WHAT'S NEW. International Developments

Size: px

Start display at page:

Download "WHAT'S NEW. International Developments"

Albert Clarke
6 years ago
Views:

1 International Developments Bank of Canada raised its target for the overnight rate to 1% citing strongerthan-expected economic performance warranting a removal of some of the considerable stimulus in place and signaled further tightening may be curbed by a rising currency and sluggish price pressures. The US Federal Reserve left interest rates unchanged but signaled one more increase in 2017and set an October start for shrinking holdings of US Treasury bonds and mortgage-backed securities acquired in the years after the 2008 financial crisis. It forecast only two increases in 2019 and one in Federal Reserve Chair Janet Yellen said gradually raising interest rates is the most appropriate policy approach amid higher uncertainty about inflation. Bank of Canada strongly indicated its concerns about the Canadian dollar's recent gains. ECB sees inflation at 1.20% in 2018 and 1.50% in 2019, well below the goal of just below 2%. While its growth forecasts for 2018 and 2019 were left unchanged, this year's projection was raised to 2.20%. People's Bank of China outlawed initial coin offerings triggering a fall in cryptocurrencies. China lifted the reserve requirement rule on currency forwards and stopped requiring foreign banks to put aside reserves for offshore yuan deposits in China, as outflows ease and exporters face strain. Japan's GDP expanded by an annualized 2.50% in the second quarter compared with a preliminary reading of 4% growth, weighed down by a revision in capital expenditure by companies. Canada's GDP expanded at an annualized rate of 4.50% in the second quarter, the strongest pace in almost six years with consumers, capital spending and exports all making big contributions. Australia's GDP grew 1.80% from a year earlier in the second quarter. New Zealand's economy expanded at a faster pace in the second quarter, with GDP rising 0.80%. U.S. trade deficit widened 0.30% to $43.70 billion in July as rising energy and aircraft exports helped offset drops in shipments of autos and 19

2 International Developments household goods as per the Commerce Department. China recorded a trade surplus of $42 billion in August amid moderating global demand for the country's products and robust domestic demand driven import growth. The U.S. CPI registered a growth of 1.90% in August from a year earlier. Eurozone consumer price inflation came in at 1.50% year-on-year in September U.K. inflation rose to 2.90% in August after the biggest surge in clothes prices in almost three decades. China's foreign-exchange reserves posted a seventh straight gain in August climbing $11 billion to $3.09 trillion. S&P Global Ratings cut China's sovereign credit rating by one step, to A+ from AA-, and revised its outlook to stable from negative stating that China's prolonged period of strong credit growth has increased its economic and financial risks. IMF Managing Director Christine Lagarde said China is making critical efforts to rein in financial risk, and cited an "incredible re-balancing" of the economy from industrial to services and technology. The Asian Development Bank raised developing Asia's 2017 growth forecast to 5.90% from 5.70%in April in its latest Asian Development Outlook Update, bolstered by a revival in world trade and strong momentum in China which is now expected to grow 6.70% y/y from 6.50% earlier. Indian Economy India registered a fiscal deficit of `20,149crore during August2017, a decline of 6% over the fiscal deficit of `14,333crore in August2016. The fiscal deficit during August 2017 accounted for 96.10% of the budgeted estimates of `5,46,532 crore for India's exports grew 10.29% in August 2017 to $23.82 billion from $21.60 billion in August Imports rose 21.02% to $35.46 billion from $29.30 billion. The overall trade deficit for April-August 2017 is estimated at $39.87 billion as compared to $12.72 billion during April-August The Index of Industrial Production (IIP) grew 1.20% in July 2017 against a growth of 4.50% in July The IIP registered a growth of 1.70% in April- 20

3 Indian Economy July 2017 as against a growth of 6.50% in April-July The eight core industries with a combined weight of 37.90% in the Index of Industrial Production (IIP) grew 4.90% in August2017 as against 3.10% in August2016. Cumulative growth for April-August was 3.0%, as against 5.40% growth in April-August Provisional annual inflation rates based on all India general CPI Rural, Urban and Combined for August 2017 on point to point basis are 3.30%, 3.35% and 3.36% (5.87%, 4.22% and 5.05% in August 2016). Inflation rates (final) for Rural, Urban and Combined for July 2017 are 2.41%, 2.17% and 2.36% respectively. The annual rate of inflation, based on monthly WPI, stood at 3.24% (provisional) for the month of August 2017 as compared to 1.88% (provisional) for July 2017 and 1.09% during August The y-o-y inflation measured by monthly CPI-IW stood at 2.52% for August 2017 as compared to 1.79% for July 2017 and 5.30% during August Point to point rate of inflation based on the CPI-AL and CPI-RL increased from 0.80% and 1.02% in July 2017 to 2.05% and 2.16% respectively in August India's holding of US Treasury Securities at the end of July 2017 stood at $ billion vis-à-vis $ billion at the end of June Direct tax collections, net of refunds, grew 17.50% in April-August to `2.24 lakh crore which is 22.90% of the total Budget Estimates of direct taxes for Finance minister Arun Jaitley said the government is planning to announce measures to revive economic growth adding that investment revival and the health of banks are areas on which attention is focused. Sebi warned that the huge inflow of foreign investments into the country is having an impact on the rupee and regulators need to manage it through a calibrated system. Sebi allowed mutual funds to use interest rate futures contracts to hedge risks from volatility in interest rates. The PM's Economic Advisory Council was reconstituted with Bibek Debroy as its chairman. 21

4 The United Nations Conference on Trade and Development expects India's economy to expand 6.70% in 2017, down from 7% in 2016, due to demonetization and the introduction of the GST. The Asian Development Bank cut India's GDP forecast to 7% y/y from 7.40% stating demonetization and the implementation of GST have dented consumer spending and business investment. OECD trimmed India's growth forecast for current fiscal to 6.70%, down from 7.30% estimated in June, citing transitory impact of GST rollout and demonetisation. Flagging the negative effect of a weak capital base, Fitch said Indian banks might require around $65 billion of additional capital to meet the new Basel-III capital standards by March India is expected to be a $6 trillion economy - the third largest in the world - in the next 10 years, majorly helped by digitisation, as per a Morgan Stanley report. Moody's said India is likely to see increased FDI inflows on the back of reforms such as introduction of the goods and services tax and the bankruptcy code. Reserve Bank of India: (Source: The Government of India nominated Shri Rajiv Kumar, Secretary, Department of Financial Services, Ministry of Finance, Government of India, New Delhi as a Director on the Central Board of Directors of Reserve Bank of India vice Ms Anjuly Chib Duggal. RBI released an indicative calendar for issuance of Government dated securities worth `2,08,000crore for the second half of the fiscal year (October 01, 2017 to March 31, 2018). RBI notified the amounts for the issuance of Treasury Bills for the quarter ending December The limit for Ways and Means Advances (WMA) for the second half of the financial year (October 2017 to March 2018) will be `25,000 crore. The limits for investment by FPIs for the quarter October-December 2017 has been increased by `80 billion in Central Government Securities and `62 22

5 Reserve Bank of India: (Source: billion in State Development Loans. The applicable system wide average figure for computing achievement under priority sector lending for is 11.78%. RBI decided to exclude issuances of issuance of Rupee denominated bonds overseas (RDBs) from the limit for investments by FPIs in corporate bonds with effect from October 3, With effect from October 3, 2017, Masala bonds form a part of the ECBs. The amount of `44,001 crore arising from shifting of Masala bonds will be released for FPI investment in corporate bonds over the next two quarters. RBI removed the threshold for reporting FCY-INR and FCY-FCY forward trades between AD Category-I banks and their clients to the CCIL Trade Repository (TR)with effect from October 03, In addition to the SBI and ICICI Bank, which continue to be identified as Domestic Systemically Important Banks (DSIBs), RBI also identified HDFC Bank as a D-SIB. RBI notified on issuance of Electronic Bank Realisation Certificate (ebrc) under its Export Data Processing and Monitoring System (EDPMS). RBI clarified that it uses sophisticated Currency Verification & Processing machines for checking the numerical accuracy and genuineness of the currency notes. RBI notified on reimbursement of Merchant Discount Rate (MDR) charges for Government transactions up to `1 lakh through debit cards. RBI notified amendments to Reserve Bank of India (Financial Services provided by Banks) Directions, The applicable average base rate to be charged by Non-Banking Financial Company - Micro Finance Institutions (NBFC-MFIs) to their borrowers for the quarter beginning October 01, 2017 will be 9.06%. RBI launched the 14th round of quarterly services and infrastructure outlook survey for Q2: RBI released data on lending rates of Scheduled Commercial Banks based on data of August

6 Reserve Bank of India: (Source: RBI released its survey of foreign liabilities and assets of mutual fund companies for RBI released data on sources of variation in foreign exchange reserves in India during April-June RBI released data on developments in India's Balance of Payments during April-June RBI released its Handbook of Statistics on the Indian economy for RBI released data on India's international trade in services for July RBI released data on overseas direct investment for August RBI released data on ECB/FCCB/RDB for August RBI released the 28th half yearly report on management of foreign exchange reserves for October-March RBI released data relating to India's international investment position (IIP) as at end-june RBI released 'Quarterly BSR-1: Outstanding Credit of Scheduled Commercial Banks for December 2016'. India's external debt stood at$485.8 billion, recording an increase of US$13.96 billion over its level at end-march RBI released the DRG study titled, Some Macroeconomic Impacts of Different Types of Public Expenditure in India - Analysis Using a Computable General Equilibrium Model. RBI released Mint Street Memos titled 'Agriculture Loan Bank Accounts - A Waiver Scenario Analysis' and 'Farm Loan Waivers, Fiscal Deficit and Inflation' and 'Non-Bank Funding Sources and Indian Corporates'. 24

WHAT'S NEW. International Developments. The Bank of Canada raised its key interest rate by 25 basis points to 1.25%.

WHAT'S NEW. International Developments. The Bank of Canada raised its key interest rate by 25 basis points to 1.25%. International Developments The Bank of Canada raised its key interest rate by 25 basis points to 1.25%. The Bank of Japan boosted its bond buying plan and reassured markets that monetary policy will remain