After a minor consolidation, AUDUSD continues its upward movement from 1.0167 and the rise extends to as high as 1.0577. Further rise to test 1.0612 previous high resistance could be expected, a break above this level will signal resumption of the longer term uptrend from 0.9581 (Jun 1 low), then next target would be at 1.0800 area. Support is now located at the upward trend line on 4-hour chart, as long as the trend line support holds, the uptrend will continue.
By Central Bank News
The central bank of Chile kept its benchmark interest rate unchanged at 5.0 percent, as expected, and said global financial conditions had improved but it could not rule out a resurgence of tensions in the euro zone.
Banco Central de Chile said the domestic economy was evolving around its trend rate and inflation remains below 3.0 percent. It added that inflationary expectations remain around the bank’s target of 3 percent, plus/minus one percentage point.
Chile’s annual inflation ticked up to 2.6 percent in August from July’s 2.5 percent. The central bank cut its interest rate by 25 basis points in January.
The bank said recent information confirmed slow growth in developed markets and a slowdown in emerging economies. This had lead to additional monetary stimulus, especially in the United States.
It added that commodity prices had rebounded in the last month, especially copper and fuels.
“Internationally, global financial conditions have improved and the financial tensions in the Eurozone have moderated after the announcements of the European Central Bank. However, there is still uncertainty about the region’s performance and a resurgence of tensions in coming months cannot be ruled out,” Banco de Chile said in a statement.
Last week the ECB announced a plan to buy an unlimited amount of bonds of euro zone member states as long as they agree to budgetary measures.
Chile’s economy expanded by 1.7 percent in the second quarter from the first quarter, for a 5.5 percent annual rate, up from 5.3 percent.
www.CentralBankNews.info
By Central Bank News
The Federal Reserve has launched its third major push to speed up the U.S. economy, worried that without further stimulus economic growth will be too weak to reduce unemployment.
The U.S. central bank will purchase $40 billion worth of agency mortgage-backed securities each month for as long as it takes to improve the labor market and will also continue to reinvest proceeds from its holdings of maturing securities, boosting its holdings by some $85 billion a month.
In addition, the Federal Reserve extended by another year its plan to keep interest rates at rock-bottom low, saying it would keep its target for the benchmark federal funds rate at 0-0.25 percent at least through 2015, when it expects the U.S. economy to be on a solid growth path.
The Federal Reserve’s policy-making body made it clear that the central bank would not rest until the unemployment rate, at 8.1 percent in August, starts to decline, as long as inflation remains low.
“If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability,” the Federal Open Market Committee (FOMC) said in a statement after its two-day meeting.
“To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens,” the FOMC added.
Despite growing concern over the risks of continued asset purchases, Chairman Ben Bernanke wants to his utmost to live up to the Federal Reserve’s mandate of fostering maximum employment along with stable prices.
“This should make it more obvious that the Federal Reserve will do what is needed to support the economy,” Bernanke told a news conference.
The Federal Reserve has already purchased $2.3 trillion of U.S. government and housing-related debt in an effort to keep interest rates and mortgage rates low, helping improve the housing market.
The Federal Reserve also released its latest economic forecasts, cutting its forecast for economic growth in 2012 to 1.7-2.0 percent, down from its June forecast of 1.9-12.4 percent. In 2013 the U.S. Gross Domestic Product is forecast to increase by 2.5-3.0 percent, up from June’s 2.2-2.8 percent.
The forecast for the unemployment rate was unchanged at 8-8.2 percent in 2012 and then falling to 7.6-7.9 percent in 2013. Inflation was expected to remain below 2 percent through 2105.
www.CentralBankNews.info
Investor’s Business Daily contributor Trang Ho interviewed Charles Sizemore in his report on investor reactions to Bernanke’s QE3 announcement (See “Five Best ETF Buys After Fed Unleashes QE3“).
Exchange traded funds rallied across the board after the Federal Reserve fired off another round of economic stimulus.
The Fed said it would buy $40 billion per month of agency mortgage-backed securities, MBS, and it would hold interest rates “exceptionally low” to mid-2015…
Cyclical and high-volatility stocks such as technology, industrials and materials will benefit most, says Charles Lewis Sizemore, founder of Sizemore Capital in Dallas.
“While the economy is slowly improving, (Ben) Bernanke fears a relapse into deflation,” Sizemore said. “This means he’ll err on the side of dovishness.”
Industrial Select Sector SPDR (XLI) leapt 0.94%. It cleared a 37.49 buy point in a classic cup-with-handle pattern.
Technology Select Sector SPDR (XLK) flew 1.24% to an 11-year high.
No related posts.
By Central Bank News
Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.
By Central Bank News
The Federal Reserve will stimulate the sluggish U.S. economy further, purchasing additional agency mortgage backed securities and said it expects to maintain the target for the federal funds rate at 0-0.25 percent at least through 2015, one year longer than it previously had forecast.
Click to read the statement from the Federal Open Market Committee.
By Central Bank News
The central bank of Latvia cut its key refinancing rate by 50 basis points to 2.5 percent to help counter the negative effects of Europe’s debt crises on the country’s economy while inflation continues to recede. The bank also cut its marginal facility rates by 100 basis points.
The Bank of Latvia said the previous cut in the refinancing rate in July and cuts in marginal facility rates in March “will provide the banks with an additional stimulus to direct available lats resources for economic development.”
In addition to its refinancing rate, the Bank of Latvia also cut its overnight deposit rate to 0.050 percent from 0.10 percent and the seven-day deposit rate to 0.075 percent from 0.125 percent.
The bank’s three marginal facility rates were reduced by 100 basis points each.
The rate for the facility that is used for up to five days was cut to 3.0 percent from 4.0 percent, the rate for using it for maximum 10 days was cut to 6.0 percent from 7.0 percent and the rate for using the facility for more than 10 days was cut to 9.0 percent from 10.0 percent.
“In view of the fact that risks for price stability in the medium term are limited and inflation continues to go down as well as the expected negative influence of the European debt crisis on the Latvian economy, the Bank of Latvia council today resolved to reduce interest rates set by the Bank of Latvia,” the bank said.
When the Bank of Latvia cut its refinancing rate by 50 basis points in July, it left the marginal facility rates unchanged.
In March this year the bank cut its marginal facility rates as interbank markets started to normalize following tensions late 2011. Marginal rates were initially raised in December 2008 to stimulate the interbank money market as the global financial crises started to spread.
Latvia’s inflation rate was steady in August from July at 1.7 percent, while the economy’s annual growth rate eased to 5.0 percent in the second quarter from 6.9 percent in the first quarter.
Latvia plans to introduce the euro currency in 2014.
www.CentralBankNews.info
By Central Bank News
The Reserve Bank of New Zealand left its benchmark Official Cash Rate (OCR) unchanged at 2.5 percent, as widely expected, as inflation is expected to settle near the midpoint of the bank’s target.
The RBNZ said the economic outlook was largely in line with its June statement and it expects the economy to grow modestly over the next few years, with repairs following earthquakes boosting the construction sector and the housing market improving as forecast.
But these positive factors are offset by tight fiscal policy and a high New Zealand dollar that cuts into export earnings, the bank added.
“Underlying annual inflation, which recently moved below 2 percent, is expected to settle near the mid-point of the target range over the medium term,” the bank said, quoting outgoing Governor Alan Bollard who leaves the bank at the end of the month.
Bollard will be replaced by Graeme Wheeler, former managing director of the World Bank.
The RBNZ targets annual inflation of 1-3 percent and it has held the OCR steady since February last year.
New Zealand’s second quarter inflation rate fell to 1.0 percent from 1.6 percent in the first quarter.
The economy expanded 2.4 percent in the first quarter from same quarter last year.
www.CentralBankNews.info
By Central Bank News
The central bank of Russia raised its refinancing rate by 25 basis points to 8.25 percent as high inflation threatens to continue to exceed the bank’s target.
The Bank of Russia said inflation in August and September had continued to rise and it estimated that consumer prices were 6.3 percent higher on September 10 from last year, exceeding its target for 2012. In August the annual inflation rate was 5.9 percent.
The bank targets annual inflation of 5-6 percent. Bank of Russia last changed interest rates in December, when it cut rates by 25 basis points.
“The observed worsening of the food market conditions in Russia and globally combined with this year’s crop harvest estimates remains the important source of inflation risks, particularly taking into account the impact of the above mentioned factors on inflation expectations,” it said in a statement.
The bank said economic output was close to its potential level though investments in production capacity and retail sales growth decelerated.
However, it added that producer confidence remained strong along with the labour market and credit growth. This should support “robust domestic demand,” the bank said.
Russia’s gross domestic product rose 0.9 percent in the first quarter from the fourth, for an annual rate of 4.0 percent.
By TraderVox.com
Tradervox.com (Dublin) – German Court ruling have offered support for the European Central Bank bond buying program which may quicken argument for Spain to request bailout from the ECB. Analysts are now evaluating the ECB’s ability to resolve the crisis. Spain has been reluctant in requesting for bailout, seeking to get aid with no strings attached. On the other hand, creditors such as Germany are unwilling to lend more money without stringent conditions. Mario Draghi, the European Central Bank President is waiting for the two sides to resolve these differences in order start buying sovereign debt on the market.
Yesterday’s ruling by the German Court is seen as a milestone step towards dealing with the debt crisis in euro area. The market will now turn its focus on Spain, which is expected to dominate discussions by finance ministers, who meet tomorrow in Cyprus. Pier Carlo Padoan, the Chief Economist at Organization for Economic Cooperation and Development, said that the ruling gives Europe a powerful financial firewall. He also noted that while this does not in itself solve the problem, it is a big step in the right direction. The Finance Ministers meeting agenda will also include Greece concerns about its aid terms and efforts by Cyprus to escape a bailout.
In addition, finance ministers will also look into a proposal presented yesterday, of making the ECB a bank-supervision system, which has been labeled as a “federation of nation states” by the European Commission President Jose Barroso. Developments in Europe’s debt crisis fighting efforts pushed stocks higher, as risk appetite boosted commodity related currencies. Spain’s 10-year borrowing cost dropped giving Prime Minister Mariano Rajoy confidence that his country can come out of the recession without asking for bailout from ECB.
Spain is unwilling to ask for bailout with the current conditions of budget cuts and economic reforms. Rajoy, Spain’s Prime Minister has insisted that his country has done enough to deserve help from the ECB. On the other hand, German Chancellor, Angela Merkel has insisted on budget cuts for countries asking for bailout positioning her as an opposition for Spain.
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