Banks can determine interest rates as cartelisation ends
The Nepal Bankers Association has decided to end the gentleman's agreement on interest rates.
The post Banks can determine interest rates as cartelisation ends appeared first on OnlineKhabar English News.
KATHMANDU, July 28: Banks and financial institutions will now be allowed to provide loans at an interest rate lower than their base rate. The Central Bank has made such an arrangement by issuing a circular on Friday.
However, for such loans, the Nepal Government/Provincial Gover
ROME, May 3: European banking stocks fell sharply on Tuesday in the wake of the failure and subsequent takeover of United States-based First Republic Bank.
Markets have also been negatively affected by speculation over interest rate hikes in the United States and Europe, with of
UNITED NATIONS, June 9: The world is facing a cost-of-living crisis unseen in at least a generation, partly due to the Ukraine conflict, said a UN report on Wednesday.
"The largest cost-of-living crisis of the 21st century has come when people and countries have a limited capacity to cope," said the second report of the Global Crisis Response Group on Food, Energy and Finance over the Ukraine conflict.
The Ukraine conflict has trapped the people of the world between a rock and a hard place. The rock is the severe price shocks in food, energy and fertilizer markets, given the centrality of both Russia and Ukraine in these markets. The hard place is the extremely fragile context in which this crisis arrived: a world facing the cascading crises of COVID-19 and climate change, it said.
"A shock of this magnitude would have been a significant challenge no matter the timing. Now, it is of historic, century-defining proportions," the report said.
The Food and Agriculture Organization's food price index is at near-record levels and 20.8 percent higher than at this time last year. Energy market volatility has increased with the recognition that a prolonged conflict will lead to higher energy prices in the medium to long term. Crude oil has now reached over 120 U.S. dollars per barrel and energy prices overall are expected to rise by 50 percent in 2022 relative to in 2021. Fertilizer prices are more than double the 2000-2020 average. Maritime transport costs are more than triple the pre-pandemic average due to the lingering effects of COVID-19 and the destruction of the transport infrastructure of Ukraine, as well as higher volume of traffic- and congestion-related delays and other factors such as rising fuel costs, said the report.
Rising interest rates and growing investor uncertainty have eroded both the value of developing countries' currencies, as well as their capacity to borrow in foreign markets, it said.
"Of greatest concern are the vicious cycles beginning to emerge along the transmission channels of the crisis," said the report.
Higher energy prices, especially diesel and natural gas, increase the costs of fertilizers and transport. Both factors increase the costs of food production. This leads to reduced farm yields and to even higher food prices next season. These, in turn, add to inflation metrics, contributing to what were already increasing interest rate pressures and tightening financial conditions. Tighter financial conditions erode the buying power of the currencies of developing countries, further increasing the import costs of food and energy, reducing fiscal space and increasing the costs of servicing debt, it said.
The vicious cycles created by a cost-of-living crisis can also spark social and political instability, warned the report.
To break the vicious cycles that feed into and accelerate this cost-of-living crisis, two broad approaches are required: mitigating the impacts of the shock and increasing the capacity of people and countries to cope, it said.
To mitigate the impacts of the crisis, markets must be made more stable and debt and commodity prices must be stabilized. This is critical to immediately restore the availability of food for all people and all countries with equitable and adequate supplies at accessible prices.
An effective solution to the food crisis cannot be found without reintegrating food production in Ukraine, as well as food and fertilizers produced in Russia, into global markets. Other initiatives include continuing to release strategic food and energy stockpiles into markets, controlling hoarding and other speculative behavior, avoiding unnecessary trade restrictions and committing to increased efficiency in the use of energy and fertilizers in developed countries, said the report.
To increase the capacity of people and countries to cope, social protection systems and safety nets must be widened and fiscal space must be increased, it said.
Social protection measures and fiscal space are, in fact, linked. Countries need support from the financial institutions to increase their fiscal space to, in turn, increase social protection spending, including cash transfers to the most vulnerable. The international community needs to help countries protect their poor and vulnerable, it said.
There is no answer to the cost-of-living crisis without an answer to the crisis of finance in developing countries, said the report.
Existing international financing mechanisms to support strong national fiscal responses need to be fully funded and operationalized quickly. Multilateral development banks must be capitalized and apply more flexible lending ratios.
The global debt architecture is not ready to face the current crisis, which arrives during a moment of record-high debt levels and rising interest rates. Current tighter monetary conditions increase the risk of a systemic debt crisis, said the report.
The Group of 20's Debt Service Suspension Initiative should be renewed, and maturities should be pushed back by two to five years. The Common Framework for Debt Treatment needs to be improved. A systematic approach to multilateral debt restructuring and relief, which includes vulnerable middle-income countries, must also be pursued to ensure long-term solutions to current challenges, it said.
UN Secretary-General Antonio Guterres called for immediate action. "The message of today's report is clear and insistent: we must act now to save lives and livelihoods over the next months and years. It will take global action to fix this global crisis. We need to start today."
UN Conference on Trade and Development Secretary-General Rebeca Grynspan, a member of the Steering Committee of the Global Crisis Response Group, who launched the report together with Guterres, also stressed the urgency of the matter.
"We are in a race against time. This is why we are calling for action, action, and action. Dealing with the consequences of inaction -- let me assure you -- will be much more costly for all than acting now," she said.
JUNE 8: Less developed countries in Europe and east Asia face a "major recession", it said.
The risk of high inflation and low growth - so-called "stagflation" - is also higher, World Bank President David Malpass said.
Energy and food bills have been rising around the world.
"The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid," Mr Malpass said.
He also warned in the World Bank's Global Economic Prospects report for June that the danger of stagflation was "considerable".
"Subdued growth will likely persist throughout the decade because of weak investment in most of the world. With inflation now running at multi-decade highs in many countries and supply expected to grow slowly, there is a risk that inflation will remain higher for longer."
Also on Tuesday, the World Bank approved $1.49bn (£1.2bn) of additional funding for Ukraine, which it said "will be used to pay for wages for government and social workers."
The new financing is part of a more than $4bn support package for the country, which covers areas including healthcare, education and sanitation.
More than a hundred days have passed since Russia's invasion of Ukraine, but only now is the sobering size of the shock waves hitting nations and households thousands of miles away from that epicentre becoming clear.
Developing nations were already struggling to get back on their feet. For every $20 households there typically earned pre-pandemic, they now only get $19.
But soaring food and energy costs threaten to throw livelihoods further into reverse, spelling misery and hardship for the most vulnerable.
And that's not just true for poorer countries. One survey shows one in six British households have turned to a food bank.
That global struggle could be compounded by the higher interest rates being used to ease inflation, just as government support to ease the impact of the pandemic is evaporating.
The World Bank is urging immediate action, from debt relief, to urging nations not to put restrictions on food exports.
Instead they want policymakers to show they are acting together to safeguard food and energy supplies, reassure volatile markets, and ease price spikes,.
Policymakers have already had to tackle an extraordinary battle.
But if we down tools now the World Bank suggests we could face an even more prolonged and painful crisis.
Hardship today doesn't just mean misery and social unrest, it can blight lives for years.
The countries in Europe that are most likely to suffer a sharp drop in economic output in 2022 are Ukraine and Russia, the World Bank forecast.
But it warned that the fallout from the war and the Covid pandemic would be wider.
"Even if a global recession is averted, the pain of stagflation could persist for several years - unless major supply increases are set in motion," Mr Malpass said.
Between 2021 and 2024, global growth is projected to slow by 2.7 percentage points, Mr Malpass said, more than twice the slow down seen between 1976 and 1979, when the world last saw stagflation.
The report warned that interest rate increases needed to control inflation at the end of the 1970s were so steep that they touched off a global recession in 1982, and a string of financial crises in emerging market and developing economies.
However, in the 1970s the dollar was weaker and oil was relatively more expensive.
Speaking to the BBC, Ayhan Kose, director of the World Bank's Prospects Group said "There is not much governments can easily do" to tackle rising energy prices.
"They shouldn't introduce export bans, they shouldn't introduce subsidies, they shouldn't introduce price controls," Mr Kose said.
"Those type of interventions distort prices and they translate into even higher prices," he added.
BRUSSELS, June 5: The EU on Friday adopted a sixth sanctions package against Russia, poised to phase out almost 90 percent of Russian oil imports into the bloc by the end of the year.
By targeting Russia's oil exports, the EU is trying to wean itself off the oil supplies from its single largest energy supplier, a move that will elevate the already-surging inflation and put its fragile economic growth at greater peril.
OIL EMBARGO
After a special summit held here, EU leaders agreed on Monday night to ban "more than two thirds" of Russian oil imports to the bloc, President of the European Council Charles Michel tweeted, referring to the move as a maximum pressure on Russia to end the ongoing conflict.
According to the measures, imports of crude oil from Russia to the EU by sea will be banned in six months while refined petroleum products will be phased out in eight months.
Deliveries of Russian crude via the Druzhba pipeline, one of the world's longest oil pipeline which runs through Poland, Germany, Hungary, Slovakia and the Czech Republic, will be exempt from the embargo for an indefinite time, local news outlets reported.
"Tonight #EUCO agreed a sixth package of sanctions. It will allow a ban on oil imports from #Russia. The sanctions will immediately impact 75% of Russian oil imports. And by the end of the year, 90% of the Russian oil imported in Europe will be banned," Michel tweeted.
WEIGH HEAVILY
It is not an easy move for the EU to cut off the import of Russian oil.
The 27-country EU relies on Russia for 30 percent of its oil consumption. In 2021, the EU imported 51 billion U.S. dollars of crude oil and 24.6 billion dollars of refined products from Russia.
In spite of the intensified efforts of the EU countries to secure oil supplies from other countries, industry analysts say it will be nearly impossible for the EU to fill the gap if Russian oil is totally banned.
Hungary, which imports 65 percent of its oil from Russia through pipelines, has asked for an exception from the ban along with Slovakia and the Czech Republic.
Hungary's Prime Minister Viktor Orban said that the EU sanctions against Russia will wreak havoc on the country's economy.
Commenting on the proposal to ban Russian oil imports, Ursula von der Leyen, president of the European Commission, said on May 4 that "finally, we now propose a ban on Russian oil. Let's be clear: it will not be easy."
The latest sanctions have been seriously questioned by some analysts especially at a time when high inflation is threatening the economic recovery in the EU.
The inflation in the euro area hit another historical high of 8.1 percent in May, the statistical office of the EU announced recently.
High inflation has become a challenge for EU members, with inflation rates climbing to 7.9 percent in Germany, 5.8 percent in France, 7.3 percent in Italy, 8.5 percent in Spain in May. In a few other countries including Slovakia and Greece, the inflation went up over 10 percent in April.
The European Commission forecast that the inflation in the EU could stand at 6.8 percent in 2022.
Stubbornly high inflation levels pile pressure on the European Central Bank (ECB) to tighten its monetary policies in order to tame price hikes. The market has been betting on an interest rate rise from the ECB in July.
The ECB warned earlier that the surging prices stemming mainly from soaring energy prices and disrupted supply chains can hardly be brought down by raising interest rates.
HONG KONG, April 27: European and Asian markets were mixed on Tuesday ahead of a big week of key events including the Federal Reserve's latest policy meeting, Joe Biden's State of the Union address and earnings from tech titans.
While trading floors are geared up for a rocket-fuelled surge in economic activity in the second half of the year and into the next thanks to vaccinations and the easing of lockdowns, investors are in wait-and-see mode for now.
The Fed's gathering, which concludes Wednesday, is broadly expected to see it reassert its pledge to maintain ultra-loose policy until its goals on unemployment and inflation are met, though its statement will be parsed for an idea about the state of the US
economy.
The central bank's meetings are a crucial focus of investor interest as they continue to fret that the expected strong recovery will send prices soaring and force policymakers to raise the record low interest rates that have been a pillar of the global rally.
"From what I can tell, the Fed is very close to meeting its objectives, but remains committed to keeping key short-term interest rates at or near zero through 2023," said markets strategist Louis Navellier.
"The truth of the matter is the Fed can never raise key short-term interest rates much, otherwise it risks blowing up the federal government's budget deficit, which is expected to cross above $30 trillion soon. So we will likely remain in an ultralow interest rate environment for the rest of our lifetimes!" Hilary Kramer, of Kramer Capital Research, was also upbeat.
"I am a bull," she told Bloomberg TV. Fed boss Jerome Powell "is going to make sure he keeps rates low, he's going to lag behind rather than trying to get ahead of inflation".
The release of earnings from Wall Street giants including Microsoft, Apple, Amazon and Google-parent Alphabet will be closely watched, with forecasts on the strong side.
The S&P 500 and Nasdaq both ended Monday at record highs. But Asia struggled to follow suit with most markets swinging in and out of positive territory. Tokyo, Hong Kong, Sydney, Seoul, Jakarta and Manila were all in the red but Singapore, Taipei, Mumbai and Bangkok edged up. Shanghai was marginally higher.
London rose soon after the open but Paris and Frankfurt dipped. Oil prices rose after taking a hefty hit in recent days on worries about the impact on demand from the frightening spread of the coronavirus in major consumer India, with a meeting of OPEC and other major producers also in focus.
Wednesday also sees Biden make his first State of the Union address to Congress, during which he could unveil a $1.8 trillion American Families Plan that would provide national child care, paid family leave and free community college, paid for with higher taxes on the rich.
