Thailand: Thai central bank chief signals less pressure for rate rise on growth risk
Thailand’s central bank may cut its economic growth projections as the global recovery falters, Governor Prasarn Trairatvorakul said, signaling there may be less scope for interest rates to rise further. Stocks fell the most in almost three years. Inflation expectations aren’t likely to increase and the Bank of Thailand has “closed the gap somewhat” on normalizing borrowing costs, Prasarn said in an interview in Washington on 24 Sept. The bank is due to unveil forecasts next month. (Bloomberg)
India: Inflation in India has been ‘fairly stubborn,’ RBI governor Subbarao says
India’s inflation rate has been “fairly stubborn” and price pressures beyond a threshold are unacceptable, central bank Governor Duvvuri Subbarao said. “Inflation has been fairly stubborn,” Subbarao said in New York today. “Above a threshold, you can’t accept high inflation to have higher growth,” he said, adding that the price-rise limit is as much as 6% for the nation. The Reserve Bank of India on 16 Sept. extended its record- interest rate increases to tame the fastest inflation among the so-called BRICS economies. India’s benchmark wholesale-price inflation accelerated to a 13-month high of 9.78% in August from a year earlier. Higher food and fuel costs and weakness in the rupee may keep boosting price pressures. Subbarao today reiterated the upward pressure on prices. A rate of “4 to 6% is the short term comfort range” for inflation, he said. “We expect inflation to slow by March 2012, but more slowly than initially expected.” (Bloomberg)
EU: ECB said to consider new covered-bond purchases to ease tensions
European Central Bank policy makers are likely to next week debate restarting their covered-bond purchases along with further measures to ease monetary conditions, a euro-region central bank official said. The reintroduction of 12-month loans to banks will also be discussed at the ECB’s 6 Oct. policy meeting, said the person, who spoke on condition of anonymity because the information is confidential. Interest rate cuts are likely to be discussed, though they are not on the current agenda, the official said. The euro rose half a cent against the dollar to as high as USD1.3543. Yield spreads between covered bonds and interest-rate swaps tightened. A spokesman for the Frankfurt-based ECB declined to comment. (Bloomberg)
US: Fed to purchase bonds 13 times a month, sell six times in operation twist
The Federal Reserve said it will buy Treasury securities 13 times a month and sell its holdings of U.S. government debt six times under its plan to lower borrowing costs known as Operation Twist. The Fed will sell USD8bn to USD9bn of nominal Treasuries five times a month per operation and USD1bn to USD1.5bn of Treasury Inflation Protected Securities, or TIPS, in one operation, according to a statement today from the Federal Reserve Bank of New York. The Fed will buy Treasuries 12 times a month and TIPS once a month. The Federal Open Market Committee said last week that it would replace USD400bn of short-term debt in its portfolio with longer-term Treasuries in an effort to further reduce borrowing costs and counter rising risks of a recession. The so- called Operation Twist drew three dissents as Chairman Ben S. Bernanke struggled to find consensus to help an economy plagued by 9.1% unemployment. (Bloomberg)
US stocks and commodities gain on Europe optimism
Stocks rallied, rebounding from last week’s decline, and Treasuries retreated as European officials discussed plans to tame the region’s debt crisis. Commodities reversed losses and the Dollar Index retreated. The S&P 500 Index jumped 2.3% to 1,162.95 while The S&P GSCI Index of commodities gained 0.2% as oil snapped a three-day slump. The Dow Jones Industrial Average gained 2.5% to 11,043.86. The European Central Bank is likely to debate restarting covered-bond purchases and may discuss interest-rate cuts to ease funding strains, a euro-region central bank official said. (Bloomberg)
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