Tell us what you think: What will spark the next big market move?

The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all capped their worst weekly performance since March on Friday, despite seeing strong gains for the day. The moves on Wall Street came amid a global market sell-off for the week. Meanwhile, the earnings season is underway in the U.S., and financial giant J.P. Morgan reported Friday that third-quarter figures beat analysts’ expectations. Also last week, fresh data showed that China’s trade surplus with the U.S. widened to a record $3


The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all capped their worst weekly performance since March on Friday, despite seeing strong gains for the day. The moves on Wall Street came amid a global market sell-off for the week. Meanwhile, the earnings season is underway in the U.S., and financial giant J.P. Morgan reported Friday that third-quarter figures beat analysts’ expectations. Also last week, fresh data showed that China’s trade surplus with the U.S. widened to a record $3
Tell us what you think: What will spark the next big market move? Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-10-15  Authors: eustance huang
Keywords: news, cnbc, companies, tell, think, central, bank, spark, weekly, week, big, worst, weekmeanwhile, widened, chinas, weeks, trade, market


Tell us what you think: What will spark the next big market move?

The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all capped their worst weekly performance since March on Friday, despite seeing strong gains for the day. The moves on Wall Street came amid a global market sell-off for the week.

Meanwhile, the earnings season is underway in the U.S., and financial giant J.P. Morgan reported Friday that third-quarter figures beat analysts’ expectations.

At the same time, U.S. President Donald Trump has been vocal in his criticism of the Federal Reserve raising interest rates, even attributing last week’s partial meltdown in stocks to the U.S. central bank and saying it has “gone crazy.”

Also last week, fresh data showed that China’s trade surplus with the U.S. widened to a record $34.13 billion in September. All this comes as the ongoing trade war between Washington and Beijing drags on.

On Sunday, China’s central bank governor said it still has “plenty” of tools to counter any downside from the trade tensions.


Company: cnbc, Activity: cnbc, Date: 2018-10-15  Authors: eustance huang
Keywords: news, cnbc, companies, tell, think, central, bank, spark, weekly, week, big, worst, weekmeanwhile, widened, chinas, weeks, trade, market


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Asia markets: Wall Street, US-China trade war, currencies in focus

Stocks in Asia slipped on Monday afternoon as investors remained cautious, following global losses in the previous week. In the Greater China region, the Hang Seng index in Hong Kong fell by around 1.32 percent as of 3:31 a.m. HK/SIN. In Japan, the Nikkei 225 fell by 1.87 percent to close at 22,271.30, while the Topix index slipped by 1.59 percent at 1,675.44, with most sectors ending the trading day lower. Meanwhile, South Korea’s Kospi also saw losses of 0.77 percent to close at 2,145.12, with


Stocks in Asia slipped on Monday afternoon as investors remained cautious, following global losses in the previous week. In the Greater China region, the Hang Seng index in Hong Kong fell by around 1.32 percent as of 3:31 a.m. HK/SIN. In Japan, the Nikkei 225 fell by 1.87 percent to close at 22,271.30, while the Topix index slipped by 1.59 percent at 1,675.44, with most sectors ending the trading day lower. Meanwhile, South Korea’s Kospi also saw losses of 0.77 percent to close at 2,145.12, with
Asia markets: Wall Street, US-China trade war, currencies in focus Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-10-15  Authors: eustance huang
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Asia markets: Wall Street, US-China trade war, currencies in focus

Stocks in Asia slipped on Monday afternoon as investors remained cautious, following global losses in the previous week.

In the Greater China region, the Hang Seng index in Hong Kong fell by around 1.32 percent as of 3:31 a.m. HK/SIN.

The Shanghai composite also slipped by 1.49 percent to close at around 2,568.10 — its lowest since November 2014 — while the Shenzhen composite declined by 1.178 percent to end the trading day at about 1,281.08.

The moves in China came as new reserve requirements for lenders went into effect, in a move by the People’s Bank of China which is expected to inject 750 billion yuan (around $108.4 billion) into the banking system.

In Japan, the Nikkei 225 fell by 1.87 percent to close at 22,271.30, while the Topix index slipped by 1.59 percent at 1,675.44, with most sectors ending the trading day lower.

Meanwhile, South Korea’s Kospi also saw losses of 0.77 percent to close at 2,145.12, with industry heavyweight Samsung Electronics slipping by 0.45 percent and chipmaker SK Hynix falling by 2.9 percent.

In Australia, the benchmark ASX 200 fell around 1 percent to end the trading day Down Under at 5,837.1 with most sectors lower. The heavily weighted financial subindex fell 1.62 percent as major banking shares saw losses — Commonwealth Bank was down 2.09 percent, ANZ fell 1.85 percent, Westpac was lower by 1.59 percent and the National Australia Bank declined by 1.58 percent.


Company: cnbc, Activity: cnbc, Date: 2018-10-15  Authors: eustance huang
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Navigating fintech’s rise: IMF, World Bank launch guide for policymakers

The International Monetary Fund and the World Bank jointly released a paper that will guide policymakers around the world in their handling of the rise of financial technology — commonly known as fintech. The paper, called the Bali Fintech Agenda, was launched on Thursday on the Indonesian island where the IMF and the World Bank are holding their annual meetings. Fintech has the potential to reach the 1.7 billion adults in the world that don’t have access to financial services, IMF Managing Dire


The International Monetary Fund and the World Bank jointly released a paper that will guide policymakers around the world in their handling of the rise of financial technology — commonly known as fintech. The paper, called the Bali Fintech Agenda, was launched on Thursday on the Indonesian island where the IMF and the World Bank are holding their annual meetings. Fintech has the potential to reach the 1.7 billion adults in the world that don’t have access to financial services, IMF Managing Dire
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Company: cnbc, Activity: cnbc, Date: 2018-10-11  Authors: yen nee lee
Keywords: news, cnbc, companies, policymakers, navigating, bank, fintechs, technology, financial, work, paper, services, world, launch, fintech, systems, imf, rise, guide


Navigating fintech's rise: IMF, World Bank launch guide for policymakers

The International Monetary Fund and the World Bank jointly released a paper that will guide policymakers around the world in their handling of the rise of financial technology — commonly known as fintech.

The paper, called the Bali Fintech Agenda, was launched on Thursday on the Indonesian island where the IMF and the World Bank are holding their annual meetings.

The paper outlines 12 “elements” or considerations that the IMF, the World Bank and governments can keep in mind when designing policies and regulations that can maximize the benefits of fintech while keeping financial systems sound.

Those “elements” include using fintech to promote financial inclusion, allowing new technology players to have level playing fields with existing companies and having countries work together to protect the global financial system.

Fintech has the potential to reach the 1.7 billion adults in the world that don’t have access to financial services, IMF Managing Director Christine Lagarde said in a statement.

But, new technology could threaten existing financial systems. For example, volatility in the price of cryptocurrencies has raised concerns about investor protection, according to the paper.

“Fintech can have a major social and economic impact for them and across the membership in general. All countries are trying to reap these benefits, while also mitigating the risks,” Lagarde said.

“We need greater international cooperation to achieve that, and to make sure the fintech revolution benefits the many and not just the few,” she added.

World Bank Group President Jim Yong Kim said fintech would be particularly helpful to low-income countries, where access to financial services is low.

Both organizations said the paper doesn’t represent current work, nor does it aim to provide specific guidance or policy advice. They will, however, start to develop specific programs on fintech.

The IMF will focus initially on the implications on monetary and financial stability and how international monetary systems and global financial safety nets evolve. The World Bank will work on using fintech to deepen financial markets, enhance responsible access to financial services, and improve cross-border payments and remittance transfer systems.


Company: cnbc, Activity: cnbc, Date: 2018-10-11  Authors: yen nee lee
Keywords: news, cnbc, companies, policymakers, navigating, bank, fintechs, technology, financial, work, paper, services, world, launch, fintech, systems, imf, rise, guide


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‘I would not associate Jay Powell with craziness,’ says IMF’s Christine Lagarde

International Monetary Fund managing director Christine Lagarde said Thursday she “would not associate” U.S. Federal Reserve Chairman Jerome Powell “with craziness.” “I would not associate Jay Powell with craziness. Lagarde made the comment in response to a question from CNBC’s Geoff Cutmore about U.S. President Donald Trump. I think the Fed has gone crazy,” the president said after walking off Air Force One in Erie, Pennsylvania for a rally. Lagarde added: “All over the world, it is certainly a


International Monetary Fund managing director Christine Lagarde said Thursday she “would not associate” U.S. Federal Reserve Chairman Jerome Powell “with craziness.” “I would not associate Jay Powell with craziness. Lagarde made the comment in response to a question from CNBC’s Geoff Cutmore about U.S. President Donald Trump. I think the Fed has gone crazy,” the president said after walking off Air Force One in Erie, Pennsylvania for a rally. Lagarde added: “All over the world, it is certainly a
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Company: cnbc, Activity: cnbc, Date: 2018-10-11  Authors: weizhen tan, ted kemp, kazuhiro nogi, afp, getty images
Keywords: news, cnbc, companies, walking, christine, jay, associate, president, bank, fed, imfs, craziness, certainly, central, powell, think, world, lagarde


'I would not associate Jay Powell with craziness,' says IMF's Christine Lagarde

International Monetary Fund managing director Christine Lagarde said Thursday she “would not associate” U.S. Federal Reserve Chairman Jerome Powell “with craziness.”

“I would not associate Jay Powell with craziness. No, no, he comes across, and members of his board, as extremely serious, solid and certainly keen to base their decisions on actual information, and decide to communicate that properly,” she said, speaking to CNBC at the IMF and World Bank annual meetings in Bali, Indonesia.

Lagarde made the comment in response to a question from CNBC’s Geoff Cutmore about U.S. President Donald Trump. The American leader knocked the Fed on Wednesday for continuing to raise interest rates despite some recent market turbulence.

“I think the Fed is making a mistake. They are so tight. I think the Fed has gone crazy,” the president said after walking off Air Force One in Erie, Pennsylvania for a rally.

Lagarde added: “All over the world, it is certainly a good principle to have independence of the central banks and of the central bank governors. Certainly we have advocated that in all countries, and I think that the Fed is no exception.”


Company: cnbc, Activity: cnbc, Date: 2018-10-11  Authors: weizhen tan, ted kemp, kazuhiro nogi, afp, getty images
Keywords: news, cnbc, companies, walking, christine, jay, associate, president, bank, fed, imfs, craziness, certainly, central, powell, think, world, lagarde


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World Bank president warns: Debt and trade problems are painting ‘a troubling picture’

Amid U.S.-China trade tensions and high levels of debt faced by low income countries, one message is clear, the president of the World Bank Group said on Thursday: Trade is important for the poor. Speaking to CNBC on Thursday at the IMF and World Bank annual meetings in Bali, Indonesia, Jim Yong Kim said that the World Bank is trying to get the message across that trade is critical. Currently, he said, there are risks from trade growth going down and many low income countries becoming more indeb


Amid U.S.-China trade tensions and high levels of debt faced by low income countries, one message is clear, the president of the World Bank Group said on Thursday: Trade is important for the poor. Speaking to CNBC on Thursday at the IMF and World Bank annual meetings in Bali, Indonesia, Jim Yong Kim said that the World Bank is trying to get the message across that trade is critical. Currently, he said, there are risks from trade growth going down and many low income countries becoming more indeb
World Bank president warns: Debt and trade problems are painting ‘a troubling picture’ Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-10-11  Authors: weizhen tan
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World Bank president warns: Debt and trade problems are painting 'a troubling picture'

Amid U.S.-China trade tensions and high levels of debt faced by low income countries, one message is clear, the president of the World Bank Group said on Thursday: Trade is important for the poor.

Speaking to CNBC on Thursday at the IMF and World Bank annual meetings in Bali, Indonesia, Jim Yong Kim said that the World Bank is trying to get the message across that trade is critical.

“We are trying to put evidence on the table which says trade is critical if we want to end extreme poverty,” he said. “Evidence is simply: We are here to end poverty, trade is important for that.”

Currently, he said, there are risks from trade growth going down and many low income countries becoming more indebted.

“We’re worried about trade tensions, we’re worried about the fact that many many lower income countries have now gone into a level of indebtedness,” he said. “It’s a troubling picture.”

Kim added: “On the other hand, the message we are trying to give here is: Let’s do everything we can to prepare for whatever trade tensions might exist. We’re preparing developing countries that are in the midst of trying to understand what will happen to those trade tensions.”

What those countries need to do is “very clear,” he said: “They need to get their fiscal house in order, they need to have monetary policy that makes sense, and that doesn’t try to manipulate currencies.”

Commenting at a Thursday news conference, Kim said he is very concerned about the trade tensions between China and the United States and warned of a clear hit to global growth if all countries escalated their tariff threats.

He added that more study is needed to understand the effects of trade war on countries that supply goods and services to China.


Company: cnbc, Activity: cnbc, Date: 2018-10-11  Authors: weizhen tan
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Larry Kudlow says the Fed is independent and the president is not dictating policy to central bank

A day after President Donald Trump called the Federal Reserve “loco,” his top economic advisor said the White House is not trying to influence monetary policy. Larry Kudlow, director of the National Economic Council, spoke Thursday to CNBC about the current state of the economy and its impact on markets. On Trump’s remarks, he did not address them directly but said the administration knows the Fed has a job to do. The president is not dictating policy to the Fed. The market weakness comes amid a


A day after President Donald Trump called the Federal Reserve “loco,” his top economic advisor said the White House is not trying to influence monetary policy. Larry Kudlow, director of the National Economic Council, spoke Thursday to CNBC about the current state of the economy and its impact on markets. On Trump’s remarks, he did not address them directly but said the administration knows the Fed has a job to do. The president is not dictating policy to the Fed. The market weakness comes amid a
Larry Kudlow says the Fed is independent and the president is not dictating policy to central bank Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-10-11  Authors: jeff cox
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Larry Kudlow says the Fed is independent and the president is not dictating policy to central bank

A day after President Donald Trump called the Federal Reserve “loco,” his top economic advisor said the White House is not trying to influence monetary policy.

Larry Kudlow, director of the National Economic Council, spoke Thursday to CNBC about the current state of the economy and its impact on markets.

On Trump’s remarks, he did not address them directly but said the administration knows the Fed has a job to do.

“The president has his own views. He’s stated them many times. There’s nothing new here as far as I can tell,” Kudlow told CNBC’s “Squawk on the Street. “We all know the Fed is independent. The president is not dictating policy to the Fed. He didn’t say anything remotely like that.”

The discussion came a day after the Dow Jones Industrial Average fell more than 800 points amid fears about rising interest rates, the escalating trade battle with China and a number of other factors. The market weakness comes amid an economy growing strongly and the unemployment rate at a nearly 50-year low.


Company: cnbc, Activity: cnbc, Date: 2018-10-11  Authors: jeff cox
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Top officials praise the Fed and its independence, after new attacks from President Trump

Prominent officials have praised the U.S. Federal Reserve, its chairman and its independence, amid new attacks from President Donald Trump. “That’s an incredible advantage for the system at a time that the system is changing, to have someone in his position who has that level of technocratic expertise,” Carney told CNBC’s Geoff Cutmore. Powell has been criticized several times for his work at the U.S central bank by the president. On Wednesday, Trump told reporters that “the Fed is going loco (c


Prominent officials have praised the U.S. Federal Reserve, its chairman and its independence, amid new attacks from President Donald Trump. “That’s an incredible advantage for the system at a time that the system is changing, to have someone in his position who has that level of technocratic expertise,” Carney told CNBC’s Geoff Cutmore. Powell has been criticized several times for his work at the U.S central bank by the president. On Wednesday, Trump told reporters that “the Fed is going loco (c
Top officials praise the Fed and its independence, after new attacks from President Trump Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-10-11  Authors: silvia amaro, alex wong, getty images
Keywords: news, cnbc, companies, bank, work, chairman, president, independence, system, praise, attacks, rates, officials, fed, trump, told, carney


Top officials praise the Fed and its independence, after new attacks from President Trump

Prominent officials have praised the U.S. Federal Reserve, its chairman and its independence, amid new attacks from President Donald Trump.

During a CNBC-moderated panel at the IMF-World Bank meetings in Bali Thursday, Bank of England Governor Mark Carney said that Fed Chairman Jay Powell “is an individual that really understands the plumbing of the U.S. and global financial systems.”

“That’s an incredible advantage for the system at a time that the system is changing, to have someone in his position who has that level of technocratic expertise,” Carney told CNBC’s Geoff Cutmore.

Powell has been criticized several times for his work at the U.S central bank by the president. On Wednesday, Trump told reporters that “the Fed is going loco (crazy)” by increasing interest rates. Trump also said that he is “not happy” with the decisions to hike rates.


Company: cnbc, Activity: cnbc, Date: 2018-10-11  Authors: silvia amaro, alex wong, getty images
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ECB’s rising growth fears not enough to derail policy: minutes

Global trade tensions could slow euro zone growth further and European Central Bank policymakers debated last month whether to downgrade their risk assessment, minutes of their September meeting showed on Thursday. Indeed, even as trade tensions weighed on growth and a stock market selloff amplified growth fears, some policymakers argued that was not enough for the bank to backtrack on policy normalization. “A gradual pace of monetary policy normalisation is justified,” Finnish central bank chie


Global trade tensions could slow euro zone growth further and European Central Bank policymakers debated last month whether to downgrade their risk assessment, minutes of their September meeting showed on Thursday. Indeed, even as trade tensions weighed on growth and a stock market selloff amplified growth fears, some policymakers argued that was not enough for the bank to backtrack on policy normalization. “A gradual pace of monetary policy normalisation is justified,” Finnish central bank chie
ECB’s rising growth fears not enough to derail policy: minutes Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-10-11  Authors: krisztian bocsi, bloomberg, getty images
Keywords: news, cnbc, companies, growth, fears, derail, policymakers, rising, ecb, bank, minutes, argued, month, policy, ecbs, meeting, inflation


ECB's rising growth fears not enough to derail policy: minutes

Global trade tensions could slow euro zone growth further and European Central Bank policymakers debated last month whether to downgrade their risk assessment, minutes of their September meeting showed on Thursday.

But policymakers ultimately concluded that the domestic economy was showing enough resilience to consider risks broadly balanced, even if some argued that the factors behind the recent slowdown may not be temporary as earlier thought, the ECB said in the accounts of the Sept 13 meeting.

The ECB kept policy unchanged as expected last month, staying on track to wrap up a 2.6 trillion-euro ($3 trillion) bond purchases scheme this year and raise interest rates next autumn, continuing its slow but steady pace of policy tightening.

Indeed, even as trade tensions weighed on growth and a stock market selloff amplified growth fears, some policymakers argued that was not enough for the bank to backtrack on policy normalization.

“A gradual pace of monetary policy normalisation is justified,” Finnish central bank chief Olli Rehn said in Indonesia on Thursday. “The current strength of the euro area economy supports our confidence that inflation will converge towards … the ECB’s price stability target.”

But some policymakers appear to be increasingly cautions, according to the minutes.

“A remark was made that some of the factors behind the (downward growth) revisions might not be entirely of a transitory nature,” the minutes showed. “It was also argued that there could be larger spillovers from weaker external demand to domestic demand.”

Still, while some policymakers argued that the case could be made for downgrading the risk assessment, there was agreement that the underlying strength of the economy would mitigate the downside risks to activity.

“High-frequency indicators had stabilised and remained at elevated levels, underlining the overall robustness of economic activity,” chief economist Peter Praet told policymakers at the meeting, the minutes showed.

With years of unprecedented stimulus finally lifting inflation, the ECB has been dialling back support, but only by the smallest of increments, fearing that bigger moves risked unravelling its work.

While the ECB has not explicitly pledged any rate hikes, policymakers, including Praet, have argued that they were comfortable with market expectation for a small increase in the fourth quarter of 2019, followed by only small and infrequent moves.

“To be any more precise than that, to lock in a date, to tie our hands, would be rather risky,” Ardo Hansson, Estonia’s central bank chief said at the annual meeting of the International Monetary Fund on Thursday.

“When we get closer, we can have another discussion if we need to adjust the language again, but this is not a debate we are going to have just yet,” Hansson said.

Policymakers also concluded last month that domestic cost pressures continued to build and broaden, indicating that inflation would rise, moving back towards the bank’s target of almost 2 percent after undershooting it for over five years.


Company: cnbc, Activity: cnbc, Date: 2018-10-11  Authors: krisztian bocsi, bloomberg, getty images
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Chinese markets see partial recovery after Monday’s sell off

The People’s Bank of China (PBOC) said on Sunday that it was cutting the amount of cash that banks have to hold as reserves by 100 basis points, effective Oct. 15. The reserve requirement ratio (RRR) is currently 15.5 percent for large commercial banks and 13.5 percent for smaller lenders. The move from the PBOC came amid concerns about the economic impact of Beijing’s ongoing trade war with Washington. “China’s latest RRR cut of the year has not managed to boost the confidence,” Huani Zhu from


The People’s Bank of China (PBOC) said on Sunday that it was cutting the amount of cash that banks have to hold as reserves by 100 basis points, effective Oct. 15. The reserve requirement ratio (RRR) is currently 15.5 percent for large commercial banks and 13.5 percent for smaller lenders. The move from the PBOC came amid concerns about the economic impact of Beijing’s ongoing trade war with Washington. “China’s latest RRR cut of the year has not managed to boost the confidence,” Huani Zhu from
Chinese markets see partial recovery after Monday’s sell off Cached Page below :
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Chinese markets see partial recovery after Monday's sell off

The People’s Bank of China (PBOC) said on Sunday that it was cutting the amount of cash that banks have to hold as reserves by 100 basis points, effective Oct. 15. The reserve requirement ratio (RRR) is currently 15.5 percent for large commercial banks and 13.5 percent for smaller lenders. The move from the PBOC came amid concerns about the economic impact of Beijing’s ongoing trade war with Washington.

“China’s latest RRR cut of the year has not managed to boost the confidence,” Huani Zhu from Mizuho Bank wrote in a Tuesday morning note. “Despite several rounds of RRR cuts, onshore credit condition remained somewhat tight, especially for (small and medium enterprises).”

Zhu explained that compared to the state-owned firms, private companies and SMEs were more likely to be hit the hardest in the protracted trade conflict with the U.S., given “less robust exports prospect, rising financing cost and softening sentiment.”

Commenting on the impact of the move by the Chinese central bank on the slide seen in the mainland markets yesterday, BlackRock’s Head of China Equities Helen Zhu told CNBC’s “Squawk Box”: “I don’t think the reaction was really to the PBOC move.”


Company: cnbc, Activity: cnbc, Date: 2018-10-09  Authors: eustance huang
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The European Central Bank could hike rates earlier than expected, El-Erian warns

The European Central Bank (ECB) could be prompted to raise interest rates sooner than planned against a backdrop of inflation and divergent monetary policy, according to Allianz’s Chief Economic Advisor, Mohamed El-Erian. But they’re going to retain optionality ’til the very last moment,” El-Erian told CNBC’s Nancy Hungerford Tuesday. El-Erian, a prominent economist and one-time CEO and co-CIO of bond giant PIMCO, said the interest rate policies of central banks were diverging quickly. And they’


The European Central Bank (ECB) could be prompted to raise interest rates sooner than planned against a backdrop of inflation and divergent monetary policy, according to Allianz’s Chief Economic Advisor, Mohamed El-Erian. But they’re going to retain optionality ’til the very last moment,” El-Erian told CNBC’s Nancy Hungerford Tuesday. El-Erian, a prominent economist and one-time CEO and co-CIO of bond giant PIMCO, said the interest rate policies of central banks were diverging quickly. And they’
The European Central Bank could hike rates earlier than expected, El-Erian warns Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-10-09  Authors: holly ellyatt
Keywords: news, cnbc, companies, earlier, bank, inflation, rates, ecb, interest, european, expected, hike, warns, central, summer, theyre, elerian, policy, going, rate


The European Central Bank could hike rates earlier than expected, El-Erian warns

The European Central Bank (ECB) could be prompted to raise interest rates sooner than planned against a backdrop of inflation and divergent monetary policy, according to Allianz’s Chief Economic Advisor, Mohamed El-Erian.

“It wouldn’t surprise me if they (the ECB) start hiking in the middle of summer (2019), as opposed to the end of the summer, or even the beginning of the summer. But they’re going to retain optionality ’til the very last moment,” El-Erian told CNBC’s Nancy Hungerford Tuesday.

El-Erian, a prominent economist and one-time CEO and co-CIO of bond giant PIMCO, said the interest rate policies of central banks were diverging quickly. The Federal Reserve has already embarked on rate hikes amid robust U.S. economic growth while the euro zone’s central bank, the ECB, is approaching rate hikes with caution. It has yet to increase rates with the 19-country euro zone still showing signs of regional weakness, and vulnerable to mounting global trade tensions.

“The interest rate dynamics are completely consistent with divergence in economic policy and divergence in performance,” El-Erian said, adding, “The question is, does it (raising rates in one country) break something somewhere else?”

“The ECB, in particular, is going to be put in a tough position because they’re dealing with high inflation. And they’re going to have to think very seriously as to whether to accelerate their rate hikes.”

The ECB has signaled that it will not raise record low interest rates before September 2019, a month before current President Mario Draghi is due to leave his post. In the meantime, headline inflation in the euro zone is expected to be 2.1 percent in September, up from 2 percent in the previous month, and above the bank’s target of below (but close to) 2 percent.

Although rising oil prices have been largely seen as the culprit for inflationary pressures (and energy costs can quickly change) if the inflation rate rises further it could put pressure on the ECB to act sooner rather than later. Inflation can be counteracted with higher interest rates. But the ECB itself signaled in September that it would not be looking to increase interest rates quickly — a policy it put in place after the sovereign debt crisis of 2011 that looked to stimulate lending and growth.

Asked about what approach the ECB might take to normalize its policy and raise interest rates, El-Erian said the central bank would have to be very cautious and might not fully signal its next move.

“I think they’ll want to have as much optionality and we’re not going to hear anything for a while,” he said.


Company: cnbc, Activity: cnbc, Date: 2018-10-09  Authors: holly ellyatt
Keywords: news, cnbc, companies, earlier, bank, inflation, rates, ecb, interest, european, expected, hike, warns, central, summer, theyre, elerian, policy, going, rate


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