Archive for Economics & Fundamentals

Chile maintains rate, but may ease again if trends persist


Chile’s central bank left its monetary policy rate steady at 2.50 percent but said it may be necessary to “extend the current monetary stimulus” if the current trend of low inflation continues, with the magnitude of any easing to be assessed in the next quarterly monetary policy report.
The Central Bank of Chile, which surprised economists by cutting its rate by 50 basis points in June, said information since its last policy report reflected “increased risks associated with the timely convergence of inflation to the target,” in particular inflation for services, and the “risks surrounding the future evolution of activity and demand, in a context of high external uncertainty.”
At today’s board meeting a majority of its members voted to maintain the rate but board member Pablo Garcia voted to lower the rate by 25 basis points.
The central bank publishes a monetary policy report every quarter and in the June report the forecasts for economic growth, investment and domestic demand for this year were lowered.
Economic growth this year was seen between 2.75 percent and 3.5 percent, down from a range of 3.0 percent to 4.0 percent in the March report, and 2018’s 4.0 percent.
In the first quarter of this year Chile’s gross domestic product stagnated from the previous quarter and on an annual basis GDP growth eased to 1.6 percent from 3.6 percent in the fourth quarter of last year.
Data for the second quarter point to “less than expected dynamism,” the central bank said, due to a poor performance by the mining sector and additional downside risks may be expected in coming months.
Exports had also contracted more than expected due to weakness in its trading partners, with growth expectations in the EES survey being lowered for this year and next year.
Chile’s inflation rate was steady at 2.3 percent in June and May, below the bank’s 3.0 percent target, and inflation expectations for the end of this year and in 12 months have declined.
Chile’s peso has risen slightly this year and was trading at 683 to the U.S. dollar today, up 1.6 percent since the start of the year.

The Central Bank of Chile released the following statement:

“In its Monetary Policy Meeting, the Board of the Central Bank of Chile decided to hold the monetary policy interest rate at 2.5%. The decision was adopted by the majority of its members, with the votes of Governor Mario Marcel, Vice-Governor Joaquín Vial, and Board members Rosanna Costa and Alberto Naudon. Board member Pablo García voted for lowering the policy rate by 25 basis points, to 2.25%.

On the external front, the expectations of a more expansionary monetary policy stance have been consolidating in various economies, both developed and emerging, some of which have already taken action in that direction. This has occurred in a context in which inflation remains well contained in the developed world and there is ongoing general concern over the performance of the global economy. Incoming data from manufacturing, investment and foreign trade have brought a negative surprise in several economies, contrasting with information about employment, consumption and services, which shows no major changes in the main economies. In this scenario, long- term interest rates posted new declines, the stock markets increased and risk premiums tightened, while capital flows into emerging economies increased at the margin and the dollar tended to weaken against other currencies. Commodities have seen limited price increases since the last Meeting, copper and oil included.

The evolution of the domestic financial market has been dominated by more expansionary monetary policy in Chile and by external developments. Peso- denominated long-term interest rates have dropped, stock returns have risen and risk indicators have declined. The exchange rate, with some volatility, is lower than it was at the last Meeting. In the credit market, housing loans dynamism is similar to the one of the past few months, while commercial and consumer loans have slowed down slightly. Meanwhile, interest rates on commercial and mortgage loans have diminished further, so they continue around record lows. The Bank Lending Survey of the second quarter reflects fairly stable supply conditions, while demand appears to be somewhat weaker in large companies and with moderate upswings in the segments of construction firms and housing financing.

Regarding activity and demand, the information at hand for the second quarter points to somewhat less than expected dynamism, partly due to poor performance of mining and some specific factors. Some qualitative background indicators suggest that additional downside risks may be expected for the coming months. About consumption, imports of consumer goods have slowed down and consumers’expectations have deteriorated significantly (IPEC). The labor market shows no significant changes, the unemployment rate remains around 7% and various indicators point to increasing job creation. On the investment side, the favorable evolution of some elements related to business services contrasts with the moderation of sales of construction materials and business expectations (IMCE), which are still slightly below their neutral levels. On the other hand, exports contracted beyond expectations, partly reflecting the weakness of some trading partners. In this context, the growth expectations contained in the Economic Expectations Survey (EES) decreased for both this year and next.

The annual CPI variation remained at 2.3% in June, while core inflation (CPIEFE) continued to hover around 2% annually. Among core inflation components, it is worth noting the widespread drop in the prices of services, more closely linked to capacity gaps and labor costs. On the contrary, the goods component of the CPIEFE posted unexpected growth, although largely driven by tourist packages. As for inflation expectations, there is a decrease for both the end of 2019 and one year ahead. For two years ahead, while the EES median remained at 3%, the median of the Financial Brokers Survey dropped to 2.8%.

The Board considers that information accumulated since the publication of the last Monetary Policy Report reflects increased risks associated with the timely convergence of inflation to the target over the policy horizon. In particular, due to lower services inflation figures, whose persistence is high relative to other CPI components and the risks surrounding the future evolution of activity and demand, in a context of high external uncertainty. In case these tendencies persist, the Board estimates that it will be necessary to extend the current monetary stimulus, in a magnitude to be assessed in the next Monetary Policy Report. Accordingly, it reiterates its will to conduct monetary policy with flexibility, so that projected inflation stands at 3% in the two- year horizon.

The minutes of this Monetary Policy Meeting will be published at 8:30 hours Friday 2 August 2019. The next Monetary Policy Meeting will take place on 3 September and the statement thereof will be published at 18 hours the same day.”


South Africa cuts rate 25 bps, data determines next move

South Africa’s central bank lowered its benchmark repurchase rate by 25 basis points to 6.50 percent amid an economic slowdown and said future policy decision will continue to be highly dependent and sensitive to the risks to the outlook and seek to anchor inflation expectations near the midpoint of its target “in this persistently uncertain environment.”
It is the first rate cut by the South African Reserve Bank (SARB) since March 2018 and follows a rate hike in November 2018.
While SARB Governor Lesetja Kganyago said the risks to growth and inflation were balanced in the near term, he is clearly concerned about the possible negative impact of any escalation of trade tensions and the absence of structural reforms – that are beyond the scope of monetary policy – that are limiting investment prospects.
The rate cut was widely expected by investors and economists after the economy shrank by 3.2 percent quarter-on-quarter in the first quarter, inflation is steady and inflation expectations have declined, and the exchange rate of the rand has risen.
SARB’s quarterly projection model shows one cut to the repo rate by the end of the fourth quarter.
South Africa’s inflation rate has remained around the midpoint of its target range of 3.0 to 6.0 percent with the latest forecast lowered slightly to an average 4.4 percent for this year, down from 4.5 percent seen in April.
For 2020 and 2021 the inflation forecast is unchanged at 5.1 percent and 4.6 percent, respectively, with inflation seen peaking at 5.4 percent in the first quarter of 2020.
In May South Africa’s headline inflation rate rose to 4.5 percent from 4.4 percent in April.
“The MPC welcomes the continued downward trend in recent inflation outcomes and the moderation in inflation expectations of about one percentage point since 2016,” said Kganyago, who this month was appointed for a second 5-year term after a bruising row within the governing African National Congress party (ANC) over SARB’s mandate and role in the economy.
After shrinking in the first quarter, mainly due to electricity shortages and labour strikes, SARB expects a rebound in the second quarter though low business confidence remains a concern.
SARB lowered its outlook for growth this year to an average 0.6 percent from May’s forecast of 1.0 percent, with the outlook for 2020 and 2021 unchanged at 1.8 percent and 2.0 percent, respectively.
Since the monetary policy committee’s last meeting in May, South Africa’s rand has risen 3.3 percent against the U.S. dollar but on improved sentiment towards riskier assets, SARB still considers it slightly undervalued, with domestic growth and fiscal risks high on investors’ list of concerns.
The rand rose in response to SARB’s rate cut to trade at 13.89 to the U.S. dollar, up 3.9 percent this year.

The South African Reserve Bank issued the following statement from its monetary policy committee and its governor, Lesetja Kganyago:

Since the May meeting of the Monetary Policy Committee (MPC), near-term indicators point to weaker-than-anticipated global economic activity. Global financial conditions have eased, as central banks in advanced economies signaled a move towards monetary accommodation. However, downside risks remain and are dominated by escalating trade and geo-political tensions.

In the domestic economy, GDP contracted in the first quarter due to a combination of supply-side and demand-side factors. Monthly inflation outcomes have stayed around the mid-point of the inflation target range, as food and services price inflation remain subdued. The medium-term inflation outlook is unchanged.

The year-on-year inflation rate, as measured by the consumer price index (CPI) for all urban areas, was 4.5% in May (up from 4.4% in April). Goods price inflation was 4.2%, while services price inflation was 4.6%. The Bank’s measure of core inflation, which excludes food, fuel and electricity, was 4.1%. Producer price inflation for final manufactured goods decreased to 6.4% (compared to 6.5% in April).

The inflation forecast generated by the SARB’s Quarterly Projection Model (QPM) is for headline inflation to average 4.4% in 2019 (down from 4.5%). The projections for 2020 and 2021 remain unchanged at 5.1% and 4.6%, respectively. Headline CPI inflation is expected to peak at 5.4% in the first quarter of 2020 and settle at 4.5% in the last two quarters of 2021. The forecast for core inflation is lower at 4.4% in 2019 (down from 4.5%), 4.7% in 2020 (down from 4.8%) and is unchanged at 4.5% in 2021.

Electricity, food and fuel price inflation have shaped the trend in headline inflation. The assumptions for Brent crude oil in the QPM have been revised down from US$69.50 to US$67 for 2019. The assumptions for 2020 and 2021 are unchanged at US$68. Fuel price inflation is expected to average 3.2% in 2019 and to peak at 13.1% in the first quarter of 2020. Although food price inflation has continued to surprise on the downside, it is expected to start rising from the end of 2019 and to peak at 5.6% in the second and third quarters of 2020.

Inflation expectations have continued to moderate. According to the Bureau for Economic Research (BER) second quarter survey, expectations are for headline inflation of 4.8% in 2019. Inflation expectations for 2020 and 2021 eased to 5.0% and 5.2%, respectively. Five-year-ahead inflation expectations remain unchanged at a historic low of 5.1%.

The inflation expectations of market analysts in the July 2019 Reuters Econometer survey have been revised lower to 4.5% (from 4.7%) in 2019 and 5.0% (from 5.2%) in 2020 and remain unchanged at 5.0% in 2021.

Market-based expectations implicit in the break-even inflation rates (i.e. the yield differential between conventional and inflation-linked government bonds) have declined significantly since our last meeting, reflecting a firmer exchange rate and subdued domestic and global inflation pressures. Five-year break-even rates decreased to 4.5% and ten-year break-even rates decreased to 5.3%, the lowest level since January 2015.

Global GDP is expected to average 3.3% in 2019 and stabilise around 3.5% from 2020. While global growth remains relatively healthy overall, recent indicators on trade and manufacturing have deteriorated sharply and a range of downside risks to growth remain. Growth in world trade volumes contracted for the fifth consecutive month, declining by 2.1% in April 2019. Trade tensions remain heightened, weighing on market confidence and lowering investment. Other downside risks include geo-political developments and high levels of corporate and sovereign debt. Across most countries, there is limited policy space to respond to shocks.

Inflation outcomes and inflation expectations in most advanced economies remain below targeted levels. Recent communication by the Federal Reserve Bank and the European Central Bank indicate that in the absence of significant shocks, monetary policy will remain accommodative over the medium term. However, market expectations of the extent of future central bank actions appear high, creating the risk of significant market volatility should these not materialise.

Emerging market currencies are firmer, reflecting a combination of US dollar weakness and shifting market sentiment. However, country specific factors remain important, with currencies of countries with stronger macroeconomic fundamentals having fared better.

Since the May MPC, the rand has appreciated by 3.3% against the US dollar, by 2.4% against the euro, and by 2.3% on a trade-weighted basis. The implied starting point for the rand is R14.30 against the US dollar, compared with R14.40 at the time of the previous meeting. At these levels, the QPM assesses the rand to remain slightly undervalued. While the rand has benefited from improved sentiment towards riskier assets, it underperformed its emerging market peers due to idiosyncratic factors. Domestic growth prospects and fiscal risks rate high among investor concerns.

GDP contracted by 3.2% in the first quarter, reflecting weakness in most sectors of the economy. The sharp quarterly decline was primarily caused by electricity shortages and strikes that fed into broader weakness in investment, household consumption and employment growth. Based on recent short term indicators for the mining and manufacturing sectors, a rebound in GDP is expected in the second quarter of 2019.

Continued low business confidence remains a concern for the MPC. The Absa Purchasing Managers’ Index averaged 46.3 points in the second quarter, remaining below the neutral level. The RMB/BER Business Confidence Index remains unchanged at 28 points. The SARB’s composite leading business cycle indicator continued to trend lower.

The SARB now expects GDP growth for 2019 to average 0.6% (down from 1.0% in May). The forecast for 2020 and 2021 is unchanged at 1.8% and 2.0% respectively.

The MPC assesses the risks to the growth forecast to be balanced in the near term but remains concerned about longer term risks. Investment prospects will continue to be limited in the absence of structural reforms. The escalation of trade tensions could have further negative impacts.

While some cyclical factors constrained recent GDP growth outcomes, the Committee remains of the view that current challenges facing the economy are primarily structural in nature and cannot be resolved by monetary policy alone. Implementation of prudent macroeconomic policies together with structural reforms that raise potential growth and lower the cost structure of the economy remains urgent.

The MPC welcomes the continued downward trend in recent inflation outcomes and the moderation in inflation expectations of about one percentage point since 2016. The Committee would like to see inflation remain close to the mid-point of the inflation target range on a more sustained basis, with inflation expectations also anchored around these levels.

The overall risks to the inflation outlook are assessed to be largely balanced. Demand side pressures are subdued, wages and rental prices are expected to increase at moderate rates and global inflation should remain low. In the absence of shocks, relative exchange rate stability is expected to continue.

However, the impact of upside risks to the inflation outlook could be significant. Global financial conditions can abruptly tighten due to small shifts in inflation outlooks in advanced economies and changing market sentiment. Domestically, the financing needs of State-Owned Enterprises (SOE) could place further upward pressure on the currency and long-term market interest rates for all borrowers. Food, electricity and water prices also remain important risks to the inflation outlook.

Against this backdrop, the MPC unanimously decided to reduce the repurchase rate by 25 basis points to 6.5% per annum with effect from 19 July 2019.

Monetary policy actions will continue to focus on anchoring inflation expectations near the mid-point of the inflation target range in the interest of balanced and sustainable growth. In this persistently uncertain environment, future policy decisions will continue to be highly data dependent, sensitive to the assessment of the balance of risks to the outlook, and will seek to look-through temporary price shocks.

The implied path of policy rates generated by the Quarterly Projection Model was for one cut of 25 basis points to the repo rate by the end of fourth quarter of 2019. The endogenous interest rate path is built into the growth and inflation forecast. The implied path remains a broad policy guide which could change in either direction from meeting to meeting in response to new developments and changing risks.”


Ukraine cuts rate 50 bps as it returns to easing path


Ukraine’s central bank lowered its key policy rate by 50 basis points to 17.0 percent as it continues its cycle of easier monetary policy toward a rate of 8.0 percent as inflation gradually declines amid prudent fiscal policy, slower wage growth, relatively low energy prices and an ample supply of both domestic and foreign food products.
In April the National Bank of Ukraine (NBU) took the first step onto a monetary easing path by cutting the rate 50 basis points after raising it six times by a total of 550 points between October 2017 and September 2018 to curb inflation from strong wage growth and consumer demand.
But in June NBU paused after inflation topped its forecast two months in a row on a temporary spike in food prices. However, the central bank was still hoping to return to the easing cycle as underlying risk to inflation were falling.
Although inflation dropped to 9.0 percent in June from 9.6 percent in May, consumer demand, production costs and higher administered prices are keeping it high and the central bank said this could slow the process of lowering the key rate to 8.0 percent.
However, NBU still expects inflation to decline toward 6.3 percent by the end of 2019 and then return to its target range in early 2020, hitting the 5.0 percent target by end-2020.
“The NBU’s baseline scenario envisages the key policy rate to decrease further, to 8% over the coming years, provide that inflation steadily declines to the 5% target,” NBU said, adding higher demand for domestic bonds and thus a higher exchange rate of the hryvnia would allow it to lower the policy rate faster than forecast.
The central bank’s rate hikes last year helped boost the hryvnia and lower inflation expectations and continued tight monetary policy will remain the main driver in lowering inflation as it limits pressure from consumer demand.
Since early September 2018 the hryvnia has strengthened and today it was trading at 25.96 to the U.S. dollar, up 6 percent this year and up 9.4 percent since Sep. 4 last year when the trend changed.
On the back of strong consumer demand, expectations of a good grain harvest, NBU raised its forecast for economic growth this year to 3.0 percent from April’s forecast of 2.5 percent and the 2020 forecast to 3.2 percent from 2.9 percent.
However, weak global activity and a decrease in gas transit to European countries from 2020 will still dampen economic growth and widen the current account deficit, NBU added.
Ukraine’s gross domestic product grew 2.5 percent in the first quarter of this year, down from 3.5 percent in the previous quarter.

     The National Bank of Ukraine issued the following release:


“The Board of the National Bank of Ukraine has decided to cut the key policy rate to 17.0% per annum effective 19 July 2019. The NBU continues the cycle of monetary policy easing as inflation is declining towards the target of 5%.
After temporary factors caused a deviation from the target in previous months, annual consumer price inflation came in at 9.0% in June 2019, approaching the trajectory of the April forecast.
Core inflation slowed to 7.4% in Q2, which was close to the NBU’s forecast.
The tight monetary policy remained a strong factor that held back underlying pressures on prices, in particular through strengthening of the exchange rate against currencies of trading partners and lower inflation expectations of households, businesses, banks, and financial analysts. At the same time, inflation remained relatively high due to the pressure from consumer demand, production costs, and rapid growth in administered prices.
Inflation will continue to decline gradually.
The NBU reiterates its forecast that inflation will decline to 6.3% as of the end of 2019, return to the target range in early 2020, and reach the medium-term target of 5% at the end of 2020.
The tight monetary conditions will continue to be the disinflation driver. Whereas the key policy rate is reduced gradually, its real value will remain high on the back of improved inflation expectations. High real interest rates will make hryvnia financial instruments more attractive for investors, which will support the exchange rate of the hryvnia. Moreover, such monetary policy stance will limit the pressure from consumer demand.
Other factors behind the gradual disinflation will include:
      a prudent fiscal policy
      the slowdown in wage growth
      relatively low energy prices in the global markets
      ample supply of domestic and foreign food products.
In 2019–2021, the economy of Ukraine will grow steadily, at 3%–4%.
The NBU has revised its economic growth forecast compared to the April macroeconomic forecast to 3% in 2019 (from 2.5%) and 3.2% in 2020 (from 2.9%) amid stronger domestic demand, more favorable terms of trade, and expectations of a larger harvest of grain crops.
Domestic demand will remain the main driver of economic growth over the coming years. Private consumption growth will decelerate, albeit remaining high owing to an increase in real household income – wages, pensions, and remittances from abroad. Capital investment will continue to grow rapidly, which will also provide significant support to the economy.
Economic growth will be dampened by a weak global economic activity and decrease in gas transit to European countries starting in 2020, due to the construction of bypassing gas pipelines.
The 2019–2021 current account deficit will stay within the bounds of reason.
In 2019, the current account deficit will narrow to 2.6% of GDP, thanks to the bumper grain harvest, a drop in energy prices, and a decline in dividend repatriation. In 2020-2021, the current account deficit will widen slightly, as a result of a decrease in natural gas transit, less favorable terms of trade, and stronger consumer and investment demand.
Further cooperation with the International Monetary Fund remains the basic assumption of the macroeconomic forecast.
This will allow Ukraine to attract other official financing, improve the conditions of access to the international capital markets, and support the interest of investors in Ukrainian assets. These borrowings will make it possible for the government to finance large payments on the external public debt. In addition, the private sector will get an opportunity to attract foreign investment.
As a result, international reserves will reach USD 23 billion in 2021.
The main internal risk to the above scenario is the further strengthening of threats to macrofinancial stability.
A delay in implementing key reforms or steps offsetting previous achievements (in particular, court rulings or legislative decisions) might increase the vulnerability of Ukraine’s economy and become an obstacle to further cooperation with the IMF. That could affect exchange rate and inflation expectations as well as the access to international capital markets as Ukraine will face a heavy debt load in the coming years.
The following risks also remain important:
      a suspension of Russian gas transit through Ukraine starting in 2020
      an escalation of trade wars and rising geopolitical tensions
      an escalation of the military conflict, and the imposition of new trade restrictions by Russia.
Considering the revised macroeconomic forecast and the balance of risks, the NBU Board has decided to lower its key policy rate to 17.0%.
The NBU has also approved the decision to start publishing the interest rate forecast when making quarterly reviews of the macroeconomic forecast beginning today.
Publishing the interest rate forecast marks an evolutionary improvement in transparency of monetary policy at central banks that apply inflation targeting. This makes the monetary policy more clear and predictable for market players, thus boosting its effectiveness.
It should be noted that the forecast imposes no obligations on the NBU, and thus the actual key policy rate may differ from the forecast ifmacroeconomic conditions change.
The NBU’s baseline scenario envisages the key policy rate to decrease further, to 8% over the coming years, provided thatinflation steadily declines to the 5% target.
The largest decrease is expected over 2020, along with inflation returning to the target range and inflation expectations improving.
If existing inflation risks, both internal and external, materialize, the key policy rate could decline to 8% more slowly. At the same time, higher demand for hryvnia domestic government bonds from nonresidents and the subsequent strengthening of the exchange rate will allow reducing the key policy rate at a faster pace than envisaged in the baseline scenario.
The decision to cut the key policy rate to 17.0% has been approved by NBU Board Decision No.493-D On the Key Policy Rate dated 18 July 2019.
A new detailed macroeconomic forecast will be published in the Inflation Report on 25 July 2019.
A summary of the discussion by Monetary Policy Committee members that preceded this decision will be published on 29 July 2019.
The next meeting of the NBU Board on monetary policy issues will be held on 5 September 2019 as scheduled.”


Indonesia cuts rate 25 bps, sees space for further cuts


Indonesia’s central bank lowered its interest rates 25 basis points to encourage bank lending and boost the economy and signaled it is ready to lower rates further as there is “adequate space for accommodative monetary policy in line with low inflation expectations and the need to further stimulate economic growth.”
Bank Indonesia’s (BI) cut its key BI 7-day reverse repo rate to 5.75 percent, its deposit rate to 5.0 percent and its lending facility rate to 6.50 percent, as widely expected.
“This policy is consistent with low inflation expectations and the need to build economic growth momentum amidst a backdrop of easing global financial market uncertainty and controlled external stability,” BI said.
BI raised its rates six times last year by a total of 1.75 percentage points during the U.S. Federal Reserve’s four rate hikes to bolster the exchange rate of the rupiah against a rising U.S. dollar.
But the Fed’s shift toward easier policy this year has stimulated investors’ interest in emerging market assets and boosted the rupiah, giving BI space to lower its own rates without fear of capital outflows and financial instability.
Today’s rate cut follows BI’s 50 basis points cut to its rupiah reserve requirements in June.
“Ongoing trade tensions continue to pressure world trade volume and undermine global economic growth,” BI said, adding slower global growth has amplified downside pressure on commodity prices, including oil, with easier monetary policy by central banks lowering financial market uncertainty and driving capital flows to developing economies.
The rupiah has been one of the main beneficiaries of this shift in capital and has been rising against the U.S. dollar since November last year.
Today the rupiah rose further to 13,960 to the dollar, up 4.3 percent this year and up 9 percent since Oct 31, 2018, boosted by an upgrade of its sovereign rating.
BI said it expects the inflow of foreign capital to further strengthen the rupiah.
Indonesia’s economy slowed in the first quarter as exports declined and BI said further stimulation of domestic demand, including investments, was “required in order to mitigate the adverse impact of global economic moderation.”
Indonesia’s gross domestic product grew 5.07 percent in the first quarter of this year, down from 5.18 percent in the fourth quarter of last year, but BI confirmed it still expects growth this year below the midpoint of 5.0-5.4 percent.
In addition to the rate cut, BI said it would institute a policy mix in cooperation with the government and other authorities to boost exports and tourism and attract foreign direct investment.
Indonesia’s current account deficit, one of the reasons behind last year’s rate hikes, is expected widen in the short run as exports decline but further ahead it is expected to narrow this year to 2.5-3.0 percent of GDP from almost 3.0 percent in 2018 as foreign capital is attracted.
Indonesia’s inflation rate eased slightly to 3.28 percent in June from 3.32 percent in May and BI reiterated it still expects inflation this year to be below the midpoint of its target corridor of 3.5 percent, plus/minus 1 percentage points.

Bank of Indonesia issued the following statement:

“The BI Board of Governors agreed on 17th and 18th July 2019 to lower the BI 7-day Reverse Repo Rate by 25 bps to 5,75%, Deposit Facility (DF) rates lowered 25 bps to 5,00% and Lending Facility (LF) rates lowered 25 bps to 6,50%. The policy is consistent with low inflation expectations and the need to build economic growth momentum amidst a backdrop of easing global financial market uncertainty and controlled external stability. The monetary operations strategy remains oriented towards ensuring adequate liquidity in the money market and strengthening the transmission of accommodative monetary policy. Bank Indonesia is maintaining an accommodative macroprudential policy stance to encourage bank lending and expand economic financing. In addition, Bank Indonesia constantly strengthens payment system policy and financial market deepening to support economic growth. Moving forward, Bank Indonesia perceives adequate space for accommodative monetary policy in line with low inflation expectations and the need to further stimulate economic growth. Moreover, Bank Indonesia will continue to strengthen coordination with the Government and other relevant authorities in order to maintain economic stability and catalyse domestic demand, while boosting exports and tourism as well as attracting foreign capital inflows, including Foreign Direct Investment (FDI).
Ongoing trade tensions continue to pressure world trade volume and undermine global economic growth.Flatter growth is predicted in the United States as exports decline due to simmering trade tensions, the fading effect of fiscal stimuli and restrained economic confidence. Growth has also slowed in Europe as a result of sluggish exports coupled with the ongoing structural issue of an aging population, which is undermining domestic demand. Declining exports and weaker domestic demand are also plaguing the economies of China and India. Global economic moderation, in turn, has amplified downside pressures on commodity prices, including oil. Several central banks in advanced and developing economies have responded to the inauspicious economic dynamics by relaxing monetary policy, including the US Federal Reserve, which is expected to lower the federal funds rate (FFR). The prevailing policy response has reduced global financial market uncertainty and driven foreign capital inflows to developing economies.
At home, Indonesia has maintained relatively stable economic growth in the second quarter of 2019 compared with conditions in the previous period. Private consumption remains solid, backed by maintained consumer confidence. Furthermore, building investment continues to expand at a stable pace. Meanwhile, exports from Indonesia are expected to contract on subdued global demand and lower commodity prices stemming from the ongoing trade dispute, although steel exports increased in June 2019. The impact of simmering trade tensions on lower exports has been felt in a number of countries. In Indonesia, the export contraction has impeded imports and undermined nonbuilding investment. Moving forward, efforts to stimulate domestic demand, including investment, are required in order to mitigate the adverse impact of global economic moderation. In general, Bank Indonesia projects national economic growth in Indonesia below the midpoint of the 5.0-5.4% range in 2019. In addition, Bank Indonesia will institute a policy mix in cooperation with the Government and other relevant authorities in order to build economic growth momentum.
Indonesia is expected to maintain Balance of Payment (BOP) performance in the second quarter of 2019, thus reinforcing external stability. BOP performance is supported by a larger capital and financial account surplus than previously projected. Foreign capital inflows in the form of foreign direct investment and portfolio investment are expected to record a significant surplus, drawn to Indonesia by a sound domestic economic outlook and attractive domestic financial investment assets. Foreign capital inflows in the form of portfolio investment as of June 2019 were recorded at USD9.7 billion. Meanwhile, the current account deficit is projected to widen as exports of goods and services decrease, exacerbated by seasonal trends to repatriate dividends and service interest payments on external debt. Indonesia’s trade balance in June 2019 recorded a USD0.196 billion surplus, down slightly from USD0.22 billion the month earlier. At the end of June 2019, the position of reserve assets was recorded at USD123.8 billion, equivalent to 7.1 months of imports or 6.8 months of imports and servicing government external debt, which is well above the international adequacy standard of three months. Looking ahead, Bank Indonesia projects a narrower current account deficit in 2019 compared with conditions in 2018, namely in the 2.5-3.0% of GDP range. Furthermore, Bank Indonesia will constantly strengthen policy synergy with the government and other relevant authorities in order to bolster external resilience, including efforts to attract FDI.
A stronger rupiah has reinforced external stability. In June 2019, the rupiah appreciated 1.04% (ptp) on the level recorded at the end of May 2019 and by 1.13% compared with the May average in 2019. Rupiah appreciation continued into July 2019, reaching 1.06% (ptp) on 17th July 2019 compared with conditions at the end of June 2019. The stronger rupiah was triggered by attractive returns on portfolio investment in domestic financial assets. In addition, the prevailing perception of Indonesia’s economic outlook is improving, especially after Standard & Poor’s (S&P) upgraded Indonesia’s sovereign rating and uncertainty eased on the global financial markets in line with the expected loosening of global monetary policy. Such developments are expected to maintain the current inflow of foreign capital to Indonesia and further strengthen the rupiah. Moving forward, Bank Indonesia predicts rupiah exchange rate stability in line with market mechanisms. To support exchange rate policy effectiveness and strengthen domestic financing, Bank Indonesia will continue to accelerate financial market deepening efforts, targeting the money market and foreign exchange market in particular.
Low and stable inflation was maintained in June 2019. Consumer Price Index (CPI) inflation stood at 0.55% (mtm) or 3.28% (yoy) in June 2019, down slightly on the previous period at 0.68% (mtm) or 3.32% (yoy). Furthermore, core inflation was also kept under control in line with policy consistency by Bank Indonesia to anchor rational inflation expectations, including maintaining rupiah exchange rates in line with the currency’s fundamental value. Administered prices (AP) recorded deflation in the reporting period as airfares were readjusted after the peak festive period. Inflationary pressures on volatile foods were controlled as the seasonal impact of Ramadan and Eid-ul-Fitr began to fade. Bank Indonesia constantly strengthens policy coordination with the central and local governments to ensure low and stable inflation, including in anticipation of an earlier and protracted dry season forecasted this year. Bank Indonesia projects inflation in 2019 below the midpoint of the target corridor, namely 3.5%±1%.
Financial system stability has been maintained amidst a backdrop of adequate liquidity and lower credit risk. Solid bank resilience was confirmed by a high Capital Adequacy Ratio (CAR) of 22.3% in May 2019, coupled with a low level of non-performing loans (NPL) at 2.6% (gross) or 1.2% (nett). The banking industry has also maintained adequate liquidity, as reflected by a ratio of liquid assets to deposits of 18.5% in May 2019, although it declined from 20.2% in April 2019. The intermediation function remains sound with the banking industry reporting credit growth in May 2019 at 11.1% (yoy), which is stable compared to the month earlier. On the other hand, the banks confirmed a moderate uptick in deposit growth to 6.7% in May 2019 from 6.6% in April 2019. Bank efficiency also improved recently, as indicated by a low BOPO efficiency ratio recorded at a level of 81.71% in May 2019. Meanwhile, the performance of public listed corporations remains healthy, buoyed by maintained repayment capacity. Moving forward, Bank Indonesia will maintain an accommodative macroprudential policy stance in order to foster credit growth in line with the sub-optimal credit cycle. In 2019, Bank Indonesia projects growth of outstanding loans disbursed by the banking industry in the 10-12% (yoy) range, with deposit growth expected in the 8-10% (yoy) range.
The payment systems, both cash and noncash, remain uninterrupted. In terms of cash payments, growth of currency in circulation decelerated to 1.4 % (yoy) in June 2019. The wholesale (RTGS) and retail (Clearing) non-cash payment systems also functioned well in the reporting period. Meanwhile transactions using ATM/debit cards, credit cards and electronic money expanded at 22.6% (yoy) in May 2019, dominated by ATM/debit cards with a 94.4% share and expanding 21.6% (yoy) in the reporting period. Electronic money continues to enjoy significant uptake, with growth reaching 262.6% (yoy). Online transactions via digital banking recorded slightly faster growth at 34.5% (yoy) compared with conditions the month earlier. The proliferation of electronic money and digital banking is in line with the ongoing shift in public preferences towards transacting with financial technology platforms (FinTech), e-commerce and electronic money in the transportation sector. Moving forward, Bank Indonesia will continue to expand the payment systems’ role in supporting economic growth. Furthermore, Bank Indonesia will continue contributing to accelerate economic transformation in Indonesia towards digital finance; to expand the electronification program, especially targeting social aid programs (bansos), integrated transportation modes and local government transactions in an attempt to increase efficiency and economic capacity; and to transform micro, small and medium enterprises (MSME) towards digital payment platforms, digital finance and e-commerce. Bank Indonesia is also currently preparing the FATF (Financial Acton Task Force) Mutual Evaluation for 2020 as part of the National Strategy Action Plan for 2019 in order to mitigate money-laundering risk in the payment system.”


South Korea cuts rate 25 bps, to keep easy policy stance

South Korea’s central bank cut its benchmark base rate by 25 basis points to 1.50 percent and said it will maintain an accommodative monetary policy stance as economic growth is expected to be moderate and inflationary pressures will remain low in response to a slowing global economy from trade disputes between the U.S. and China.
It is Bank of Korea’s (BOK) first rate cut since June 2016 and reverses the 25-point rate hike in November 2018, which was partly due to concern over rising household debt but also to give the central bank some more room to deal with any future economic downturns.
The rate cut comes after recent data showed a large drop in South Korean exports as the global economy cools, and BOK lowered its forecast for 2019 economic growth to around 2.2 percent from April’s forecast of 2.5 percent, which had been cut from an earlier 2.6 percent.
South Korea’s won fell 0.3 percent immediately after the rate cut to 1,182.6 per U.S. dollar, pushing this year’s depreciation to 5.5 percent, before settling slightly higher at 1,178.5.
“The Board (of BOK) judges that the pace of domestic economic growth has slowed as construction investment has continued undergoing an adjustment and the slowdowns in exports and facilities investment have deepened, although consumption has continued to grow moderately,” BOK said.
South Korea’s gross domestic product slowed to annual growth of only 1.7 percent in the first quarter of this year, down from 2.9 percent in the fourth quarter of last year, with exports in the second quarter down 8.4 percent after a 8.5 percent fall in the first quarter.
BOK expects the decline in construction investment to continue as exports and facilities investment also recover later than it had expected while consumption will continue to grow.
South Korea’s inflation rate has remained well below its 2.0 percent target – it was steady at 0.7 percent in May and June – and BOK expects inflation to remain below the path it predicted in April.
BOK forecast headline inflation would fluctuate below 1.0 percent for some time and then run at the low to mid-1.0 percent level in 2020.

The Bank of Korea issued the following statement:

“The Monetary Policy Board of the Bank of Korea decided today to lower the Base Rate by 25 basis points, from 1.75% to 1.50%.
Based on currently available information the Board considers that the pace of global economic growth has continued to slow as trade contracted mainly due to the US-China trade dispute. Global financial markets have been stable in general, with stock prices in major countries increasing in line primarily with expectations of monetary easing in major countries. Looking ahead, the Board sees global economic growth andtheglobal financial markets as likely to be affected by factors such as the degree of the spread of trade protectionism, the changes in the monetary policies of major countries, and geopolitical risks.
The Board judges that the pace of domestic economic growth has slowed as construction investment has continued undergoing anadjustment and the slowdowns in exports and facilities investment have deepened, although consumption has continued to grow moderately. Employment conditions have partially improved, with the increase in the number of persons employed having risen. With respect to future domestic economic growth, the Board expects that the adjustment in construction investment will continue and exports and facilities investment will recover later than originally expected, although consumption will continue to grow. GDP is forecast to grow at the lower-2% level this year, below the April forecast (2.5%).
Consumer price inflation has remained low at the mid- to upper-0% level, in consequence mainly of the continued decline in petroleum product prices. Core inflation (with food and energy product prices excluded from the CPI) has been at the mid- to upper-0% range, and the rate of inflation expected by the general public has been at the low-2% level. Looking ahead, it is forecast that consumer price inflation will fall short of the path projected in April and fluctuate for some time below 1% and then run at the low- to mid-1% level from next year. Core inflation will also gradually rise.
The volatility of price variables in the domestic financial markets has increased. Long-term market interest rates have fallen significantly, in line mainly with concerns about economic slowdowns at home and abroad.Stock prices andthe Korean won-US dollar exchange rate have fluctuated considerably, mainly affected by the US-China trade dispute and Japans export restrictions. The rate of increasein household lending has continued to slow, whilehousing prices have continued their downtrend.
Looking ahead, the Board will conduct monetary policy so as to ensure that the recovery of economic growth continues and consumer price inflation can be stabilizeat the target level over medium-term horizon, while paying attention to financial stability. As it is expected that domesticeconomic growthwill bemoderate and it is forecast thatinflationary pressures on the demand side will remain at a low level, the Board will maintain its accommodative monetary policy stance. In this process it will carefully monitor developments such as the US-China trade dispute, Japans export restrictions, any changes in the economies and monetary policies of major countries, the trend of increase in household debt, and geopolitical risks, while examining their effects on domestic growth and inflation.”


Powell Puts Rate Cut Up For Debate

By Orbex

At an event yesterday, Jerome Powell, the chair of the Federal Reserve, said that the magnitude of the projected rate cut at the upcoming Fed meeting was up for debate. He did, however, indicate that the Fed will definitely be cutting rates as early as July.

Meanwhile, the lack of progress in the US-China trade negotiations also hit the markets. Equities retreated while safe havens such as the yen and gold rose on the day.

Euro Posts Modest Gains on CPI

Inflation data for the eurozone showed that consumer prices edged higher. The headline inflation rate rose 1.3% on the year, beating estimates of a 1.2% increase.

The core inflation rate also nudged higher, rising 1.1%. Meanwhile, the European Parliament confirmed the appointment of Ursula Von der Leyen as the next Chairman of the European Commission, while Christine Lagarde was formally nominated as the next ECB Chairperson.

EURUSD Pares Losses, but Trades Flat

The currency pair recovered from the losses set earlier this week. However, price action continues to trade flat as the pair approaches the support/resistance level of 1.1250. With the new range formed between 1.1250 and 1.1188, we expect price to breakout from this range to establish further direction.

Crude Oil Falls on EIA Inventory Report

WTI Crude oil prices fell after the US. Energy Information Administration reported a higher than expected inventory. US crude oil stockpiles fell 3.12 million. This was more than the estimates of a 3.6 million decline in inventory. The data was shrugged aside as initial news reports indicated that Tehran was dropping its nuclear program, which was later denied.

WTI Breaks Below Key Support Level

The declines in oil prices continue for the third consecutive day. Price broke past the previously established support level near 57.50. While attempting to recover the losses, if resistance forms near this level, we expect oil prices to drop further. The next main support is at the 54.42 level.

Gold Rises to Fresh Six-Year High

The precious metal was once again seen rallying as price touched a new six-year high briefly at 1426 an ounce. The gains came following reports of a lack of progress on the trade talks between the US and China. The US economic data on housing was also disappointing leading to a modest risk-on sentiment.

XAUUSD Forms an Ascending Triangle

Gold prices edged higher, once again testing the previously established resistance levels near 1423. In the process, price action has formed an ascending triangle pattern. A breakout above the resistance could indicate further gains in the near term. The minimum upside is seen near the 1445 level. To the downside, if the resistance fails, we expect gold to find support off the minor rising trend line.

By Orbex


Getting Ready For Australian Employment Data

By Orbex

Coming up, we’ve got some key employment data out of Australia. And this release has a habit of moving the AUD and NZD.

It’s the first time we will be getting a full set of jobs data after the RBA’s first rate cut, so everyone is extra interested to see what, if any, effect there was from monetary policy.

Also, in the minutes of the last meeting, the RBA made it clear that they are paying close attention to the labor market. This is while they consider if even another rate cut would be indicated. Of course, inflation remains the preeminent gauge for the central bank, but we’re going to have to be looking at employment a lot more closely going forward.

How Things Are Shaping Up

This week is pretty quiet on the economic front. In fact, this is the last major data until the end of the month, leaving the currency pretty much in the hands of technicals.

This doesn’t mean that we will see a pause in volatility, though. There is still a wealth of economic data from outside the country continent that could affect the exchange rate.

The market usually focuses on the employment change figure, similar to how it does with the US NFP. And the unemployment rate usually takes second fiddle. The participation rate is really only relevant to parse an unexpected change in the jobless rate.

Employment Change

The consensus among analysts is that employment data will come in on the soft side. Projections are for 27.8K jobs to have been added in June. This would be quite a drop from the 42.3K registered the prior month. Of course, it’s also the middle of winter in Australia, which is likely to impact the figure as well.

For reference, there is something of a “normal” range for job adds, which is between 10-40K. Beyond those ranges, we could expect a stronger reaction from the market.

Aside from the raw number of jobs created, the perception of labor tightness could also move the markets. If employers are finding it difficult to get employees, we could see rising wages and further inflation.

Unemployment Rate

The expectations are for the unemployment rate to stay the same at 5.2%. The rate has been slowly creeping up after bottoming out at 4.9% in February. A slight tick up wouldn’t be all that much of a surprise to the market considering the weaker projections for job creation.

However, softer labor figures would be quite disappointing for the RBA. With the telegraphing of two hikes well ahead of the meeting, it would be expected that the measures had at least some impact.

The Factors

Last week, we had consumer and business confidence that disappointed quite a few analysts. This has led to the projections of the softer job figures this time around. Generally, there is a bump up in employment during the election period, which also contributes to the softer jobs result.

This means that there is at least a portion of the market pricing in a below average unemployment figure, and that can give us some potential for a strong upside if the data were to beat expectations.

By Orbex


The Triple Nexus: Why Is Philippines Targeted

By Dan Steinbock

Recently, the Duterte administration has been targeted by UN human rights chiefs, democracy promoters, data-trackers, even the Clooneys. But these influence networks share a common triple nexus.

Recently, the UN Human Rights Council accepted a resolution to initiate a “comprehensive” review of the Philippine drug war. The resolution passed narrowly (18 to 14, with 5 abstentions). Yet, it authorized the UN human rights chief Michelle Bachelet to examine evidence of “thousands of deaths at the hands of the police.”

Why has the tiny Iceland in the Atlantic been pushing a resolution in Southeast Asia? Well, that is a net effect of the triple nexus (see Figure).

Figure         The Triple Nexus

The human rights nexus (read: Soros)

Actually, Iceland joined the Human Rights Council only in mid-2018, filling the seat vacated by the United States, which withdrew from the body. The key role belonged to Iceland’s permanent UN representative Bergdís Ellertsdóttir who is better known for security issues, NATO, EU security, bilateral US relations, international trade and security. She won’t stay in the Council; she will become Iceland’s US ambassador.

US is vital to Iceland, which joined NATO already in 1949, although amid great domestic opposition. Two years later, a defense agreement was signed with the US and US troops stayed in Iceland until 2006.

From Iceland, the mantle of the Philippine drugs review will move to Michelle Bachelet, a veteran Chilean politician. Her ratings plunged during her second Chilean presidency in the 2010s when she was linked with the land-purchase debacle by her son and daughter-in-law.

Like her predecessor, former UN Commissioner Zeid Raad Al Hussein, a vocal critique of the Duterte administration, Bachelet supports many causes funded by George Soros and has been applauded by the billionaire investor’s Open Society Foundations. But not all of these causes are as progressive. Despite Soros’s stated support of all kind of transparency initiatives, in 2016 Panama Papers revealed his deep money ties to secretive weapons and intel investment firm Carlyle Group, alongside members of Saudi Arabian Bin Laden family, according to Fox News.

The most recent Michelet debacle involves her Venezuela report. Despite appeals by an array of victims of right-wing violence, Michelet ignored them, along with the devastating impact of US sanctions and regime-change efforts since 2015. As a result, critics, including Jeffry Sachs and Mark Weisbrot argue that her report may result in thousands of new premature civilian deaths.

The democracy-promotion nexus (read: Albright)

Reportedly, Amal Clooney will lead a team of international lawyers representing Maria Ressa, Rappler’s CEO who faces numerous court cases and investigations. The Clooneys threw their support behind Ressa during her US visit in May.

Since the 2000s, both Clooneys have been active in Democratic causes. In 2010, George Clooney was nominated for life membership in the Council on Foreign Relations, US bipartisan think-tank promoting democracy.

After his “philanthropic missions” in Africa, he was linked in the early 2010s with Luis Moreno Ocampo, former chief prosecutor of the International Criminal Court (which enjoys Soros funding and has also targeted the Duterte administration). In a balanced analysis, European Investigative Collaborations have concluded that the ICC, Clooney, Omidyar may actually have “interfered in the pursuit of global justice.”

In turn, both Clooneys and Ocampo are linked with Madeleine Albright, former US Secretary of State who has often denounced Ressa’s arrests. Albright has a vital role in US democracy promotion. When the National Endowment for Democracy (NED) was insulated from the CIA in the early 1980s, it also led to the establishment of subsidiaries, such as the National Democratic Institute, which Albright chairs. NDI has participated in regime change efforts in Pinochet’s Chile and the Nicaraguan Revolution since the 1980s.

It’s also good business. Albright chairs her Albright Stonebridge Group (ASB), a “global business strategy” firm, and the affiliated Albright Capital Management, an “emerging markets investment firm.” Through NDI/NED, one can shape world events in poorer economies; through ASB/ACM, one can cash on the consequent changes.

The data-tracking nexus (read: Omidyar)

In addition to Clooneys and Soros, Ocampo has been linked with Pierre Omidyar, eBay’s founder and owner, and Rappler’s billionaire funder. The official version about Omidyar’s riches is that he created eBay for his then-fiancee as an online marketplace for her to improve a collection of Pez candy dispensers, as Time once reported (the magazine Albright has used to defend Ressa).

According to Yasha Levine’s Surveillance Valley (2018), the story is a bit different. eBay grew after it created an internal police and intelligence agency of former FBI agents in 1999 to spy on eBay users and track down fraud. They “worked closely with intelligence and law enforcement agencies in every country where it operated — including the United States, Canada, Brazil, Mexico, Malaysia, India, Russia, Czech Republic and Poland.” In the process, eBay handed over user data to the NSA and FBI, without requiring subpoenas or court orders.

It all paid off royally. Today eBay’s annual revenue is close to $11 billion and its total assets are estimated at more than $25 billion. Omidyar made his money through daily real-time information on media consumers, a slate of connections to national security, and a media empire that protects him from critical scrutiny, while profiling him as a “progressive philanthropist.”

The neoconservatives

As Omidyar’s media muscle has expanded internationally, so have the odd bedfellows. Thanks to his contributions, Omidyar forged close ties with President Obama whom he met often in the White House. Rappler is just one of many media gadgets in the Omidyar Network, whose chief of policy and advocacy is Ben Scott, an Obama official who also served in Hillary Clinton’s State Department.

While Omidyar sponsors the Intercept led by the prominent US civil rights advocate Glenn Greenwald, he is in control with the NSA whistleblower Snowden’s files. Yet, only a fraction of those files have been released, while, Robert Lietzke, Snowden’s former boss at Booz Allen Hamilton, has joined “Omidyar Fellows Program.”

Similarly, Omidyar’s funds the Center for Public Integrity, which promotes political transparency, yet puts his money into neoconservative leader William Kristol’s Defending Democracy Together and Alliance for Securing Democracy, a project of the German Marshall Fund which he also donates to, and The Bulwark. They are all reminiscent of the bygone neoconservative think-tank Project for New American Century (PNAC), created by Kristol and Robert Kagan, that paved the ideological way to multiple wars in the past two decades, with little transparency.

Why should a progressive do-gooder associate with such warmongers? In 2016, Kristol and Kagan led an open revolt against candidate Trump and for Hillary Clinton. The Biden-Pelosi offspring hope to keep neoconservatives in 2020 and 2024 as well.

Rappler’s “Creepy business model”

Only a few critical accounts have been published about the reclusive Omidyar. In part perhaps, such accounts are missing because he also funds the watchdogs. Last fall, Ressa was awarded by the Committee to Protect Journalists (CPJ), which was touted widely around the world. What was left unsaid is that Omidyar funds the CPJ, along with many other high-profile journalist consortia.

It’s a bit as if Oscars would be prioritized to movies whose producers fund the Oscars. That seems to keep some journalists from biting the hand that feeds them. After all, Omidyar also pushes “fact-checking” media groups (which tends to target particularly those causes that he opposes).

Many Filipinos seem to regard Rappler as a sort of “Voice of America,” yet it portrays itself as an independent outfit, despite murky financial flows and politics. Moreover, right after Ressa’s arrest and release, the Omidyar Network and the Omidyar-funded CPJ raised $500,000 for her legal defense fund (that will pay lawyers who will defend her, which will push Rappler, which will promote the Omidyar Network and so on). In return, Ressa has paid her dues. Last October, she complained at the NATO-backed Atlantic Council’s Stratcom conference in Washington about a campaign of legal intimidation and online trolling by Duterte supporters.

However, Rappler’s user-tracking model has also attracted concern because it couples journalism with behavior profiling, as Yasha Levine stresses. Prior to Omidyar’s investment ,Rappler boasted about another investor (North Base Media), which has been associated with Soros funding and destabilization. Last year, Rappler launched a civil engagement arm, MovePH, which is of great interest to Omidyar’s coordination with state and intel operations.  Unlike Greenwald’s Intercept which has exposed the abuses of the US security state, say Omidyar critics Alexander Rubinstein and Max Blumenthal, “Rappler’s mission in the Philippines appears to have an ulterior and entirely opposite agenda. In announcing Omidyar’s investment in the digital media site, Rappler touted its one-of-a-kind and arguably extremely creepy business model.”

_ _ _ _ _ _

What is most tragic but telling about the triple nexus is that all these associated international rights organizations, watchdogs and foreign governments, which are now targeting Philippines, were so silent about rights abuses before 2016, when drugs and political corruption reigned and rule of law was diluted.

Human rights matter. Democracy matters. Media integrity matters. None of them should be undermined at the expense of economic profits, political power or geopolitical gains.

About the Author:

Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world nd the founder of Difference Group. He has served at India, China and America Institute (US), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see  

The original commentary was released by The Manila Times on July 15, 2019


Upbeat US Retail Sales Soften Rate Cut Expectations

By Orbex

The better than expected retail sales report from the US undercut the expectations that the Fed will lower rates more aggressively. Following the upbeat jobs report in June, retail sales report also came out higher than expectations. This lowered the expectations that the Fed will cut rates at a faster pace. The Fed is due to meet later in July where there is a high chance that the Fed funds rate will be cut by 25 basis points against the initial expectations of a 50bps rate cut.

US Retail Sales Pushes Euro Lower

The monthly retail sales report from the US showed a larger than expected gain. June retail sales grew 0.4% on the month, beating estimates of a 0.1% increase. The data for May was revised down to show a 0.4% increase. Excluding autos and gasoline, retail sales grew by 0.7%. The better than expected report pushed the USD higher as a result.

EURUSD Loses the 1.1250 Handle

The EURUSD currency pair broke below the 1.1250 level of support to which it held on to earlier. This sent the currency pair to a weekly low. Further downside momentum could push the common currency to test the previous lows of 1.1188. We expect the sideways range to continue in the short term.


Oil Prices Ease Further on Iran Nuclear Deal Talks

Crude oil prices extended declines further for a second consecutive day. WTI Crude oil fell over 3% on Tuesday. The declines came after Washington said that it was in talks with Tehran over the nuclear deal from which the US had pulled out earlier. This had led to escalating tensions between the US and Iran.

Crude Oil at Support

The declines in crude oil came as price stalled close to the resistance area of 60.64. This led to prices falling to the lower support area of 57.50 as a result. However, price action is likely to remain caught within the range established. A breakout below 57.50 could trigger further declines lower. The next main target will be the 50 handle which marks a psychological level of support.


UK Average Earnings Rise Higher than Expected

The monthly jobs report from the UK saw the average hourly earnings rising more than expected. Earnings index rose 3.4%, beating estimates of a 3.1% increase. Data for the previous release was revised higher to show a 3.2% increase in the three months to the year basis. The UK’s unemployment rate held steady at 3.8%. The sterling was however unmoved as concerns of a no-deal Brexit overshadowed the economic data.

GBPUSD at Fresh Two-Year Lows

The currency pair slipped to a fresh two-year low as it tested 1.2395 briefly. Price action remains weak especially after breaking past the previously established lows. In the short term, we could expect to see a modest rebound to 1.2450 level. This could act as resistance which will keep the downside bias intact.


By Orbex


Canada CPI To Ease In June

By Orbex

Statistics Canada will be releasing the monthly inflation figures later today. According to the median estimates from economists, Canada’s inflation is forecast to slow.

After inflation surged in May, headline CPI is forecast to rise just 0.2% on a month over month basis in June. This marks a slower pace of increase compared to the 0.4% rise seen in May 2019.

On a year over year basis, Canada’s annual inflation is expected to ease from 2.4% to 2.1% in the twelve months ending June 2019.

Most of the gains in inflation during May came from higher food prices. On the contrary, fuel and energy prices fell. When excluding the volatile components, Canada’s inflation rate edged higher by 2.7%.

Following the May 2019 inflation figures, the Bank of Canada held interest rates steady at 1.75%. The odds for a rate cut also fell sharply.

While Canada is experiencing a rebound in the economy, recent data has been subdued. For example, the recently released monthly jobs report showed Canada’s unemployment rate rising from 5.4% to 5.5%.

The economy was also seen losing 2,200 jobs during the month, following two consecutive months of solid gains.

Canada’s Consumer Prices Surge in May 2019

Consumer prices in Canada rose 2.4% in May compared to the same month, a year ago. The gains in consumer prices came on higher food prices. In April, Canada’s inflation rate nudged to 2.0%, official data from Statistics Canada showed earlier in June.

On a year over year basis, prices rose in all of the eight categories in the consumer price index. There were some significant increases seen in food prices. Food prices rose 12% during the twelve months through May 2019. This followed a 3% increase in the twelve months through to April.

Canada Inflation
Canada Inflation, May 2019

The acceleration in inflation came due to the growth in food prices. Cost of fresh vegetables rose 16.7% while the price of meat products grew 2.9%.

Canada’s durable goods prices rose 2.5% compared to the same period the year before and the cost of new vehicles rose 4.2%.

Gasoline and fuel prices were the exceptions. Gasoline prices fell 3.7% compared to May last year. Energy prices have been low, rising just 0.1% in the past year. Gasoline prices were down 3.7% on the whole.

The inflation rate rose 2.7% when excluding energy prices.

Despite the uptick in the inflation data, the data remains quite volatile. The numbers are easily skewed by various factors.

The core inflation rate measure from Statistics Canada is a more stable figure to follow. The core inflation rate in the twelve months to May 2019 was 2.1%. This was, incidentally, the highest inflation rate in Canada since 2012.

Following the strong inflation reading, the Bank of Canada held interest rates steady. At its meeting in early July, the Bank of Canada said that it was closely monitoring the risks from the global trade tensions.

Unlike the Fed and the ECB which are contemplating to ease monetary policy, the BoC is maintaining a wait and watch mode.

Will Canada Inflation Rise in June?

Various inflation figures from economies such as the US showed a modest uptick in inflation. The gains came due to a slight increase in international oil prices. Thus, the uptick in the energy prices could see headline inflation rising marginally.

However, the Bank of Canada views the core inflation rate as a steady measure of consumer prices. The core inflation rate was at 2.1% in May. A miss on the estimates is unlikely to shift the consensus view on the BoC in the near term.

Thus, the risks are more to the upside than a miss on the estimates for consumer prices.

Having said that, for the Bank of Canada, it is not just inflation but also the risks from a slowing global economy as well. As a result, the markets could merely brush aside today’s inflation report.

By Orbex