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Swiss Franc Reaches an Eight-Year High Against the US Dollar
The Swiss franc reached its strongest level against the dollar since 2015 amid speculation the Swiss National Bank will raise interest-rates as the Federal Reserve may be ending its tightening cycle later this year. The currency strengthened as much as 0.5% to 0.8751 per dollar after data showed that US consumer prices increased 0.2% in June, versus estimate for a 0.3% increase. Swiss National Bank Vice President Martin Schlegel last week said additional rate increases aimed at inflation don’t threaten financial stability. The central bank’s next scheduled meeting is in September. The franc — both a haven and ... (full story)
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In order to preserve anchored inflation expectations, central banks must bring inflation back down to their targets in a reasonable period of time.1 But price stability (and, in the case of the Federal Reserve, maximum employment) is not the only objective central banks must aim to achieve. Ensuring financial stability is also a primary responsibility for central banks because financial crises can cause great hardship to Main Street. Managing inflation and achieving financial stability are usually distinct and often complementary goals, where central banks’ limited policy tools can simultaneously work to support both objectives. But these goals can come into tension at times, creating a dilemma for policymakers to decide which objective to prioritize. In recent months, such a tension arose when some regional banks in the U.S. ran into trouble due to securities losses triggered by poor risk management by these firms in the context of policymakers having raised interest rates to combat high inflation. Although today the banking system overall is sound and resilient, bank stresses nonetheless could emerge again. In my view, given the risks that these banks have taken on, the outlook for some regional banks largely depends on what happens to inflation: post at 9:33am: Fed’s Kashkari: If High Inflation Persists, Fed May Need To Raise Rates Further - Fight Against Inflation Must Succeed - Higher Rates Could Increase Pressure On Banks - Bank Supervisors Should Ensure All Banks Are Prepared To Withstand Higher-Rate Environment
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The Bank of Canada today increased its target for the overnight rate to 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is also continuing its policy of quantitative tightening. Global inflation is easing, with lower energy prices and a decline in goods price inflation. However, robust demand and tight labour markets are causing persistent inflationary pressures in services. Economic growth has been stronger than expected, especially in the United States, where consumer and business spending has been surprisingly resilient. After a surge in early 2023, China’s economic growth is softening, with slowing exports and ongoing weakness in its property sector. Growth in the euro area is effectively stalled: while the service sector continues to grow, manufacturing is contracting. Global financial conditions have tightened, with bond yields up in North America and Europe as major central banks signal further interest rate increases may be needed to combat inflation. The Bank’s July Monetary Policy Report (MPR) projects the global economy will grow by around 2.8% this year and 2.4% in 2024, followed by 2.7% growth in 2025. Canada’s economy has been stronger than expected, with more momentum in demand. Consumption growth has been surprisingly strong at 5.8% in the first quarter. While the Bank expects consumer spending to slow in response to the cumulative increase in interest rates, recent retail trade and other data suggest more persistent excess demand in the economy. In addition, the housing market has seen some pickup. New construction and real estate listings are lagging demand, which is adding pressure to prices. In t post at 10:01am: ?*BOC SEES CPI RETURNING TO TARGET 6 MONTHS LATER, IN MID-2025 *BOC EXPECTS OUTPUT GAP TO CLOSE 9 MONTHS LATER, IN EARLY 2024 *CANADA GDP NOW SEEN AT 1.8% THIS YR, 1.2% IN 2024, 2.4% IN '25 *BOC CONCERNED PROGRESS TOWARD 2% INFLATION TARGET COULD STALL post at 10:03am: BOC: LABOR MARKET HAS EASED MILDLY, CONDITIONS REMAIN TIGHT. post at 10:01am: CANADA BOC INTEREST RATE DECISION ACTUAL: 5.00% VS 4.75% PREVIOUS; EST 5.00% BANK OF CANADA RAISES O/N INTEREST RATE TO 5.00%, HIGHEST IN 22 YEARS BOC: CANADA’S ECONOMY HAS BEEN STRONGER THAN EXPECTED, WITH MORE MOMENTUM IN DEMAND BOC: GOVERNING COUNCIL REMAINS CONCERNED THAT… https://t.co/Nac5t6Pxjk post at 10:12am: BoC Sees CPI Returning To Target 6 Months Later, In Mid-2025 - To Assess Data, Gives No Guidance On Future Path Of Rates - Announcement Does Not Include Language From June Rate Decision Saying 'Monetary Policy Was Not Sufficiently Restrictive'
The objective of Canada’s monetary policy is to promote the economic and fi nancial well-being of Canadians. Canada’s experience with infl ation targeting since 1991 has shown that the best way that monetary policy can achieve this goal is by maintaining a low and stable infl ation environment. Doing so fosters confi dence in the value of money and contributes to sustained economic growth, a strong and inclusive labour market and improved living standards. • In 2021, the Government of Canada and the Bank of Canada renewed the fl exible infl ation-targeting strategy of the monetary policy framework for a further fi ve-year period, ending December 31, 2026 post at 10:05am: BOC: INFLATION TO AVERAGE 3.7% IN 2023 (VS 3.5% IN APRIL), 2.5% IN 2024 (VS 2.3%), 2.1% IN 2025.
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- Posted: Jul 12, 2023 9:47am
- Submitted by:Category: Fundamental AnalysisComments: 0 / Views: 2,874