(Bloomberg) — Singapore’s central bank is likely to keep monetary policy unchanged Wednesday as it allows fiscal measures to do the heavy lifting in getting the city-state’s economy back on track.

The Monetary Authority of Singapore, which uses the currency as its main policy tool rather than interest rates, probably will refrain from changing any of the three currency band settings, according to all 19 economists surveyed by Bloomberg.



chart: Singapore Monetary Policy History


© Bloomberg
Singapore Monetary Policy History

The MAS — which typically makes policy decisions twice a year, in April and October — took the unprecedented step in its last announcement of lowering the midpoint of the currency band and reducing the slope to zero. That meant it would allow for a weaker exchange rate to head off deflation and support the export-reliant economy.

Loading...

Load Error

Since then, the economy has plunged into recession amid the pandemic and the government has unleashed billions of dollars of stimulus to save businesses and jobs. The city-state is slowly starting to shake off the impact of mobility restrictions and exports have continued to gain, but the recovery is likely to be a slow one as international travel restrictions remain and global demand stays weak.

“We’ve not seen the full extent of the crisis” and as much as 20% of the economy will face “deep scarring from which they may not recover,” MAS Managing Director Ravi Menon said Monday during a virtual forum hosted by the Institute of International Finance.

While the city-state has likely seen the worst of the GDP downswing, Menon said non-performing loans and bankruptcies probably will rise through the start of 2021.

The government has forecast a 5%-7% contraction in the economy this year, the worst since independence more than a half-century ago, and may revise that estimate when the Ministry of

(Bloomberg) — Singapore’s central bank is likely to keep monetary policy unchanged Wednesday as it allows fiscal measures to do the heavy lifting in getting the city-state’s economy back on track.

The Monetary Authority of Singapore, which uses the currency as its main policy tool rather than interest rates, probably will refrain from changing any of the three currency band settings, according to all 19 economists surveyed by Bloomberg.



chart: Singapore Monetary Policy History


© Bloomberg
Singapore Monetary Policy History

The MAS — which typically makes policy decisions twice a year, in April and October — took the unprecedented step in its last announcement of lowering the midpoint of the currency band and reducing the slope to zero. That meant it would allow for a weaker exchange rate to head off deflation and support the export-reliant economy.

Loading...

Load Error

Since then, the economy has plunged into recession amid the pandemic and the government has unleashed billions of dollars of stimulus to save businesses and jobs. The city-state is slowly starting to shake off the impact of mobility restrictions and exports have continued to gain, but the recovery is likely to be a slow one as international travel restrictions remain and global demand stays weak.

The government has forecast a 5%-7% contraction in the economy this year, the worst since independence more than a half-century ago, and may revise that estimate when the Ministry of Trade & Industry releases advance third-quarter figures on Wednesday. Analysts project gross domestic product rebounded an annualized 33.5% on a quarterly basis in the three months through September, while declining 6.8% from a year earlier, Bloomberg survey data show.



chart: Bouncing Back


© Bloomberg
Bouncing Back

Here’s a look at what’s expected in the central bank’s statement, which is due to be released at 8 a.m. local time on Wednesday:

Policy Band

The MAS

The yield on Italian 10-year
TMBMKIT-10Y,
0.680%

and 30-year
TMBMKIT-30Y,
1.529%

debt fell to record lows on Monday.

As this chart from Deutsche Bank shows, the yield on the Italian 10-year is lower than it was even before Italy became a country. Deutsche Bank strategist Jim Reid attached proxies for Italian debt, such as from Naples, to chart pre-1861 data. (There is also a gap in the data series for the 1700s.)

He also charted debt-to-gross-domestic-product, which shows the Italian economy with an all-time low capability to service that debt.

The move on Monday came after the European Central Bank’s chief economist gave an interview suggesting the central bank may take further action. Among the ECB’s actions stimulus so far is the purchase of government debt from countries including Italy, through what’s called the pandemic emergency purchase program.

“Has the ECB permanently suppressed yields and spreads or are there many more twists and turns to this story over the years ahead? I would lean towards the latter but for now Italian politics and their control of the second wave are acting as strengths and not weaknesses,” Reid said.

David Stockman, the former Reagan-era budget director and acerbic critic, looked at the same chart and issued this brief but withering analysis: “when central banks crush rates, politicians bury their governments in debts.”

The current explosion in debt-to-GDP has been because the latter dropped, precipitously. The Italian economy shrank by 18% year-over-year in the second quarter.

Italy also has been issuing more debt. According to Italian bank Intesa Sanpaolo, Italy is forecast to issue a net €177 billion in new debt in 2020, compared with €54 billion in 2019.

Source Article

RIYADH, Saudi Arabia, Oct. 12, 2020 /PRNewswire/ — The fourth G20 Finance Ministers and Central Bank Governors (FMCBG) Meeting will be held virtually on October 14 under the Saudi G20 Presidency to discuss the global economic development and support a swift and sustained global economic recovery. FMCBGs will also discuss updates to the G20 Action Plan – Supporting the Global Economy through the COVID-19 Pandemic (the G20 Action Plan) – in addition to the progress made on the G20 Debt Service Suspension Initiative and its proposed extension into 2021.

After the conclusion of the meeting, a virtual press conference will be conducted at 6:15 PM Riyadh time (UTC+3) by the Saudi Finance Minister Mr. Mohammed Al Jadaan, and the Saudi Arabian Monetary Authority Governor Dr. Ahmed Al Kholifey.

The media is invited to submit questions for the virtual press conference online via the official form at https://bit.ly/3lAkiOJ or by emailing G20Media@saudisecretariat.gov.sa directly.

All questions from the media will be submitted to the press conference moderator. Every attempt will be made to answer as many questions as possible during the allocated timeframe.

The press conference will be live-streamed on Twitter at https://twitter.com/g20org as well as the IMF/WB Annual Meetings Official Website at https://meetings.imf.org/en/2020/Annual.

 

Cision
Cision

View original content:http://www.prnewswire.com/news-releases/g20-finance-ministers-and-central-bank-governors-meeting-and-virtual-press-conference-to-be-held-october-14-301150189.html

SOURCE Saudi G20 Presidency

Source Article

A rare regime-change in economic policy is under way that’s edging central bankers out of the pivotal role they have played for decades.

Fiscal policy, which fell out of fashion as an engine of economic growth during the inflationary 1970s, has been front-and-center in the fight against Covid-19. Governments have subsidized wages, mailed checks to households and guaranteed loans for business. They’ve run up record budget deficits on the way — an approach that economists have gradually come to support, ever since the last big crash in 2008 ushered in a decade of tepid growth.

And the public spending that put a floor under the pandemic slump is increasingly seen as vital for a sustained recovery too. When it looks like drying up, as it did in the U.S. last week, investors start to worry.

Digging Deeper

Short of room to cut interest rates, developed economies have relied more heavily on fiscal stimulus in the current recession.

How long to keep the taps open will be a key theme at this week’s International Monetary Fund meetings — and the biggest challenge for politicians in charge of national budgets, once they emerge from crisis-fighting mode. Right now their own inhibitions about debt look like the main obstacle, as traditional barriers melt away.

Financial markets, where bond vigilantes were once reckoned to exert a powerful check on deficit-spending governments, are ready to lend them money at very low interest rates. The short-run concern for investors is that politicians will stall the recovery by spending too little. JPMorgan predicts that this year’s big fiscal boost to the global economy may turn into a 2.4 percentage-point drag on growth in 2021, as virus relief programs expire.

The same worry weighs on monetary authorities, whose autonomy from the rest of government was designed so they