After a week of tension in financial markets the European Central Bank (ECB) became the first mover in a global test of how concerns about a potential banking crisis might influence monetary policy — and kept its focus at least for now on fighting inflation with a half-point rate increase.
Foreshadowing a risk-management decision the US Federal Reserve is to face next week, the ECB’s policy statement on Thursday led with what has become a common refrain among central bankers — “inflation is projected to remain too high for too long” — while insisting it can ensure financial stability even as interest rates keep rising.
“We are not waning on our commitment to fight inflation... The determination is intact,” ECB President Christine Lagarde said in remarks after the policy decision. “There is no tradeoff between price stability and financial stability... We are addressing the price stability issue by raising the interest rate by 50 basis points.”
Photo: EPA-EFE
“Separate from that, we are also monitoring market tensions” and would be prepared to provide additional support for financial institutions if necessary, she added.
Lagarde’s firewall between two complex problems is something Fed officials are also likely to embrace, and hope it proves effective as they decide how to balance their own unfinished inflation battle against concerns their aggressive rate hikes over the past year are beginning to bite harder on the economy.
Lagarde said her outlook was conditioned on a “baseline” projection set before the failure of Silicon Valley Bank in the US last week, the announcement by the Fed of a new liquidity program as a result and new uncertainty closer to home in the troubles faced by Credit Suisse, an institution domiciled outside the eurozone, but deeply connected.
US policymakers will have had more time to digest market developments before their meeting on Tuesday and Wednesday next week, and build that into their rate decision, as well as into longer-term projections for where the economy and monetary policy are heading in the coming months and years.
Recent US economic data have given the Fed little reason to declare victory over inflation, with consumer prices still rising at a 6 percent annual rate, and only initial indications of a significant easing in hiring and wage growth — something US policymakers feel will be needed for inflation to cool.
Jobless claims fell below 200,000 for the week ending Saturday last week, while housing starts last month surged, unexpected strength from one of the sectors of the economy considered most sensitive to rising interest rates.
After volatile moves in bond and rate futures markets this week, traders in securities tied to Fed policy expected — at least as of midday Thursday — that the US central bank would move ahead with another quarter-point rate increase.
Nvidia Corp CEO Jensen Huang (黃仁勳) is expected to miss the inauguration of US president-elect Donald Trump on Monday, bucking a trend among high-profile US technology leaders. Huang is visiting East Asia this week, as he typically does around the time of the Lunar New Year, a person familiar with the situation said. He has never previously attended a US presidential inauguration, said the person, who asked not to be identified, because the plans have not been announced. That makes Nvidia an exception among the most valuable technology companies, most of which are sending cofounders or CEOs to the event. That includes
TARIFF TRADE-OFF: Machinery exports to China dropped after Beijing ended its tariff reductions in June, while potential new tariffs fueled ‘front-loaded’ orders to the US The nation’s machinery exports to the US amounted to US$7.19 billion last year, surpassing the US$6.86 billion to China to become the largest export destination for the local machinery industry, the Taiwan Association of Machinery Industry (TAMI, 台灣機械公會) said in a report on Jan. 10. It came as some manufacturers brought forward or “front-loaded” US-bound shipments as required by customers ahead of potential tariffs imposed by the new US administration, the association said. During his campaign, US president-elect Donald Trump threatened tariffs of as high as 60 percent on Chinese goods and 10 percent to 20 percent on imports from other countries.
Taiwanese manufacturers have a chance to play a key role in the humanoid robot supply chain, Tongtai Machine and Tool Co (東台精機) chairman Yen Jui-hsiung (嚴瑞雄) said yesterday. That is because Taiwanese companies are capable of making key parts needed for humanoid robots to move, such as harmonic drives and planetary gearboxes, Yen said. This ability to produce these key elements could help Taiwanese manufacturers “become part of the US supply chain,” he added. Yen made the remarks a day after Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) said his company and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) are jointly
MARKET SHIFTS: Exports to the US soared more than 120 percent to almost one quarter, while ASEAN has steadily increased to 18.5 percent on rising tech sales The proportion of Taiwan’s exports directed to China, including Hong Kong, declined by more than 12 percentage points last year compared with its peak in 2020, the Ministry of Finance said on Thursday last week. The decrease reflects the ongoing restructuring of global supply chains, driven by escalating trade tensions between Beijing and Washington. Data compiled by the ministry showed China and Hong Kong accounted for 31.7 percent of Taiwan’s total outbound sales last year, a drop of 12.2 percentage points from a high of 43.9 percent in 2020. In addition to increasing trade conflicts between China and the US, the ministry said
RSS