- Central Bank Digital Currency (CBDC) – Virtual Handbook International Monetary Fund
- IMF says central bank digital currencies can replace cash: ‘This is not the time to turn back’ CNBC
- IMF launches virtual guide on central bank digital currencies CNA
- CBDCs Can Replace Cash in Island Economies, Offer Resilience: IMF Chief Kristalina Georgieva CoinDesk
- Remarks by the IMF Managing Director Kristalina Georgieva at the IMF-Singapore Regional Training Institute (STI)’s 25th Anniversary Event, Central Bank Digital Currency: Emerging Good Practices International Monetary Fund
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Tag Archives: Monetary
‘Surprisingly resilient’: IMF lifts global growth forecasts | International Monetary Fund
The International Monetary Fund (IMF) has raised its 2023 global growth outlook slightly due to “surprisingly resilient” demand in the United States and Europe and the reopening of China’s economy after Beijing abandoned its strict zero-COVID strategy.
The IMF said global growth would still fall to 2.9 percent in 2023 from 3.4 percent in 2022, but its latest World Economic Outlook forecasts mark an improvement over an October prediction of 2.7 percent growth this year, with warnings that the world could easily tip into recession.
For 2024, the IMF said global growth would accelerate slightly to 3.1 percent, but interest rate hikes by central banks around the world would slow demand.
IMF chief economist Pierre-Olivier Gourinchas said recession risks had subsided and central banks were making progress in controlling inflation, but more work was needed to curb prices, and new disruptions could come from further escalation of the war in Ukraine and China’s battle against COVID-19.
“We have to sort of be prepared to expect the unexpected, but it could well represent a turning point, with growth bottoming out and then inflation declining,” Gourinchas told reporters of the 2023 outlook.
Strong demand
In its 2023 gross domestic product (GDP) forecasts, the IMF said it now expected GDP growth in the US of 1.4 percent, up from the 1.0 percent predicted in October and following 2.0 percent growth in 2022.
The fund cited stronger-than-expected consumption and investment in the third quarter of 2022, a robust labour market and strong consumer balance sheets.
It said the eurozone had made similar gains, with 2023 growth for the bloc now forecast at 0.7 percent, compared with 0.5 percent in the October outlook, following 3.5 percent growth in 2022. The IMF said Europe had adapted to higher energy costs more quickly than expected, and an easing of energy prices had helped the region.
The United Kingdom was the only major advanced economy the IMF predicted to be in recession this year.
It forecast the British economy to shrink 0.6 percent this year, compared with a previous expectation for growth of 0.3 percent. People are struggling with higher interest rates, and government moves to further tighten spending are also squeezing growth, it said.
“These figures confirm we are not immune to the pressures hitting nearly all advanced economies,’’ Chancellor of the Exchequer Jeremy Hunt said in response to the IMF forecast. “Short-term challenges should not obscure our long-term prospects — the UK outperformed many forecasts last year, and if we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years.”
China reopens
The IMF revised China’s growth outlook sharply higher for 2023, to 5.2 percent from 4.4 percent in the October forecast after its ‘zero-COVID’ strategy held back the economy. China’s growth rate was 3.0 percent in 2022, below the global average for the first time in more than 40 years.
Still, the fund added that China’s growth will “fall to 4.5 percent in 2024 before settling at below 4 percent over the medium term amid declining business dynamism and slow progress on structural reforms”.
At the same time, it maintained India’s outlook for a dip in 2023 growth to 6.1 percent but a rebound to 6.8 percent in 2024, matching its 2022 performance.
Gourinchas said together, the two Asian powerhouse economies will contribute more than 50 percent of global growth in 2023.
He acknowledged that China’s reopening would put some upward pressure on commodity prices, but “on balance, I think we view the reopening of China as a benefit to the global economy” as it will help ease production bottlenecks that have worsened inflation and by creating more demand from Chinese households.
Even with China’s reopening, the IMF is predicting that oil prices will fall in both 2023 and 2024 due to lower global growth compared with 2022.
Risks
The IMF said there were both upside and downside risks to the outlook, with built-up savings creating the possibility of sustained demand growth, particularly for tourism, and an easing of labour market pressures in some advanced economies helping to cool inflation, lessening the need for aggressive rate hikes.
But it detailed more and larger downside risks, including more widespread COVID-19 outbreaks in China and a worsening of the country’s property turmoil.
An escalation of the war in Ukraine could lead to a further spike in energy and food prices, as would a cold northern winter next year as Europe struggles to refill gas storage and competes with China for liquefied natural gas supplies, the fund said.
Gourinchas said central banks need to stay vigilant and be more certain that inflation is on a downward path, particularly in countries where real interest rates remain low, such as in Europe.
“So we’re just saying, look, bring monetary policy slightly above neutral at the very least and hold it there. And then assess what’s going on with price dynamics and how the economy is responding, and there will be plenty of time to adjust course, so that we avoid having overtightening,” Gourinchas said.
Third of world economy to hit recession in 2023, IMF head warns | International Monetary Fund (IMF)
For much of the global economy, 2023 is going to be a tough year as the main engines of global growth – the US, Europe and China – all experience weakening activity, the head of the International Monetary Fund has warned.
The new year is going to be “tougher than the year we leave behind,” IMF managing director Kristalina Georgieva said on the CBS Sunday morning news program Face the Nation on Sunday.
“Why? Because the three big economies – the US, EU and China – are all slowing down simultaneously,” she said.
“We expect one-third of the world economy to be in recession. Even countries that are not in recession, it would feel like recession for hundreds of millions of people,” she added.
2023 IMF PREDICTION: “We expect one-third of the world economy to be in recession,” IMF Managing Director Kristalina Georgieva tells @margbrennan. But, a strong U.S. labor market might help the world get through a difficult year, she says. pic.twitter.com/Vbhj478pFo
— Face The Nation (@FaceTheNation) January 1, 2023
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2023 IMF PREDICTION: “We expect one-third of the world economy to be in recession,” IMF Managing Director Kristalina Georgieva tells @margbrennan. But, a strong U.S. labor market might help the world get through a difficult year, she says. pic.twitter.com/Vbhj478pFo
— Face The Nation (@FaceTheNation) January 1, 2023
In October, the IMF cut its outlook for global economic growth in 2023, reflecting the continuing drag from the war in Ukraine as well as inflation pressures and the high interest rates engineered by central banks like the US Federal Reserve aimed at bringing those price pressures to heel.
Georgieva said that China, the world’s second-largest economy, is likely to grow at or below global growth for the first time in 40 years as Covid-19 cases surge following the dismantling of its ultra-strict zero-Covid policy.
“For the first time in 40 years, China’s growth in 2022 is likely to be at or below global growth,” Georgieva said.
2023 will be a difficult year for the world. The silver lining is we can use it to transform economies & accelerate change that’s good for our climate, good for growth. At the IMF, we recognize our responsibility to be a force for good. Watch the event: https://t.co/Yv1TvfCytH pic.twitter.com/lsrXDDLNyy
— Kristalina Georgieva (@KGeorgieva) December 29, 2022
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2023 will be a difficult year for the world. The silver lining is we can use it to transform economies & accelerate change that’s good for our climate, good for growth. At the IMF, we recognize our responsibility to be a force for good. Watch the event: https://t.co/Yv1TvfCytH pic.twitter.com/lsrXDDLNyy
— Kristalina Georgieva (@KGeorgieva) December 29, 2022
Moreover, a “bushfire” of expected Covid infections there in the months ahead are likely to further hit its economy and drag on both regional and global growth, said Georgieva, who traveled to China on IMF business late last month.
“For the next couple of months, it would be tough for China, and the impact on Chinese growth would be negative, the impact on the region will be negative, the impact on global growth will be negative,” she said.
Meanwhile, Georgieva said, the US economy is standing apart and may avoid the outright contraction that is likely to afflict as much as a third of the world’s economies.
The “US is most resilient,” she said, and it “may avoid recession. We see the labour market remaining quite strong.”
“This is … a mixed blessing because if the labour market is very strong, the Fed may have to keep interest rates tighter for longer to bring inflation down,” Georgieva said.
The US job market will be a central focus for Federal Reserve officials who would like to see demand for labour slacken to help undercut price pressures. The first week of the new year brings a raft of key data on the employment front, including Friday’s monthly nonfarm payrolls report, which is expected to show the US economy minted another 200,000 jobs in December and the jobless rate remained at 3.7% – near the lowest since the 1960s.
Reuters contributed to this report
Almost $100M exits US crypto funds in anticipation of hawkish monetary policy
Institutional investors offloaded $101.5 million worth of digital asset products last week in ‘anticipation of hawkish monetary policy’ from the U.S. Federal Reserve according to CoinShares.
U.S. inflation rates hit 8.6% year-on-year at the end of May, marking a return to levels not seen since 1981. As a result, the market is expecting the Fed to take considerable action to reel in inflation, with some traders pricing in three more 0.5% rate hikes by October.
According to the latest edition of CoinShares’ weekly Digital Asset Fund Flows report, the outflows between June 6 and June 10 were primarily led by investors from the Americas at $98 million, while Europe accounted for just $2 million.
Products offering exposure to crypto’s top two assets, Bitcoin (BTC) and Ethereum (ETH), accounted for nearly all outflows at $56.8 million and $40.7 million a piece. The month-to-date figures also paint a grim figure at $91.1 million worth of outflows for BTC products and $72.3 million in total outflows for ETH products.
“What has pushed Bitcoin into a “crypto winter” over the last six months can by and large be explained as a direct result of an increasingly hawkish rhetoric from the US Federal Reserve.”
While CoinShares suggested that Bitcoin has been pushed into a crypto winter, the year-to-date (YTD) inflows for BTC investment products still stand at $450.8 million. In comparison, funds offering exposure to ETH have seen hefty YTD outflows of $386.5 million, suggesting the sentiment amongst institutional investors still heavily favors digital gold.
The report also highlighted that the total assets under management (AUM) for Ether funds have “fallen from its peak of US$23bn in November 2021 to US$8.7bn” as of last week.
Notably, it appears that the institutional investors offloaded their BTC and ETH products before most of the latest price carnage happened to both assets.
Related: Bitcoin price drops to lowest since May as Ethereum market trades at 18.4% loss
According to data from CoinGecko, between June 6 and June 10, the price of BTC and ETH dropped 4.7% and 5.9% each. However, since June 11, BTC and ETH have plunged around 25.7% and 33.2% respectively.
Apart from BTC and ETH outflows, multi-asset funds saw outflows of $4.7 million, and Short Bitcoin products posted minimal outflows of $200,000. At the same time, investors also “steered clear of adding to altcoin positions.”
China cuts key rates, stepping up monetary stimulus effort to underpin economy
A man checks phone at Lujiazui financial district in Pudong, Shanghai, China March 14, 2019. REUTERS/Aly Song
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SHANGHAI, Jan 20 (Reuters) – China stepped up its monetary easing efforts to prop up a slowing economy this week by lowering a set of key policy rates and lending benchmarks, and markets believe Beijing could ease further before growth bottoms out.
With the property downturn seen persisting into 2022 and fast-spreading Omicron variant dampening consumer activity, many analysts expect more easing measures will be necessary, despite other major economies, including the United States, appearing set to tighten their monetary policies this year.
The one-year loan prime rate (LPR) was lowered by 10 basis points to 3.70% from 3.80%. And the five-year LPR was reduced by 5 basis points to 4.60% from 4.65%, the first reduction since April 2020.
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The LPR cuts were expected after official comments called for more monetary easing to prop up the broad economy.
All 43 participants in a snap Reuters poll predicted a cut to the one-year LPR for a second straight month. Among them, 40 respondents also forecast a reduction to the five-year LPR rate. read more
The cut to the 5-year LPR suggested that “the Chinese authorities are keen to lower the cost of credit lending, so the total credit growth is expected to rebound after the Spring Festival to ease the pressure on macro economy,” said Marco Sun, chief financial analyst at MUFG.
“China’s monetary policy still has some room for easing in the first half of this year, depending on the policy transmission effect and the growth target set by annual parliamentary meeting in March.”
China’s central bank “should hurry up, make our operations forward-looking, move ahead of the market curve, and respond to the general concerns of the market in a timely manner,” People’s Bank of China Vice Governor Liu Guoqiang said on Tuesday, heightening market expectations for more stimulus to help economic stability. read more
Sheana Yue, China economist at Capital Economics, expects a further 20 basis point cut to the one-year LPR during the first half of this year.
Liu’s comments followed unexpected cuts to borrowing costs for short- and medium-term loans this week, after December economic data showed further weakening in consumption and the troubled property sector, both major growth drivers. read more
Interest rates on medium-term lending facilities (MLF) now serve as a guide to the LPR. Market participants believe moves to the LPR should mimic adjustments to MLF rates.
Most new and outstanding loans in China are based on the one-year LPR. The five-year rate influences the pricing of mortgages.
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Reporting by Winni Zhou and Andrew Galbraith; Editing by Muralikumar Anantharaman, Christopher Cushing and Gerry Doyle
Our Standards: The Thomson Reuters Trust Principles.
Asia stocks bounce from one-year low, China gains on monetary easing
SINGAPORE, Dec 7 (Reuters) – Asian shares staged a recovery on Tuesday on receding worries about the impact of the Omicron variant while Chinese markets were supported by the central bank easing monetary policy.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) advanced 1.3% and was on course for its biggest jump in two months, after declining on Monday to the lowest level in one year.
Euro Stoxx 50 futures rose 0.5% and FTSE futures put on 0.08% in early trade, indicating a firm market open after European stocks ended higher on Monday.
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China’s CSI300 index (.CSI300) gained 0.6% and Hong Kong’s Hang Seng Index (.HSI) advanced 1.7% as the central bank freed up $188 billion in liquidity through a policy easing. read more
“With this cut, policymakers are demonstrating a more forceful approach to prevent an all-out property market rout,” David Chao, global market strategist, Asia Pacific, ex-Japan, at Invesco said in a note.
The People’s Bank of China said on Monday it would cut the amount of cash that banks must hold in reserve, its second such move this year, releasing the funds in long-term liquidity to bolster slowing economic growth.
China is in a mid-cycle slowdown and the RRR cut is exactly what the economy needs to get back on track, said Chao. “It’s feasible that more RRR cuts are in store over the next year in order to stabilize growth,” he added.
Elsewhere, Australia’s S&P/ASX200 (.AXJO) rose 0.95%, while Japan’s Nikkei (.N225) advanced 2.1% as risk-on sentiment pushed markets higher.
MSCI’s main Asia ex-Japan benchmark has lost about 5% so far this year, with Hong Kong markets figuring among the big losers, while Indian (.BSESN) and Taiwanese stocks (.TWII) outperformed.
Shares in embattled developer Evergrande (3333.HK) edged up 1.7% after hitting a record low on Monday as markets awaited to see if the real estate giant has paid $82.5 million with a 30-day grace period coming to an end.
Elsewhere, markets were supported by gains on Wall Street, where economically sensitive stocks outperformed.
“While epidemiologists have rightly warned against premature conclusions on Omicron, markets arguably surmised that last week’s brutal sell-off ought to have been milder,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, said in a note.
“After all, early assessments of Omicron cases have been declared mild, spurring half-full relief.”
Omicron has spread to about a third of U.S. states, but the Delta version accounts for the majority of COVID-19 infections in the United States, health officials said on Sunday. read more
Dr. Anthony Fauci, the top U.S. infectious disease official, told CNN it does not look like Omicron has a “great degree of severity.”
Stocks on Wall Street closed higher on Monday.
The risk-on mood also helped the dollar climb against safe haven currencies such as the Japanese yen, , which lost 0.6% overnight, while the risk-friendly Australian dollar also found buyers.
Also supporting the dollar was the expectation the Federal Reserve will accelerate the tapering of its bond-buying program when it meets next week in response to a tightening labour market.
Oil prices ticked higher, consolidating a nearly 5% rebound the day before as concerns about the impact of the Omicron variant on global fuel demand eased.
Brent crude futures strengthened 0.9% to $73.7 a barrel, after settling 4.6% higher on Monday.
Gold prices were steady at $1,778.5 per ounce on expectations U.S. consumer price data due later this week will show inflation quickening.
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Reporting by Anshuman Daga; Editing by Sam Holmes and Lincoln Feast.
Our Standards: The Thomson Reuters Trust Principles.
Since 2008, Monetary Policy Has Cost American Savers about $4 Trillion
After 13 years with on average negative real returns to savings, it is time to require the Fed to address its impact on savers.
By Alex J. Pollock, Senior Fellow at the Mises Institute.
With inflation running at over 6 percent and interest rates on savings near zero, the Federal Reserve is delivering a negative 6 percent real (inflation-adjusted) return on trillions of dollars in savings. This is effectively expropriating American savers’ nest eggs at the rate of 6 percent a year.
It is not only a problem in 2021, however, but an ongoing monetary policy problem of long standing. The Fed has been delivering negative real returns on savings for more than a decade. It should be discussing with the legislature what it thinks about this outcome and its impacts on savers.
The effects of central bank monetary actions pervade society and transfer wealth among various groups of people — a political action. Monetary policies can cause consumer price inflations, like we now have, and asset price inflations, like those we have in equities, bonds, houses, and cryptocurrencies. They can feed bubbles, which turn into busts. They can by negative real yields push savers into equities, junk bonds, houses, and cryptocurrencies, temporarily inflating prices further while substantially increasing risk. They can take money away from conservative savers to subsidize leveraged speculators, thus encouraging speculation. They can transfer wealth from the people to the government by the inflation tax. They can punish thrift, prudence, and self-reliance.
Savings are essential to long-term economic progress and to personal and family financial well-being and responsibility. However, the Federal Reserve’s policies, and those of the government in general, have subsidized and emphasized the expansion of debt, and unfortunately appear to have forgotten savings. The original theorists of the savings and loan movement, to their credit, were clear that first you had “savings,” to make possible the “loans.” Our current unbalanced policy could be described, instead of “savings and loans,” as “loans and loans.”
As one immediate step, Congress should require the Federal Reserve to provide a formal savers impact analysis as a regular part of its Humphrey-Hawkins reports on monetary policy and targets. This savers impact analysis should quantify, discuss, and project for the future the effects of the Fed’s policies on savings and savers, so that these effects can be explicitly and fairly considered along with the other relevant factors.
The critical questions include: What impact is Fed monetary policy having on savers? Who is affected? How will the Fed’s plans for monetary policy affect savings and savers going forward?
Consumer price inflation year over year as of October 2021 is running, as we are painfully aware, at 6.2 percent. For the ten months of 2021 year-to-date, the pace is even worse than that—an annualized inflation rate of 7.5 percent.
Facing that inflation, what yields are savers of all kinds, but notably including retired people and savers of modest means, getting on their savings? Basically nothing.
According to the Federal Deposit Insurance Corporation’s October 18, 2021, national interest rate report, the national average interest rate on savings account was a trivial 0.06 percent. On money market deposit accounts, it was 0.08 percent; on three-month certificates of deposit, 0.06 percent; on six-month CDs, 0.09 percent; on six-month Treasury bills, 0.05 percent; and if you committed your money out to five years, a majestic CD rate of 0.27 percent.
I estimate, as shown in the table below, that monetary policy since 2008 has cost American savers about $4 trillion.
The table assumes savers can invest in six-month Treasury bills, then subtracts from their average interest rate the matching inflation rate, giving the real interest rate to the savers. This is on average quite negative for these years. I calculate the amount of savings effectively expropriated by negative real rates. Then I compare the actual real interest rates to an estimate of the normal real interest rate for each year, based on the fifty-year average of real rates from 1958 to 2007. This gives us the gap the Federal Reserve has created between the actual real rates over the years since 2008 and what would have been historically normal rates. This gap is multiplied by household savings, which shows us by arithmetic the total gap in dollars.
*Total household savings consists of time and savings deposits, money market fund shares, and Treasury bills
** Normal real rate is the average of 6-month Treasury bill yields minus CPI inflation, 1958-2007, =1.66%
Sources: Federal Reserve Statistical Release, Financial Accounts of the United States – Z.1, U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items in U.S. City Average, & Board of Governors of the Federal Reserve System (US), 6-Month Treasury Bill Secondary Market Rate
To repeat the answer: a $4 trillion hit to savers.
The Federal Reserve through a regular savers impact analysis should be having substantive discussions with Congress about how its monetary policy is affecting savings, what the resulting real returns to savers are, who the resulting winners and losers are, what the alternatives are, and how its plans will impact savers going forward.
After thirteen years with on average negative real returns to conservative savings, it is time to require the Federal Reserve to address its impact on savers. By Alex J. Pollock, Senior Fellow at the Mises Institute.
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