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BOJ Member Kataoka Suggests Monetary Policy Expansion

Japanese policymakers plan to expand the country’s monetary policies in the recent review in September that sums up the opinions of the Bank of Japan’s board members meeting on Friday. This implies that the divisions are improving directed by the policies.

Majority of the board members agrees to sustain the current stimulus program even if it would take time to reach the inflation target rate of 2 percent. Although, it was not clear who gave comments in particular and which direction it would go.

One member, Goushi Kataoka has expressed contradiction on keeping the rates and be hawkish instead, implying that the current policy is not enough to boost the inflation and reach the 2 percent target. He specifically mentions the need for an expansion of monetary easing since the sales tax are expected to be increased in October 2019 moving towards the goal.

Some members raised concerns regarding the serious problem of North Korea and how it would affect the country. A member commented that if the geopolitical tension further escalated, the BOJ has to be ready in handling the situation by making necessary policy adjustments to avert the deflationary idea.

The monetary policy meeting of the BOJ has kept its short-term interest rate target at -0.1 percent and a potential to set the 10-year government bond yields close to zero percent. The central bank already expects that the price target of the central bank would take some time and requires patience to keep the current policy.

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British Economy Soften in Third Quarter, says CBI

The growth in the UK private sector had reduced marginally during the third quarter, as mentioned in the industry poll issued on Sunday, amid the optimistic outlook of various firms in the following months.

The monthly indicator of the Confederation of British Industry for the output for manufacturers, retailers and services companies is down to +11, compared with the +14 for the three months to August. Even though there are mixed expectations, the overall data for the next quarter is anticipated to perked up to +18 which is two points from August.

The survey of the CBI signaled that it is impossible to persuade the rate setters of the BoE who stated that interest rates would increase sooner or later, in consideration of the continuous economic development and price growth.

The Office for National Statistics (ONS) mentioned last week that the British economy had an uptick on its slowest annual pace in 2013 subsequent to the EU exit in 2016. As indicated in the Reuters poll last week, many economists predicted that rate hikes will be in November while the other respondents believed that it is inappropriate to imply such action.

Australia’s Consumer Confidence Slightly Declined

The consumer confidence in Australia declined last week due to the current and future finances sentiment and risks on longer-term outlook remains.

The ANZ-Roy Morgan Consumer Confidence Index slipped by 0.6 percent to 113.4 during the week until October 1st, showing a positive sentiment to the economic situation offset by the decline in the prospect of households based on personal finances.

Moreover, consumers are confident regarding the current and future conditions of the economy and came in at 2.5 percent last and 2.0 percent accordingly. However, the household’s outlook is down to 1.6 percent.

Felicity Emmett, ANZ Senior Economist, stated that the financial condition remains above average in the longer-term even though its stability became shaky. The index for buying household goods lowered down by 3.3 percent, as the increased last week eased off and keep below the long-term average. This coincided with the forecast on retail sales for the month of August which has the tendency to decline due to the recovery period.

Furthermore, expectations for inflation revised upward from 0.1 percent to 4.5 percent based on the four-week moving average.

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Australia’s Consumer Confidence Slightly Declined

The consumer confidence in Australia declined last week due to the current and future finances sentiment and risks on longer-term outlook remains.

The ANZ-Roy Morgan Consumer Confidence Index slipped by 0.6 percent to 113.4 during the week until October 1st, showing a positive sentiment to the economic situation offset by the decline in the prospect of households based on personal finances.

Moreover, consumers are confident regarding the current and future conditions of the economy and came in at 2.5 percent last and 2.0 percent accordingly. However, the household’s outlook is down to 1.6 percent.

Felicity Emmett, ANZ Senior Economist, stated that the financial condition remains above average in the longer-term even though its stability became shaky. The index for buying household goods lowered down by 3.3 percent, as the increased last week eased off and keep below the long-term average. This coincided with the forecast on retail sales for the month of August which has the tendency to decline due to the recovery period.

Furthermore, expectations for inflation revised upward from 0.1 percent to 4.5 percent based on the four-week moving average.

UK Inflation Ranked First Among The G7: OECD

According to the statistics issued by the Organisation for Economic Co-operation and Development (OECD), the cost of living in Britain increased faster compared to other countries, including the so-called ‘G7 leading global economies’. Based on the revealed figures, the British economy has the highest inflation rate among top economies of the world, as the Brexit weighed on the sterling pound and continue to put pressure on household finances.

Inflation in the United Kingdom rose to 2.9% last month due to a surge in prices of fuel and clothing which exacerbate the pressure towards cash-strapped households struggling with slow wage growth. The UK was able to overcome the 1.7% average, which is also greater than the recorded inflation of other G7 members (Canada, France, Germany, Italy, Japan and the United States). It also exceeded the OECD average percentage of 2.2%, this further indicates that Britain surmounted the European Union including other G20 nations, showing results at .5%, 1.7%, and 2.3%.

However, the Britons are currently facing poor wage growth and high expenditure on the back of a weaker pound. This is because of the Brexit referendum that heightened prices for energy, imported goods, and services. Furthermore, United Kingdom is only behind Estonia, Latvia, Mexico, and Turkey.

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Miscalculation of ONS Affected BoE’s Possible Rate Hike

The Office for National Statistics of UK further put pressure on the Bank of England over the issue of the rate hike next month after it lacks confidence to the pacing of the labor costs. On Monday, the official statistics agency admitted the mistakes made on its initial estimates for the growth of wage costs unit. The calculation is shown an annualized 2.4 percent in three months to June against the earlier published 1.6 percent on Friday.

The upward revision indicates that growth wages in Britain could be a driving force closely examined by Threadneedle Street, while there is a possible rate increase for the first time in the past decade. Moreover, the growing labor costs imply the strengthening of the economy, confirming a raise in interest rates.

The borrowing cost would likely boost from 0.25% to 0.5% and the committee for the monetary policy should decide whether the economy is capable to come up with the increase.

Regardless of the optimistic signs of the economy, there are varying prospects for a weaker scenario. As reports from the construction sector revealed signs for a possible downturn. While the Organisation for Economic Co-operation and Development, on the other hand, predicted that UK economy will slow-up in 2018.

Furthermore, analysts from Swiss bank UBS mentioned that the rate hike could worsen the potential reversal of the British economy due to Brexit procedures.

The wages of British laborers were not able to surge over inflation rate since the 1970s in spite of low levels of unemployment. However, salary growth is improving but fail to keep its pace due to a high cost of living brought by imports value relative to the sluggish pound.

Rise in German Exports and Bigger Trade surplus in August

Exports from Germany surpassed imports in August bringing the gap of the trade surplus wider and reflects the performance of the Europe’s biggest economy where it appears to be robust in the third quarter on Tuesday.

The exports were seasonally adjusted and climbed by 3.1 percent for October while imports got higher by 1.2 percent according to the data from the Federal Statistics Office. This has been the highest growth of exports in twelve months.

Overall, both exports and imports had operated better than anticipated. A poll from Reuters noted that the exports increased by 1.0 percent and imports ascended by 0.5 percent. On the other hand, the seasonally adjusted trade surplus gapped much bigger at 21.6 billion euros or $25.42 billion after adjustment on 19.3 billion euros in July. The reading from August was much elevated than the predicted figure of 20.0 billion euros from Reuters.

The wider account surplus shows the exchange of goods, services, and investment as it dropped to 17.8 billion euros and revised upwards to 19.6 billion euros in July which is not modified.