of initial claims, which smoothes out volatility in the measure, was 453,750. That's down 11,000 from the previous week's revised average of 464,750. The report also said 4,648,000 people filed continuing claims in the week ended March 13 vs. preceding week's revised 4,725,500 claims. (CNN Money, Xinhua)
The Federal Reserve must start making plans now for asset sales to meet its goal of returning a record US$2.32tr balance sheet to its pre-crisis size and makeup, St. Louis Fed President James Bullard said. “You have to think about what kind of time horizon you want to get back to that normal balance sheet, and probably that has to involve some asset sales at some point,” said Bullard. He said there’s no agreement among policy makers on when to start the sales, and the economic recovery remains too fragile to start now. “I don’t think you could do any kind of tightening policy right now,” Bullard said. (Bloomberg)
Europe’s loans to households and companies declined 0.4% yoy in February, marking the sixth straight month of decline as sluggish economic expansion reduced demand for credit. M3 money supply, which the ECB uses as a gauge of future inflation, fell 0.4% yoy in February (+0.1% in Jan), worse than market consensus of a 0.1% yoy drop. M1 money supply growth eased to 10.9% (+11.5% in Jan). (Bloomberg)
European Central Bank (ECB) President Jean-Claude Trichet said the bank will leave emergency collateral rules in place into 2011, softening his stance as Greece struggles to reduce the European Union’s largest budget deficit. “It is the intention of the ECB’s Governing Council to keep the minimum credit threshold in the collateral framework at investment grade level (BBB-) beyond the end of 2010,” he said. (Bloomberg)
European chiefs agreed to bring in the International Monetary Fund (IMF) to help aid debt-stricken Greece in the face of opposition from the European Central Bank (ECB). Leaders of the 16-nation euro region endorsed a Franco-German proposal for a mix of IMF and bilateral loans as the ECB’s president, Jean-Claude Trichet, said Europe has to resolve the crisis on its own. “If the IMF or any other authority exercises any responsibility instead of the eurogroup, instead of the governments, this would clearly be very, very bad,” Trichet said. (Bloomberg)
Australian borrowing costs need to continue being moved gradually toward “more normal levels” to prevent the nation’s economic rebound from stoking inflation, Assistant Governor Philip Lowe said. “We need to ensure that inflation pressures remain contained and that inflation expectations remain well anchored,” he noted. (Bloomberg)
Japan’s government, faced with more houses than households, is encouraging people to renovate their homes as a step toward creating a strong resale market. Prime Minister Yukio Hatoyama’s administration is offering environmental incentives to homeowners to remodel, rather than follow the postwar scrap-and-build policy of tearing down old houses. The ruling Democratic Party of Japan aims to boost sales of existing homes and extend their lifespan from an average of 30 years, compared with 55 in the US. (Bloomberg)
Taiwan’s central bank signaled it will accelerate the withdrawal of funds from the financial system and impose “prudent” measures on property lending to prevent the emergence of asset bubbles. The central bank will issue longer-dated certificates of deposit to banks to soak up liquidity, it said. Governor Perng Fai-nan and his board left the benchmark discount rate on 10-day loans to banks at 1.25%, as forecast by economists. “Taiwan’s property prices are high in certain areas, so we can’t use blunt policy. We need to use targeted measures and supervision to handle the matter,” Perng said. (Bloomberg)
Indonesia hopes to attract US$90bn of private infrastructure investment in the next five years to help it reach its growth target of 7.0%. Poor infrastructure is one of the main obstacles to unlocking the huge potential for Southeast Asia's biggest economy. "We plan to spend US$140bn for infrastructure spending in the next five years. However, US$90bn of that has to come from the private sector," Investment Coordinating Board chairman Gita Wirjawan said. (Channel News Asia)
Debt-laden Dubai World said it has proposed to repay its creditors in full through the issuance of two tranches of new debt maturing in five and eight years. It said that the total debt owed to creditors which will be negotiated amounts to US$14.2bn, implying that the remaining of total liabilities of US$23.5bn "as at 31 Dec 09" will be paid by the government. The government will convert its financial support of US$8.9bn to the group into equity. The government will also commit to inject up to US$1.5bn in cash into Dubai World "to fund the company's working capital and interest payment commitments that will arise from the new debt facilities," the firm added. (Channel News Asia)
Hong Kong’s exports rose 28.5% yoy in February (18.4% in Jan). That compares with the median estimate for a 25.3% gain. Import growth slipped to 22.4% yoy (39.5% in Jan), narrowing the trade deficit to HKD19.7bn (-HKD29.5bn in Jan). (Bloomberg)
India’s food-price inflation rate fell to a five-month low, a drop that may be insufficient to avert further interest-rate increases by the central bank. An index measuring wholesale prices of lentils, rice, vegetables and other food articles compiled by the commerce ministry rose 16.22% yoy in the week ended March 13, after a 16.3% gain the previous week. (Bloomberg)
The world’s largest economies, including the US, UK and Europe, face “difficult fiscal decisions” in coming years to curb debt levels, according to Australian central bank Governor Glenn Stevens, the only Group of 20 policy maker to boost borrowing costs this year. “At some point, significant discretionary tightening will be required. Without a “credible path to fiscal sustainability” economic growth “could easily be stunted by rising risk premia built into interest rates as markets worry about long-run solvency,” Steven noted. (Bloomberg)
China central bank Deputy Governor Zhu Min said interest rates are a “heavy-duty weapon” and alternative tools for addressing liquidity are working well, helping to explain why the bank hasn’t raised borrowing costs. “We are very careful on the interest rate, because it is a heavy-duty weapon. We are very careful managing liquidity” with other instruments, and it looks like that “works very well,” he said, citing an expected slowdown in credit growth in March. (Bloomberg)
South Korea’s economy expanded 0.2% qoq in 4Q09 (3.2% in 3Q09), matching the initial estimate. Gross domestic product (GDP) increased 6.0% yoy (0.9% in 3Q09), also matching the January estimate. (Bloomberg)
The University of the Thai Chamber of Commerce said anti-government protests in Thailand could harm growth, forecasting the economy may expand as little as 3% in 2010. Thailand might lose as much as THB100bn (US$3.1bn) from falling consumption and lost investment and tourism revenue should the protests last for three months, the university said. (Bloomberg)
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