US home prices in 20 US cities rose in December for a seventh consecutive month, indicating the industry at the heart of the worst recession since the 1930s is stabilising. The S&P/Case-Shiller home-price index increased 0.3% mom on a seasonally adjusted basis, more than anticipated and matching the gain in November. The gauge was down 3.1% yoy, the smallest decline since May 2007. (Bloomberg)
US Treasury announced that it is reopening and rebuilding its Supplementary Financing Program (SFP), under which the Treasury last year sold extra Treasury bills and deposited the proceeds in a special SFP account at the Fed. The net effect of SFP operations is to drain reserve balances from depository institutions. But it is not expected to have a significant monetary impact in the near term, especially with the Fed continuing to purchase agency and agency-guaranteed mortgage backed securities. (Xinhua)
The Bank of England (BOE) may have to restart its asset-buying programme if the economic outlook worsens, governor Mervyn King said. While the serious downside risks of another Great Depression had diminished, the economy was not out of the woods yet, he said. “If the news is that the economic outlook seems even weaker, inflation pressure is lower and that moves down that profile, I think there is a strong case then for expanding further the asset purchases,” King said. (Financial Daily)
China's exports may grow by 8% in 2010 but problems still existed with getting exports back to pre-crisis levels, Minister of Industry and Information Technology (MIIT), Li Yizhong said. It was unlikely for China's exports to recover to pre-crisis levels in the short-term, attributing the slow rebound to rising international protectionism and the fact that Chinese manufacturers relied too much on overseas markets, Li said. (XinHua)
Hong Kong’s inflation slowed to 1.0% in January (+1.3% in Dec 09) as the timing of a Chinese Lunar New Year holiday distorted comparisons with a year earlier. That matched the median estimate in a Bloomberg News survey. (Bloomberg)
Singapore’s consumer prices climbed 0.2% yoy in January (-0.5% in Dec 09) as transportation and healthcare costs rose. The index this month reflects a change in the base year to 2009 from 2004. Prices climbed 0.7% mom in January (-0.6% in Dec 09), without adjusting for seasonal factors. Economist s projected it would increase by 0.7% yoy. (Bloomberg)
India’s fiscal stimulus is a “short-term measure” to support economic growth, junior finance minister Namo Narain Meena said, signaling the government may remove some tax incentives in the budget on 26 Feb. “The expansionary fiscal stance is a short-term measure to address demand slowdown in the economy and to minimise the adverse impact of the global financial crisis,” Meena said. (Bloomberg)
Ballooning debt is likely to force several countries to default and the US to cut spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big American banks. Following banking crises, “we usually see a bunch of sovereign defaults, say in a few years,” Rogoff said.
- The US is likely to tighten monetary policy before cutting government spending, sending “shockwaves” through financial markets. Fiscal policy won’t be curbed until soaring bond yields trigger “very painful” tax increases and spending cuts, he said.
- “Most countries have reached a point where it would be much wiser to phase out fiscal stimulus,” said Rogoff. It would be better “to keep monetary policy soft and start gradually tightening fiscal policy even if it meant some inflation.” (Bloomberg)
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