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from MacroScope:
The chairman’s challenge: Bernanke says ‘taper,’ markets hear ‘tighten’
For a central bank that likes to tout the importance of clear communication, the Federal Reserve sure knows how to be obtuse when it wants to. Take Bernanke’s testimony before the Joint Economic Committee of Congress last month. His prepared remarks were reliably dovish, emphasizing weakness in the labor market and offering no hint of an imminent end to the current stimulus program, which involves the monthly purchase of $85 billion in assets.
It was during the question and answer session that the real fireworks came. Asked about the prospect for curtailing such bond buys, Bernanke said:
If we see continued improvement and we have confidence that that's going to be sustained then we could in the next few meetings ... take a step down in our pace of purchases. If we do that it would not mean that we are automatically aiming towards a complete wind down. Rather we would be looking beyond that to see how the economy evolves and we could either raise or lower our pace of purchases going forward.
Those three little words, “next few meetings,” proved rather costly to global financial markets – about a trillion bucks a word in stock value losses.
from Expert Zone:
India Markets Weekahead – Volatility seen as RBI policy review in focus
(Any opinions expressed here are those of the author and not of Thomson Reuters)
Volatility is here to stay and trying to predict the markets on a daily basis is a futile exercise. It’s no better than tossing a coin.
Monsoon rains are early and heavier then normal, raising the hopes of green shoots in the next few months. Macro numbers were showing signs of bottoming out but the rupee slide has thrown calculations awry. A feeble request by the finance minister urging people to shun gold won’t do much good in a country enamoured by gold.
from MacroScope:
To ‘taper’ or not to ‘taper’? Fading the Fed semantics debate
Is Federal Reserve Chairman Ben Bernanke avoiding the word “taper” in order to temper expectations that the U.S. central bank will ratchet down its massive bond buying program? This is one view that’s been widely bandied about in recent days.
But then why is it that the Fed officials who are most eager to "taper" have pretty much stopped using the word, too?
from Expert Zone:
Why the RBI should cut rates again
(Any opinions expressed here are those of the author and not of Thomson Reuters)
In May, the Reserve Bank of India (RBI) had hesitatingly cut the repo rate by 0.25 percent, which made no impression on the stock market or commercial banks. That was because both expected the cut to be more substantial. But the RBI had not obliged.
Perhaps the monsoon, which arrived on the dot and is progressing satisfactorily, may make some difference to the RBI’s expectations of food inflation - which had been its principal reason for hesitancy. While it’s too early to predict monsoon behaviour for the rest of the season and the likely improvement in agricultural production, it does appear the improvement should be significant and inflation dampened perceptibly. Reduction in inflation, however, is not the only reason why the interest rate should have been cut.
from MacroScope:
Inflation, not jobs, may hold key to Fed exit
It’s that time of the month again: Wall Street is anxiously awaiting the monthly employment figures – less because of its interest in job creation and more because of what the numbers will mean for the Federal Reserve’s unconventional stimulus policies.
As one money manager put it all too candidly: “Bad news is good news in this market lately because it keeps the Fed buying bonds and interest rates low.”
from Global Investing:
South Africa’s perfect storm
Of all the emerging currency and bond markets that are feeling the heat from the dollar's rise, none is suffering more than South Africa. A series of horrific economic data prints at home, the prospect of more labour unrest and the slump in metals prices are making this a perfect storm for the country's financial markets.
Some worrying data from the Johannesburg Stock Exchange this morning shows that foreigners sold almost 5 billion rand (more than $500 million) worth of bonds during yesterday's session alone. Over the past 10 days, non-resident selling amounted to 10.7 billion rand. They have also yanked out 1.2 billion rand from South African equities in this time. And at the root of this exodus lies the rand, which has fallen almost 15 percent against the dollar this year. Now apparently headed for the 10-per-dollar mark, the rand's weakness has eaten into investors' total return, tipping it into negative return for the year.
from India Insight:
India GDP: What the economists are predicting
Investors and policymakers will be closely watching India’s fourth-quarter and full fiscal year 2012/13 gross domestic product (GDP) growth figures on Friday.
The economy grew 4.5 percent in the December quarter, but a Reuters poll has shown that Asia’s third-largest economy will likely perform a little better and expand by 4.8 percent in the quarter that ended in March.
from MacroScope:
The rationale for a December Fed taper
Vincent Reinhart, a former top Federal Reserve researcher who is now chief U.S. economist at Morgan Stanley, believes the U.S. central bank will begin pulling back on the pace of asset purchases in December. Here’s how he arrives at that timeline:
We believe the Fed is going to need to see four employment reports averaging net gains in nonfarm payrolls of at least 200,000 to justify reducing the pace of its asset purchases. The arithmetic of the calendar would then put the earliest date of tapering/tightening in September, which conveniently for the Fed is a meeting followed by a press conference.
from Anatole Kaletsky:
The many interpretations of Ben Bernanke
Federal Reserve Board Chairman Ben Bernanke testifies before Congress in Washington, May 22, 2013. REUTERS/Gary Camero
On Wednesday in Washington, Federal Reserve Chairman Ben Bernanke presented congressional testimony that repeated, virtually word for word, statements about U.S. monetary policy he has been making since last September.
from Global Investing:
Paid for the risk? Egypt’s tempting pound
Surprising as it may seem, the Egyptian pound has got some fans. The currency has languished for months at record lows against the dollar and the headlines are alarming -- the lack of an IMF aid programme, meagre hard currency reserves, political upheaval. So what's to like ?
Analysts at Societe Generale say that just looking at the spot exchange rate of the pound is missing the bigger picture. Instead, they advise buying 12-month non-deliverable forwards on the pound -- essentially a way of locking into a fixed rate for pound against the dollar in a year's time depending on where you think it may actually trade. They write:
