Month: March 2013

By MoneyMorning.com.au

It’s now one year to the day since the end of our first-ever investment conference at Sydney’s Intercontinental Hotel last year. The great economic power struggle that was discussed at the ‘After America’ conference is raging even more intensely this year.

Big political and economic moves have been made by all the key players – Australia, China, America, Japan, and both Koreas. In this short update, I’ll review the five most significant changes investors must reckon with as they’re caught in the cross-fire of this Pacific power struggle.

The topics raised and questions debated over those two days last year – China’s political power transition, the fate of Australia’s commodities boom, and the ultimate fate of the American dollar in the currency war – are still as urgent to investors today as they were a year ago. I went back and viewed some of the presentations recorded on DVD during the week. Here is a quick summary of the key-note presentations and their key ideas:

Knowing What You Don’t Know by Dylan Grice: Before he left the Alternative Views team at Societe Generale to join Edelweiss Holdings, our favourite Scotsman delivered a tour of history that puts today’s currency war in context. He explored the reasons for the fall of Rome, the cause of the Great Depression, and why Romanian witch doctors have a better record of forecasting than central bankers.

Chinese Grand Strategy and American Hegemony by Dr Paul Monk. ‘For most of the past two millennia, China was a world unto itself, turned inward, and in no sense dominant, even in Eurasia, to say nothing of the world at large,’ said Dr Monk. The former analyst of the Department of Defence and the Defence Intelligence Organisation added that, ‘We should not, therefore, get carried away by what I call the ‘middle kingdom mystique’. China’s past did not and does not make its ascent in our time natural.’

Following the Money – New Bull Markets for the 21st Century by David Thomas. Thomas, a 30-year veteran of emerging markets and Asia Pacific focused on the opportunities ahead over the long-term. He asked ‘Where do we look for growth in the future? After America, what are the clues and the things we should be looking for as an indicator of future booming economies?’

The Great Re-Set by Satyajit Das: The author of Traders, Guns, and Money gave a command performance to close the show. For an hour and a half he showed precisely how Australia’s economy is tied to the China story, and how the European debt crisis is a small part of a larger systemic problem requiring a great ‘Re-set.’ His remarks earned him a standing ovation from the crowd.

And those are just the keynotes!

There are over six discs in the DVD set. Dr Steve Keen dropped in for a cameo presentation on the Australian housing market and the world economy. He said, ‘We wouldn’t be in this room if it wasn’t for the level of private debt in the world right now. Private debt is what’s caused the bubble.’ He showed in great detail what to expect.

And of course, all of my colleagues at Port Phillip Publishing gave their take on the question. Some of the presentations had immediate investment consequences. But most were longer-term, dealing with the question of how to craft an investment portfolio that takes into account this huge sea-change in economic affairs.

I’m not going to go through each of those presentations. You can watch them all on the DVD. You can also print out and read the transcripts that were made of the entire event’s proceedings. If you are just starting to grapple with this issue, it’s a perfect way to start your thinking and planning.

Seven Situations Complicate the ‘After America’ Story

If anything has become clearer in the last year since the conference, it’s that Australia is caught in the crossfire of a currency war. The Aussie dollar is making new highs against the Japanese Yen. With the cash-rate at an ‘emergency low’ of 3%, the Reserve Bank of Australia (RBA) is one of the few central banks in the world NOT engaged in a war to cheapen its currency.

The RBA’s strategy has produced mixed results for investors. The strong Australian dollar has induced capital to flow into the country from abroad, driving up bank stocks and other high-yielding blue chips like Telstra. But for manufacturing, tourism, and exports, the high dollar is a bane.

Those are some of the domestic impacts of the currency war. But to put the issue in a larger context, let’s briefly look at six big changes to the story since last March. In this long-term battle for economic and political ascendancy, these are the six developments that will determine who wins and who loses. Investors will have to reckon with all of them.

#1: New Chinese political leadership

Xi Jinping officially became China’s new President on Thursday, March 14^th. His ascension marked the end of an intricate, year-long process marked by a huge internal power struggle within the Communist Part of China (CPC) that resulted in the ousting of Chongqing mayor Bo Xilai. Xi now has the reins of power for the next ten years. His leadership group will decide whether to respond to the global currency war with a new round of ‘stimulus’ on urban development. This spending, if it comes, is one factor that could contribute to a ‘second wind’ for the Australian resources market.

#2: Japan and China feud over the Senkaku Islands

The Senkaku Islands are located in the East China Sea, between Japan and China. In September of last year, a long-running territorial dispute over the ownership of the islands reignited after the Japanese government purchased the islands from their private owners. Since then, an escalating game of brinksmanship and political rhetoric has marked this as a flashpoint between Japan-China relations. The US is conspicuous for its absence so far, but may be un-interested (or unable) in managing affairs in the Pacific.

#3: Japan’s offensive in the currency war

A key factor in Japan’s growing geopolitical tension with China has been the election of the new Prime Minister Shinzo Abe in December of 2012. But Abe’s influence over Japanese monetary policy has been just as momentous. He has replaced the governor of the Bank of Japan with a ‘dove’ who’s vowed to fight deflation. This is Japan’s offensive in the currency war. The result has been a new-high in the Aussie dollar/Japanese Yen exchange rate. With Japan determined to weaken the Yen, capital flows to Australia have supported a fast start to 2013 for the All Ordinaries (up 8.3% year-to-date).

#4: Renewed tension between South and North Korea

New UN sanctions against the regime of Kim Jong Un have prompted the North Koreans to threaten America and South Korea with nuclear annihilation in recent days. The rhetoric has also ramped up to coincide with annual joint US/South Korean military exercises. China’s ability to manage its client state is an open question. Is it using the North Korean regime to destabilise US influence in the region? Or is North Korea a true geopolitical wild card, not answerable to anyone and capable of being the ‘Black Swan’ of 2013?

#5: Political stale mate in US fiscal policy

Barack Obama surprised the press by cruising to re-election in November of 2012, despite getting fewer total votes than his victory in 2008. But since his official inauguration in January, his administration has been engaged in a series of running fiscal battles with the Republicans in Congress. Deals over the debt ceiling, the sequester, and the budget have become permanent features of the Washington landscape. Despite all this, the Dow Jones Industrials have made a new all-time high and enjoyed their longest rally in 16 years. America’s long-term fiscal position of high deficits and a bigger debt continues to worsen.

#6: The ‘Code War’

It’s clear to most investors that the Pacific Powers – China, the US, and Japan – are engaged in a currency war. The objective of this war is to boost economic growth through exports by making your currency cheaper. But in recent months, another war has hit the front pages. Commonly referred to as ‘hacking’, I prefer to think of it as the ‘code war’, wherein governments use computer hackers to attack strategic competitors. When the New York Times published an article on Unit 61398 – a unit of the People’s Liberation Army of China that’s allegedly in the business of staging cyber-attacks on American groups like the Department of Defence – it was a clear sign that a new era of cyber warfare has begun.

#7: Australia’s Federal Election

Australians go to the polls on September 14^th to vote for members of Parliament. At stake is the fate of the mining tax, the carbon tax, and the size and scope of future government deficits. Though I’m sceptical that a change in political leadership will mean a big change in fiscal management, Australia’s strategic posture relative to China and America IS up for review. How the country navigates between two Pacific powers – one rising economically and the other trying to get back on its feet – is one of the great political challenges of the day.

With stocks rising, investors couldn’t be blamed for not taking geopolitical matters too seriously right now. But this is precisely the time to consider them – BEFORE they burst on the scene to affect investment values in the middle of a crisis. That was the whole purpose of the ‘After America’ conference in 2012. And it’s what makes the comments and presentations at the conference valuable today.

Of course a simple review might ask the question: was the premise of the conference even valid? Is China rising? Is America falling? Must Australia choose between the two? Or can it chart a more independent course?

And finally, what are investors to make of all the different forces and factors? Is the commodity boom still a safe bet? Or should recent market highs be taken with a big grain of salt? Could geopolitical factors affect investment markets this year in ways we haven’t anticipated? Stay tuned.

Dan Denning
Publisher, Money Morning

Join me on Google Plus

By MoneyMorning.com.au

‘A game changer…and highly lucrative’ – Reuters

I grabbed a taxi and headed up to the Le Meridien Hotel in Etiler, a neighbourhood in Istanbul, Turkey. I was on my way to have breakfast with N. Malone Mitchell III. He is the CEO, chairman and 40% owner of TransAtlantic Petroleum.

Malone’s company is the best way I’ve found to play a fascinating emerging energy story. It comes with risk, but offers a potential two-five times return on your money over the next few years…

A New Shale Gas Player

Let me start with the big picture in Turkey.

Turkey sits on large untapped resources of shale gas. Nobody yet knows just how much natural gas Turkey might hold. One guess puts Turkey’s shale gas reserves at 20 trillion cubic metres. A fraction of that in Ukraine drew a $10 billion investment from Shell last month.

The irony is that Turkey depends heavily on expensive imports for both oil and gas. Depending on your neighbours for oil and natural gas is not so bad. The problem is that it is expensive in this case. Natural gas prices in Turkey top $10 per thousand cubic feet compared with just $3 in the US. So you can see the economic incentive to develop those native resources. For years out of reach, new technology makes accessing them possible.

On the day of my meeting with Malone, Reuters released a story on Turkey’s gas potential. Malone got it on his phone while we were eating breakfast and showed it to me. A key excerpt:

‘With domestic gas consumption rising and [Turkey’s] geographic location meaning it is also well placed to supply international markets, major exploitable reserves could be a game changer for Turkey’s economy and highly lucrative for whoever finds them.

‘”We are keen to exploit this method and we must make economic use of shale gas,” energy minister Taner Yildiz told Reuters, saying it would be a priority for the near future.’

This sets up the macro appeal of TransAtlantic. The other part of the appeal is in the micro, which begins with the talented Mr. Mitchell himself. He is a self-made oil and gas billionaire, a successful builder of companies. He is also, as I noted above, a big shareholder. And he has been buying more of late.

I’ve been following TransAtlantic for a few years now. I share it with you here because it is one of the most intriguing ideas I have in Turkey and a good way to get exposure to a unique energy story.

The Perils of the Energy Business

It has not been a happy story to date. Over breakfast, Malone and I talked about the challenges TAT has had so far.

There has been a big learning curve in figuring out the geology. In many ways, TransAtlantic’s experiences mimic those of other successful unconventional plays. ‘It can take two years of failures before it all comes together,’ Malone said.

There has also been the challenge of finding the right mix of people and getting the right systems in place. Malone told me about the intricacies of Turkish tax accounting, for instance. And he related some stories about personnel issues.

It is always easier to draw up the blueprint than to put it into action – especially in emerging markets. On the positive side, Malone said doing business in Turkey was as easy as doing business in Texas or Oklahoma from a regulatory point of view.

And though there have been setbacks, the plum of Turkey is as ripe as when Malone got involved in March 2008. He said Turkey then was like Texas in 1938 – a practically virginal land flush with oil and gas possibilities.

I asked him if he was still as excited about it as he was then. ‘Yes,’ he said, ‘but I wish we knew then what we know now. Knowledge comes at a price.’

Frustrated by delays in ramping up production, the market has all but abandoned the shares. They now languish at around $1. Even just the value of its proved reserves – the so-called SEC PV-10 value – is about $1.75 per share (pretax). That gives the company no credit for whatever lies in its 5 million acres of underexplored land area. Yes, 5 million acres.

I asked Malone what he thought the market was missing with TransAtlantic.

‘Well, the market thinks we aren’t going to do anything,’ he said, thinking about that languishing share price. ‘The truth is if we weren’t a public company, I’d be fine about where we are.’

A Strategic Base in a Growing Market

Indeed, the company is in a good position in a strategic sense. It has those 5 million acres locked up on long-term leases. It was early enough that it grabbed some of the best acreage. There are only three oil companies of consequence in Turkey: the national oil company, a privately held oil company and TransAtlantic. Everybody who comes after gets the crumbs left by these three.

Besides, TransAtlantic is already doing its bit to provide oil and gas to Turkey’s thirsty industrial base. In the Thrace Basin, TransAtlantic gas supports the city of Bursa. About 60 miles southeast of Istanbul, the Ottomans captured the city in 1326 and made it their first capital. Surrounded by forested hills and fruit orchards, it was once a Silk Road city.

Today, there are nearly 2 million people in Bursa and it is home to thriving automotive and textile industries. And there are a couple of big catalysts on the horizon that could make 2013 the year when the cards finally turn up right for Malone and his fellow shareholders.

First, Turkey’s unconventional oil and gas plays are getting more attention. Just a couple of days after our meeting, Malone would attend Turkey’s first shale gas and oil conference at the Bilkent Hotel in Ankara. There is an excitement in the air about what could happen in Turkey. And it is still very early.

The buzz could help Malone as he is trying to nail down a joint venture to accelerate the development of TransAtlantic’s acreage. The JV, Malone has said before and repeated at breakfast, could be as big as the sale of Viking (the company’s oil field services arm).

For reference, this sale brought TransAtlantic $164 million, gross. As the whole market cap of TAT is only about $370 million, a JV that brought in that kind of cash would be huge.

Second, the company is drilling some potentially high-impact wells. We should get the results on these wells within in the next six months. Malone was optimistic that these would bring strong results. Exciting results here could also light a fire under the stock.

I was glad to meet up with Malone. I have confidence he will figure it out and make it work. I think he is honest. He also owns a bunch of stock – an owner-operator, for sure. His track record of success is beyond dispute. All in all, a good mix, in my experience.

Reflecting on what TAT is building, I thought about how a bigger oil outfit will one day want to own it all. ‘Someday, somebody is going to want to write you a big check,’ I said.

Malone said nothing, but his expression and his eyes told all. Exactly, they seemed to say. Exactly.

Chris Mayer
Contributing Editor, Money Morning

Join Money Morning on Google+

From the Archives…

Why the Stock Market Boom is on Pause
8-03-2013 – Kris Sayce

Why the Dow Jones Record High Doesn’t Matter
7-03-2013 – Murray Dawes

Taking China’s Economic Pulse from Hong Kong
6-03-2013 – Dr Alex Cowie

Buy Gold When They’re Crying…Sell Gold When They’re Yelling
5-03-2013 – Dr Alex Cowie

Do You Want to Be Right About Investing, or Do You Want to Make Money?
4-03-2013 – Kris Sayce

Dear investor,

We’re about to share with you a developing social trend from Europe that may shock you — it might even enrage you — so please be forewarned.

A new report from the Socionomics Institute, a U.S.-based think tank that studies developing global trends in social mood, reveals a striking resemblance between modern-day Greece and pre-WWII Germany.

• Nazi salutes.
• Praise for Adolf Hitler
• Swastika-like banners

Now, before you write off this warning as a run-of-the-mill, Nazi-name-dropping scare tactic, consider this: A rising political party known as Golden Dawn is resurrecting such practices, all hallmarks of Hitler’s Third Reich, in modern-day Greece, which has suffered a dramatic, 88% stock market decline over the past five years — a decline far greater than that of Germany’s 73% stock rout from 1927 to 1932.

“History doesn’t repeat itself, but it does rhyme,” goes an old saying attributed to American author Mark Twain. And new research from the Socionomics Institute sees a disturbing pattern of rhymes between modern-day Greece and pre-WWII Germany.

To be sure, market and political developments in Greece will have a significant impact on the future of Europe, the Americas and beyond.

Read the rest the Institute’s new February report to learn more about the developing threats out of Greece. The full report is available for free for this month only as part of a special promotion run by the Institute in conjunction with its partners at Elliott Wave International, the world’s largest market forecasting firm.

>> Follow this link to read more about the negative social mood wave washing over Europe in the full February issue of The Socionomist (a $19 value) – for free this month only.

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world’s largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.

By www.CentralBankNews.info     Latvia’s central bank held its benchmark refinancing rate steady at 2.5 percent, saying it’s policy stance is appropriate in light of low inflation and no risks to price stability from economic growth.
   The Bank of Latvia, which cut rates by 100 basis points in 2012, also said it would retain its reserve requirement.
    In February Latvia’s inflation rate fell to 0.3 percent from 0.6 percent, and in January the bank forecast 2013 inflation of 2.0 percent. The Bank of Latvia aims for price stability but does not have an actual inflation target.
    “Since the inflation indicators are consistently low and the rate of economic growth poses no risks to price stability in the medium term, the Bank of Latvia Council is of the opinion that the current stance of monetary policy is appropriate for the economic situation,” the bank said.
    Latvia’s Gross Domestic Product expanded by 1.4 percent in the fourth quarter from the third quarter for annual growth of 5.1 percent, slightly down from the third quarter’s rate of 5.2 percent.
    The bank forecasts 2013 growth of 3.6 percent, down from 2011’s 5.5 percent.
    Earlier this month Latvia’s government applied to join the embattled euro zone with a final decision expected in July.

    Latvia pegged its currency to the single currency after joining the European Union in 2004 and stuck with the link through the past five years of financial and economic turmoil though many economists said it would have softened the economic downturn if it had devalued the currency. Latvia needed a bailout in 2009 by the International Monetary Fund and the EU.
    Neighboring Baltic state Estonia already joined the euro in 2011 and Lithuania pegged its currency to the euro in 2002 and has said it is considering joining the euro in 2015 or 2016.
    Many mortgages in Latvia are already denominated in euros

    www.CentralBankNews.info

London Gold Market Report
from Ben Traynor
BullionVault
Thursday 14 March 2013, 09:00 EST

GOLD dropped below $1580 per ounce Thursday morning, while gold in Sterling and Euros fell back below £1060 and €1225 an ounce respectively, extending losses from a day earlier that following stronger-than-expected US retail sales data.

Like gold, silver drifted lower this morning, dipping below $28.60 an ounce, while other commodities were broadly flat and European stock markets ticked higher.

US, UK and German government bond prices fell, while the US Dollar Index, which measures the Dollar’s strength against a basket of other currencies, rose to its highest level since August.

The Dow Jones meantime ended higher Wednesday for the ninth day in a row, setting another new record high.

“The US stock market [is] now increasingly viewed as gold’s main ‘competition’ for investment Dollars,” says Ed Meir, metals analyst at brokerage INTL FCStone.

“We think gold lacks both technical momentum and investment interest to recover significantly from current levels,” adds a note from Credit Suisse.

“Gold has lost its luster,” agrees Danske Bank senior commodities analyst Christin Tuxen, speaking at Bloomberg’s FX Debates event in London Wednesday.

“Some of the reasons investors had last year to buy into gold are now gone. The focus will be on interest rates not surging, but gradually moving higher.”

China’s central bank has moved from last year’s pro-growth loose monetary policy stance to a “neutral” one, People’s Bank of China governor Zhou Xiaochuan has said.

“Obviously there’s a lot of [gold] investment demand in China… a large part of why people in China bought gold is because prices went up ” says Credit Suisse analyst Ric Deverell, adding that a price fall could be detrimental for Chinese gold demand.

In the US, the Commodity Futures Trading Commission is considering whether the twice-a-day London Gold Fix, which sets the international benchmark gold price, could have been manipulated in the same way as the London interbank offered rate (Libor), the Wall Street Journal reported Wednesday.

“[The fixings are] not arbitrary,” said a spokesman for the London Bullion market Association.

“It’s very much done on a demand-supply basis until a price is arrived at. It’s fully transparent, it’s nothing like Libor.”

Over in Europe, “substantial progress is being made toward structurally balanced [government] budgets,” according to a draft European Union summit statement obtained by news agency Bloomberg ahead of the two-day meeting which starts today.

The statement, reports Bloomberg, calls for “growth-friendly consolidation” of government finances.

Elsewhere in Europe, Ireland borrowed €5 billion selling new benchmark 10-Year bonds yesterday, the first such sale since the country was bailed out in 2010.

The volume of gold production in South Africa fell 8.1% year-on-year in January, despite total mineral production rising 7.3% over the same period, according to Statistics South Africa figures published Thursday.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

By Chris Vermeulen, GoldAndOilGuy.com

Trading with the trend should be your main focus for long term success no matter what type of trader you are (Options Trader, Stock Trader, or ETF Trader) although it’s not as easy as it sounds.

The good news is that there is a simple trading model that removes 95% of trading analysis and greatly reduces trading related emotions because the key technical analysis rules based on one of the world’s best chart technicians (John Murphy) technical analysis methods have been applied to the chart automatically. The key is to identify the trend of the market. Once that is known you can focus on trading strategies that take advantage of the current trend.

Over the past few years I have been creating this indicator/chart layout tool which converts my chart reading experience, tips and tricks into a simple system removing analysis paralysis which cause most individuals to second guess what they see and don’t pull the trigger. Using too many indicators or read/listening several other traders commentaries with different views than you causes this paralysis.

My simple red light, green light model clearly shows a viewer the current trend and expected price range (high and low) looking forward a couple days. I uses a series of data points like volatility, volume, cycles, momentum, chart patterns and logic rules. It even shows extreme pivot points helping you find low risk entry prices for both bull and bear market conditions.

Recent trends and signals for the SP500 Index Daily Chart:

Trading With the Trend – The Sweet Spots

Knowing the direction of the market is simple using the chart system above but trading with the trend is not that simple because of natural human behavior. Instead traders fall victim to trying to pick a top or bottom because they think the price is overbought or oversold and they want to catch the next big trend change.

We all know the saying “the market climbs a wall of worry”.  Well, the biggest worry most traders have is buying long in a bull market because stocks and price always look overbought and ready to top each week… This leads to people trying to get fancy picking a top only to get their head handed to them a few days or weeks later depending on how stubborn they are to exit a losing position.

The key to long term success is to buy during broad market (SP500) corrections once sentiment, cycles and momentum are starting to flash extreme oversold conditions. These show up as green arrows on the trend chart. At that point most sectors and high beta stocks like IBM, GOOG etc… should be at a key entry points with most of the downside risk removed already. Remember ¾ stocks follow the broad market so it only makes sense to follow it also.

What about a runaway stock market? This is when the stock market does not pullback but just keep grinding its way higher and higher… The only thing you can do is sit in cash, or look for a stock or sector that is having a small pause or pullback and get long with a small position until you get that broad market pullback and major by signal to add more.

Below are a few sectors showing a minor pause/pullback within this bull market.

Mid-Week Trend Conclusion:

Overall, the broad market remains in an uptrend. While I would like to see the SP500 pullback and give us another major buy signal like it did in December and February I do mind that much if prices keep running higher as it just give us more cushion and potential profits for when the trend does eventually roll over and flip signals. I hope you found this report interesting. It’s just scratching the surface of this topic but it’s a start.

Know the stock market trends by joining my free newsletter: www.GoldAndOilGuy.com

Chris Vermeulen

By www.CentralBankNews.info     Norway’s central bank kept its policy rate steady at 1.5 percent, saying economic growth and inflation had been slightly lower than projected so it first expects to raise rates in the Spring of 2014.
    Norges Bank started easing its upward rate bias last October when it delayed a planned rate increase until this year from end-2012. At its previous meeting in January, the bank maintained a slight upward bias but it has now delayed any rate change until next year.
    “The analysis suggests that the key policy rate be kept lower longer than previously anticipated,” the bank quoted its governor Oeystein Olsen as saying.
    “The first increase in the key policy rate is now projected to take place in spring 2014,” he added. Norway’s central bank cut rates twice in 2012 for a total cut of 49 basis points.
    While growth and inflation remain low, the central bank said household debt and house prices were still rising faster than income.
     The central bank said it would introduce a countercyclical capital buffer to give banks more capital to draw on in an economic downturn. The size would be determined later this year.

    Norway’s inflation rate fell to 1.0 percent in February from 1.3 percent in January and the central bank said its policy rate was low because inflation is low and because interest rates abroad are low.
    The central bank targets inflation of 2.5 percent.
    The bank added that growth prospects for trading partners had weakened though global growth remains robust. Capacity utilization in the Norwegian economy is above normal and unemployment is low.
    “At the same time, there are now prospects that it will take longer for inflation to move up to the inflation target,” the central bank said.
    Norway’s Gross Domestic Product rose 0.4 percent in the fourth quarter from the third quarter for an annual rate of 2.1 percent.

    www.CentralBankNews.info
 

By www.CentralBankNews.info     Switzerland’s central bank maintained its interest rate and exchange rate targets, as expected, and said the downside risks to the Swiss economy remain considerable while revising downwards its inflation forecast.
    The Swiss National Bank (SNB) kept its target range for three-month Libor at zero to 0.25 percent and repeated its pledge to “buy foreign currency in unlimited quantities” to keep the Swiss franc below 1.20 per euro.
    The cap on the Swiss franc was introduced in September 2011 as jittery investors from the euro zone sought refuge in Swiss assets, pushing up the value of the Swiss franc and negatively affecting the competitiveness of Swiss industry.
    Switzerland’s headline inflation rate in February was minus 0.3 percent, the 17th month in a row with deflation. In 2012 the average inflation rate was minus 0.7 percent
    The SNB now expects an inflation rate of minus 0.2 percent for 2013, plus 0.2 percent for 2014 and 0.7 percent for 2015. This compares with its previous forecast of 0.1 percent in 2013 and 0.4 percent in 2014.
    “Under this assumption, the Swiss franc weakens over the forecast period,” the SNB said, adding that “in the foreseeable future, therefore, there continues to be no threat of inflation in Switzerland.”

    Switzerland’s economic growth slowed as expected in the fourth quarter, but the SNB said it continues to expect growth of 1.0-1.5 percent in 2013.
    Gross Domestic Product expanded by 0.2 percent in the fourth quarter from the third, for annual growth of 1.4 percent, up from 1.2 percent.
    “Downside risks to the Swiss economy remain considerable,” the SNB said, adding that tensions in the euro area may rise again and uncertainty about the future of fiscal policies in many advanced countries is dampening consumer and investment confidence, posing risks to growth.
    “The global economic situation and sentiment on the financial markets therefore remain vulnerable,” the SNB said.

    www.CentralBankNews.info

By www.CentralBankNews.info     The Philippine central bank kept its benchmark overnight borrowing, or reverse purchase facility, rate steady at 3.50 percent but again cut the rate on its Special Deposit Account (SDA) facility due to a “benign inflation outlook and improving growth prospects.”
    Bangko Sentral ng Pilipinas (BSP) cut the rate on the SDA facility by 50 basis points to 2.50 percent  on all maturities, effectively immediately. In January the BSP set the SDA rate at 3.0 percent, the first time it was set below the benchmark rate.
    The BSP said the decision to keep benchmark rates steady was based on its view that inflation was “likely to remain manageable” – a phrase often used by the central bank – and inflation expectations also remain firmly anchored.
    “Although global economic activity has gained traction, lingering fiscal and financial market stresses in the advanced economies continue to dampen the broad outlook, thereby mitigating upward pressures on commodity prices,” the BSP said.
    However, further capital inflows, along with rate adjustments to domestic power rates and stronger growth in domestic liquidity posed upside risks to the inflation outlook, the central bank cautioned.
   “Latest baseline forecasts have risen slightly due to the higher inflation out-turns in recent months but continue to track the lower half of the 4 +/- 1 percent target range for 2013 and 2014,” the bank said.
    The Philippines’ headline inflation rate rose to 3.4 percent in February from January’s 3.0 percent within the BSP’s forecast of 2.8-3.7 percent for the month. The central bank attributed the rise to higher prices on food, alcohol and tobacco, and domestic petroleum products.
    On average, the inflation rate is 3.2 percent year-to-date, within the government’s 2013 target range of 3-5 percent, the central bank said earlier this month. The core inflation rate rose to 3.8 percent in February from 3.6 percent.

    The Philippine’s Gross Domestic Product in the fourth quarter rose by 1.5 percent from the third quarter for annual growth of 6.8 percent, down from the third quarter’s 7.2 percent.

By www.CentralBankNews.info 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.