Market

Asia, Market, World

Rate increases will persist even when the Bank of Japan fires in September.

What’s happened? The Bank of Japan (BOJ, the central bank) decided to keep its policy rate unchanged at 0.25% at its policy board meeting on September 20th, pausing after a 15-basis-point increase in July. On the same day, official data showed that headline consumer price inflation accelerated to a 10-month high of 3% in August, from 2.8% in July, following strong growth in prices for food and utilities. Why does it matter? The BOJ is determined to pursue monetary normalisation by raising interest rates and winding down its asset-purchase programmes. However, the pace of the policy shift and the terminal policy rate will depend on Japan’s economic fundamentals, notably the strength of private demand and inflation expectations. The pause in September was factored into EIU’s foreca...
Asia, China, Market

China boosts its struggling economy with its most aggressive intervention in years.

China’s central bank has cut interest rates in an attempt to revive flagging economic growth and prevent scores of debt-laden property owners from going bust in its boldest intervention to boost the economy since the pandemic. Adopting a suite of measures to reduce borrowing costs, the People’s Bank of China cut interest rates on existing mortgages by 0.5 percentage points and supported new lending by reducing the level of reserves banks must set aside before making loans. The bank’s governor, Pan Gongsheng, said he would also ease restrictions on borrowing to invest in stocks and shares on Chinese exchanges, boosting the Shanghai composite index by more than 4% within hours of the announcement. Oil prices rose, with Brent crude up more than 1% at nearly $75 a barrel. The central...
China, Market

To boost its economy, China unleashes a financial bazooka.

What’s happened? On September 24th a series of policies were announced by China’s three top financial officials at a press conference to backstop the stalling economy. These notably included a 20-basis-point cut to the seven-day reverse repo rate (RRR; the policy interest rate); a 50-basis-point cut to the reserve requirement ratio (RRR); a rate cut on existing mortgages; capital replenishment of large state-owned banks; and other measures to support the housing and the stock markets. Why does it matter? The rare, simultaneous rollout of so many measures highlights the urgency for policymakers to prop up the economy. We believe that real GDP growth this year will miss the government’s annual target, and may even undershoot our own conservative growth forecast of 4.7%. The cuts to...
US Economic Projection
Market, USA

US Economic Projection

The Q3 2024 forecast indicates how robust consumer spending, high business investment, and lower interest rates have kept optimism about the US economy intact. However, risks like geopolitical tensions and persistently high inflation remain. Despite persistent concerns surrounding the durability of growth and interest rate policy, the US economy remains fundamentally strong. While real gross domestic product growth slowed in the first quarter of this year, growth rebounded to a strong 3.0% in the second quarter. All available evidence suggests policymakers may have managed to bring inflation under control without causing a recession. Deloitte’s baseline scenario remains relatively positive. The boom in factory construction will continue to boost the economy’s potential in the coming...
China, Market

Et tu, Milei? Is Argentina Regaining Contact with China?

When Mauricio Macri was elected president of Argentina in 2015 as leader of the center-right coalition Cambiemos, he adopted a confrontational stance on China, distancing himself from the approach of his predecessor, Cristina Kirchner. He instead privileged relations with the United States and other Western powers to “reinsert Argentina into the world.” It did not last. By the end of his first year in office, Macri had signed a series of economic agreements with Beijing. By the end of his administration in 2019, China had consolidated its role as a strategic partner. Similarly, Javier Milei came to the Casa Rosada skeptical about Argentina’s friendship with China. In his case, however, the libertarian leader also brought an ultra-ideological and personalistic approach to foreign policy...
Asia, Market, World

The geopolitics of the green transformation in Southeast Asia

As their green-transition efforts are increasingly caught up in the US–China rivalry, Southeast Asian states must find a way to convert potential short-term economic gains into long-lasting ones. With policymakers focused on global geopolitical flashpoints from the South China Sea to Myanmar and the Middle East, Southeast Asia’s growing emphasis on its green transition has generally been an under-appreciated agenda item. Following the latest Association of Southeast Asian Nations (ASEAN) Foreign Ministers’ Meeting in Vientiane in July 2024, however, the meeting’s 36-page Joint Communique highlighted the importance of ‘green growth’ in advancing sustainable development. Indeed, nine out of ten ASEAN members have pledged to achieve carbon neutrality or net-zero emissions by mid...
The Interpreter: Describe “economic statecraft.”
Asia, Market, World

The Interpreter: Describe “economic statecraft.”

What is “economic statecraft”? Economic statecraft refers to a state’s use of economic policy instruments to achieve foreign policy objectives. Australia uses various tools of economic statecraft – including development assistance, loans, work visas, investment incentives and travel restrictions – as foreign policy levers to achieve its aims. Another term that is frequently used interchangeably with economic statecraft is geoeconomics. Geoeconomics focuses on the broad strategic interplay between economics and geopolitics, encompassing a wide range of economic policies and global power dynamics. What does economic statecraft include? A useful way to think about economic statecraft is in terms of carrots and sticks or, more formally, incentives or inducem...
An economist claims that China’s economy is undergoing a “slow, painful, grinding adjustment.”
Asia, China, Market

An economist claims that China’s economy is undergoing a “slow, painful, grinding adjustment.”

SINGAPORE — Following a slew of data released over the weekend from China that painted a fairly bleak outlook for its economy, analysts have tapered their expectations for the country’s full year GDP growth. “There hasn’t been much good news in this latest round of data, and this has been the pattern for the last few months,” said Eswar Prasad, professor of international trade and economics at Cornell University, on CNBC’s “Street Signs Asia” on Monday. “Both the long term issues related to property prices and so on, and the short term issues related to domestic demand in particular, especially private investment and household consumption have not been doing well at all,” Prasad said. He warned that Beijing’s economic outlook for the second half of the year is now “flas...
Asia, Market

Financial Conditions in Emerging East Asia Improve with Moderate Inflation

MANILA, PHILIPPINES (16 September 2024) — Emerging East Asia’s financial conditions have improved, leading to declining bond yields amid moderating inflation and expected interest rate cuts, according to a new report by the Asian Development Bank (ADB). Emerging East Asia’s financial markets rebounded starting in July, when the United States (US) Federal Reserve hinted at a policy rate cut in September, according to the latest edition of Asia Bond Monitor, released today. Emerging East Asia’s currencies appreciated against the US dollar, and risk premiums narrowed. Meanwhile, regional equity markets gained except for in the People’s Republic of China (PRC) and Hong Kong, China, where weak economic performance weighed on equity performance. Emerging East Asia’s equity market record...
China, Market

In September, China’s consumer prices increased more slowly.

C hina's consumer inflation rate slowed in September, official data showed Sunday, in a sign that demand remains fragile in the world's number two economy. The slowdown comes as authorities have been seeking to boost domestic activity and shore up China's ailing property sector, with officials on Saturday announcing plans for a significant fiscal stimulus package. The consumer price index (CPI), a key measure of inflation, rose 0.4 percent year-on-year in September, down from the 0.6 percent recorded in August, the National Bureau of Statistics (NBS) said. The figure came in below the 0.6 percent forecast in a Bloomberg survey of economists. August's figure, the highest level since February, had raised hopes that consumer confidence may be picking up. While many major Western economies ha...