Brazil’s central bank 1% rate hike, as expected

Banco Central do Brasil​ hikes its benchmark interest rate to 6.25% from 5.25%.

Headlines via Reuters from the statement (bolding mine):


  • decision was unanimous
  • sees rate hike of the same magnitude at next meeting
  • in the current phase of rate hike cycle, this pace of adjustments is best to guarantee the anchoring of inflation expectations
  • sees robust economic recovery in the second half of year
  • baseline scenario and balance of risks indicate that an interest rate hike cycle should advance into contractionary territory
  • elevated fiscal risk creates an upward asymmetry in the balance of inflation risks
  •  the current pace of rate hikes will allow the committee to obtain more information regarding the state of the economy and the persistence of shocks
  • price increases for industrial goods have not subsided and should remain a pressure in the short run.
  •  new round of market discussion regarding inflationary risks in advanced economies could result in a challenging environment for emerging economies

BOJ March monetary policy meeting minutes – full text

Bank of Japan Minutes not shedding too much further light on policy deliberations

Headlines via Reuters:


  • members agreed YCC exerting intended policy effect
  • some members said review confirmed some fluctuations in bond yields won’t diminish impact of monetary easing
  • some members said must scrutinise financial system developments due to accumulating side-effects of easing on banking system
  • members agreed BOJ must respond flexibly, effectively without hesitation to changes in economic, price and financial developments
  • a few members said appropriate to stress anew that excessive falls in super-long bond yields could hurt economy in long run



The full text is here if you wish


Bank of Japan Minutes not shedding too much further light on policy deliberations

Maurice Pernot Autograph Manuscript Signed – Incredible Content About Gandhi #Mypersonalcollection #AnirudhSethi

Autograph manuscript in French, signed “Maurice Pernot” seven pages, 8.25 x 10.5, circa 1930. An untranslated article entitled “Gandhi, l’Inde et l’Empire,” discussing Mohandas Gandhi’s non-violent protest against the salt tax with the Salt March, the social condition of the ‘untouchables’ and women in India, English fabrics, and global opinion. In small part (translated):

Why did he choose his choice of Ahimsa (non-violence)? It is because he took as his starting point, not an abstract idea, but a present reality, India with its diverse peoples, its religious beliefs, its social traditions, India with its virtues and with its faults…He is still an active and a realist. inspires, it is on reality that it is based…The result? No one would dare to predict its importance…The logical solution of the Indian problem—as of all colonial problems—should undoubtedly be sought in a formula of political and economic association.

The coming debt and population problem

Death and taxes

Debt levels are set to rise to unprecedented levels. According to the International Monetary Fund in June the public debt, as a share of GDP in advanced economies, is set to come in at over 130% for this year and next. To put that into perspective that surpasses the debt levels from the second world war.If you look at the chart below you can see that the double whammy of the Global Financial Crisis, followed by the present pandemic is pushing debt to record levels.

Death and taxes


The population problem

The general thinking now is that the present crisis is a one in a hundred years kind of event (what if it isn’t) and that future generations will be able to claw back the debt levels over time. However, a publication from the Lancet in the UK suggests that there is a falling population that could fall by 9% at the end of the century. So, this means that there will be a large decline in numbers of working age adults. There are some countries which are projected to be particularly badly hit. Japan, Spain, Portugal, and Thailand are expected to see their populations halve by the end of the century. The countries which are projected to see 25% population declines are also projected to see a higher ration of older to younger people. So, more of this debt is going to be shouldered by fewer as an ageing population raises further spending considerations.

What will happen next?

There will be moves by governments to start to cap this debt problem. It will not be allowed to continue unless we get into worst disasters than we presently are in. The main concern is that of default. As long as willingness to repay remains, then the debt pile can be reduced. The main risk is if the debt becomes too great and the easiest solution is to just walk away…

Full statement of the BOE August monetary policy meeting decision

The full statement by the BOE on its August policy decision

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. In that context, its challenge at present is to respond to the economic and financial impact of the Covid-19 pandemic. At its meeting ending on 4 August 2020, the MPC voted unanimously to maintain Bank Rate at 0.1%. The Committee voted unanimously for the Bank of England to continue with its existing programmes of UK government bond and sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, maintaining the target for the total stock of these purchases at £745 billion.

The Committee’s projections for activity and inflation are set out in the accompanying August Monetary Policy Report. Although recent developments suggest a less weak starting point for the Committee’s latest projections, it is unclear how informative they are about how the economy will perform further out. The outlook for the UK and global economies remains unusually uncertain. It will depend critically on the evolution of the pandemic, measures taken to protect public health, and how governments, households and businesses respond to these factors. The MPC’s projections assume that the direct impact of Covid-19 on the economy dissipates gradually over the forecast period. Given the inherent uncertainties regarding the evolution of the pandemic, the MPC’s medium-term projections are a less informative guide than usual.

Global activity has strengthened over recent months, although it generally remains below its level in 2019 Q4. Covid-19 has continued to spread rapidly within a number of emerging market economies, however, and there has been a renewed rise in cases in many advanced economies. (more…)

Japan PM Abe: Current situation does not call for state of emergency declaration

Comments by Japanese prime minister, Shinzo Abe

  • Coronavirus cases are rising, government is watching closely
It is clear that the virus situation across the country is not getting any better as the curve is steepening as the days go by. Japan reported a single day record of 980 new virus cases yesterday, with infections also picking up outside of Tokyo.
Osaka is reported to find 149 new cases today and that would be the daily record for the prefecture, with Tokyo having found another 260 new cases as reported earlier.
As much as the government insists that things are “under control”, you have to wonder where will they draw the line and say that they have made a mess of the situation.
Eventually, the fear of the virus spread in itself will take a toll on the economy – as much as the government wants to keep business activity running for as long as they can afford to. Unfortunately, that comes at the costs of people’s health and well being, and at worst lives.

John Kenneth Galbraith, an economist, says the financial markets are characterized by…

“…extreme brevity of the financial memory.  In consequence, financial disaster is quickly forgotten.  In further consequence, when the same or closely similar circumstances occur again, SOMETIMES IN A FEW YEARS, they are hailed by a new, often youthful, and always extremely self-confident generation as a brilliantly innovative discovery in the financial and larger economic world.  There can be few fields of human endeavor in which history counts for so little as in the world of finance.” [emphasis mine].

Moody’s affirms USA credit rating at Aaa, outlook stable

Moody’s not interested in a lawsuit

Print all you like, spend all you like. No one is downgrading the USA after S&P did and the government sued them for $1.5B for mortgages. Even the company knew what it was all about.
At the same time, a country that prints its own money can’t default. But they can devalue.

Flood of Japanese money rushing to USD assets

Bloomberg report on Japanese investors, facing ongoing negative rates domestically, are buying dollars and risk assets

  • “The presence of the Japanese as the main carry trade driver seems to be growing as they must turn to overseas investments”
Demand for higher-yielding American assets growing
  • In April, Japan’s money managers bought the most U.S. corporate debt in eight years and the second-highest amount of equities in five years
  • “Japanese investors use yen to fund purchases of Treasuries or U.S. corporate bonds, for instance, to seek credit spreads and these flows are continuing,” said Koichi Sugisaki, a strategist at Morgan Stanley MUFG Securities Co. in Tokyo.
Check out USD/JPY … its net more or less unchanged, even a little lower, since November last year …. Without all the Japanese money leaving yen into USD it’d have to be lower I guess?
Bloomberg report on Japanese investors, facing ongoing negative rates domestically, are buying dollars and risk assets 

Fitch Revises India’s Outlook to Negative, Affirms IDR at ‘BBB-‘ Full Text

Fitch Ratings has revised the Outlook on India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable and affirmed the rating at ‘BBB-‘.



The revision of the Outlook to Negative on India’s Long-Term IDRs reflects the following key rating drivers:

The coronavirus pandemic has significantly weakened India’s growth outlook for this year and exposed the challenges associated with a high public-debt burden. Fitch expects economic activity to contract by 5% in the fiscal year ending March 2021 (FY21) from the strict lockdown measures imposed since 25 March 2020, before rebounding by 9.5% in FY22. The rebound will mainly be driven by a low-base effect. Our forecasts are subject to considerable risks due to the continued acceleration in the number of new COVID-19 cases as the lockdown is eased gradually. It remains to be seen whether India can return to sustained growth rates of 6% to 7% as we previously estimated, depending on the lasting impact of the pandemic, particularly in the financial sector.

The humanitarian and health needs have been pressing, but the government has shown expenditure restraint so far, due to the already high public-debt burden going into the crisis, with additional relief spending representing only about 1% of GDP by our estimates. Most elements of an announced package totalling 10% of GDP are non-fiscal in nature. Some further fiscal spending of up to 1 percentage point of GDP may still be announced in the next few months, which was indicated by a recent announcement of additional borrowing for FY21 of 2% of GDP, although we do not expect a steep rise in spending. (more…)

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