Major central banks should press ahead with interest rate increases, the Bank for International Settlements (BIS) said yesterday, while recognising that some turbulence in financial markets will have to be negotiated along the way.
The BIS, an umbrella body for leading central banks, said in one of its most upbeat annual reports for years that global growth could soon be back at long-term average levels after a sharp improvement in sentiment over the past year.
Though pockets of risk remain because of high debt levels, low productivity growth and dwindling policy firepower, the BIS said policymakers should take advantage of the improving economic outlook and its surprisingly negligible effect on inflation to accelerate the “great unwinding” of quantitative easing programmes and record low interest rates.
New technologies and working practices are likely to be playing a role in suppressing inflation, it said, though normal impulses should kick in if unemployment continues to drop.
“Since we are now emerging from a very long period of very accommodative monetary policy, whatever we do, we will have to do it in a very careful way,” BIS’s head of research, Hyun Song Shin said. “If we leave it too late, it is going to be much more difficult to accomplish that unwinding. Even if there are some short-term bumps in the road it would be much more advisable to stay the course and begin that process of normalisation.”
Mr Shin added that it will be “very difficult, if not impossible” to remove all those bumps.
Good communication from central bankers will be important, but even more crucial is the need for banks to be strong enough to cope with any turbulence.
The BIS identified four main risks to the global outlook in the medium-term.
A sudden flare-up of inflation which forces up interest rates and hurts growth, financial stress linked to the contraction phase of financial cycles, a rise in protectionism and weaker consumption not offset by stronger investment.
The first seems unlikely for now at least, with Mr Shin saying that the BIS, like many, had been surprised that inflation and wage growth has remained so subdued as growth in major economies has picked up.
The question for central bankers, therefore, is whether new technologies and working practices had fundamentally changed the inputs in their economic models and whether it is right to keep such a heavy focus on keeping inflation at certain levels - near 2 per cent for likes of the European Central Bank and US Federal Reserve.
“Inflation is certainly not the only variable that matters ... and we should keep one eye at least on financial developments,” Mr Shin said.
A broadening away from inflation-targeting to financial market conditions would require a mindset change in large parts of the world and could speed up interest rate cycles.
When the Fed last embarked on rate increases more than a decade ago, it took two years to raise them from 1 percent to above 5 per cent, with hikes at 17 consecutive meetings. In the current cycle, it has taken 18 months for a 1 percentage point increase.
The BIS report added that the lack of clarity over inflation also makes it far harder to judge how far rates could go up before they start coming down again.
“In practice, therefore, central banks have little alternative but to move without a firm end-point in mind,” it said.
The report also touched on another current global theme -- protectionism, potentially one of the most damaging of the four main risks it identified.
One piece of research based on the US transport industry estimated that if 10 per cent tariffs were put on imports from Mexico or China, US labour costs would have to drop by about 6 per cent to compensate for the higher costs of “imported inputs”.
For some of the largest emerging markets there were also concerns about dollar debt and protracted credit expansion, often alongside rising property prices, storing up risks. Low interest rates, though, have generally kept debt-service ratios below critical thresholds.
“The policy challenge is to take advantage of the current tailwinds to put the expansion on a sounder footing,” said Claudio Borio, the head of the BIS monetary and economic department.
“First and foremost, that requires building resilience, domestically and globally.”
The BIS’s financial results, which were also published yesterday, showed the Swiss-based bank had made a net profit US$1.124 billion over the year to March 31 and had a balance sheet worth $329bn.
Black Panther
Dir: Ryan Coogler
Starring: Chadwick Boseman, Michael B Jordan, Lupita Nyong'o
Five stars
The specs
Engine: 2-litre 4-cylinder and 3.6-litre 6-cylinder
Power: 220 and 280 horsepower
Torque: 350 and 360Nm
Transmission: eight-speed automatic
Price: from Dh136,521 + VAT and Dh166,464 + VAT
On sale: now
PETER PAN & WENDY
Director: David Lowery
Stars: Alexander Molony, Ever Anderson, Joshua Pickering
Rating: 3/5
MATCH INFO
Tottenham Hotspur 3 (Son 1', Kane 8' & 16') West Ham United 3 (Balbuena 82', Sanchez og 85', Lanzini 90'+4)
Man of the match Harry Kane
How champions are made
Diet
7am - Protein shake with oats and fruits
10am - 5-6 egg whites
1pm - White rice or chapati (Indian bread) with chicken
4pm - Dry fruits
7.30pm - Pre workout meal – grilled fish or chicken with veggies and fruits
8.30pm to midnight workout
12.30am – Protein shake
Total intake: 4000-4500 calories
Saidu’s weight: 110 kg
Stats: Biceps 19 inches. Forearms 18 inches
WandaVision
Starring: Elizabeth Olsen, Paul Bettany
Directed by: Matt Shakman
Rating: Four stars
Kanye West
Ye — the rapper formerly known as Kanye West — has seen his net worth fall to $400 million in recent weeks. That’s a precipitous drop from Bloomberg’s estimates of $6.8 billion at the end of 2021.
Ye’s wealth plunged after business partners, including Adidas, severed ties with him on the back of anti-Semitic remarks earlier this year.
West’s present net worth derives from cash, his music, real estate and a stake in former wife Kim Kardashian’s shapewear firm, Skims.
Five expert hiking tips
- Always check the weather forecast before setting off
- Make sure you have plenty of water
- Set off early to avoid sudden weather changes in the afternoon
- Wear appropriate clothing and footwear
- Take your litter home with you
Scoreline
Al Wasl 1 (Caio Canedo 90+1')
Al Ain 2 (Ismail Ahmed 3', Marcus Berg 50')
Red cards: Ismail Ahmed (Al Ain) 77'
pakistan Test squad
Azhar Ali (capt), Shan Masood, Abid Ali, Imam-ul-Haq, Asad Shafiq, Babar Azam, Fawad Alam, Haris Sohail, Imran Khan, Kashif Bhatti, Mohammad Rizwan (wk), Naseem Shah, Shaheen Shah Afridi, Mohammad Abbas, Yasir Shah, Usman Shinwari
Hydrogen: Market potential
Hydrogen has an estimated $11 trillion market potential, according to Bank of America Securities and is expected to generate $2.5tn in direct revenues and $11tn of indirect infrastructure by 2050 as its production increases six-fold.
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Falling costs of renewable energy and electrolysers used in green hydrogen production is one of the main catalysts for the increasingly bullish sentiment over the element.
The cost of electrolysers used in green hydrogen production has halved over the last five years and will fall to 60 to 90 per cent by the end of the decade, acceding to Haim Israel, equity strategist at Merrill Lynch. A global focus on decarbonisation and sustainability is also a big driver in its development.
Copa del Rey
Barcelona v Real Madrid
Semi-final, first leg
Wednesday (midnight UAE)
The specs: 2019 Mercedes-Benz C200 Coupe
Price, base: Dh201,153
Engine: 2.0-litre turbocharged four-cylinder
Transmission: Nine-speed automatic
Power: 204hp @ 5,800rpm
Torque: 300Nm @ 1,600rpm
Fuel economy, combined: 6.7L / 100km
2024 Dubai Marathon Results
Women’s race:
1. Tigist Ketema (ETH) 2hrs 16min 7sec
2. Ruti Aga (ETH) 2:18:09
3. Dera Dida (ETH) 2:19:29
Men's race:
1. Addisu Gobena (ETH) 2:05:01
2. Lemi Dumicha (ETH) 2:05:20
3. DejeneMegersa (ETH) 2:05:42
The essentials
What: Emirates Airline Festival of Literature
When: Friday until March 9
Where: All main sessions are held in the InterContinental Dubai Festival City
Price: Sessions range from free entry to Dh125 tickets, with the exception of special events.
Hot Tip: If waiting for your book to be signed looks like it will be timeconsuming, ask the festival’s bookstore if they have pre-signed copies of the book you’re looking for. They should have a bunch from some of the festival’s biggest guest authors.
Information: www.emirateslitfest.com
Inside Out 2
Director: Kelsey Mann
Starring: Amy Poehler, Maya Hawke, Ayo Edebiri
Rating: 4.5/5
Confirmed bouts (more to be added)
Cory Sandhagen v Umar Nurmagomedov
Nick Diaz v Vicente Luque
Michael Chiesa v Tony Ferguson
Deiveson Figueiredo v Marlon Vera
Mackenzie Dern v Loopy Godinez
Tickets for the August 3 Fight Night, held in partnership with the Department of Culture and Tourism Abu Dhabi, went on sale earlier this month, through www.etihadarena.ae and www.ticketmaster.ae.
Expo details
Expo 2020 Dubai will be the first World Expo to be held in the Middle East, Africa and South Asia
The world fair will run for six months from October 20, 2020 to April 10, 2021.
It is expected to attract 25 million visits
Some 70 per cent visitors are projected to come from outside the UAE, the largest proportion of international visitors in the 167-year history of World Expos.
More than 30,000 volunteers are required for Expo 2020
The site covers a total of 4.38 sqkm, including a 2 sqkm gated area
It is located adjacent to Al Maktoum International Airport in Dubai South