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Fed Minutes Suggest Yellen Made the Difference in ‘Close Call’

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  • Fed Minutes Suggest Yellen Made the Difference in ‘Close Call’

Divided in their views over the labor market, most Federal Reserve officials last month ultimately listened to Chair Janet Yellen’s argument for holding off on a rate hike, for now.

“A growing number of committee members are pulling in the direction of hiking, so it’s becoming increasingly harder for Yellen to hold them back,” said Roberto Perli, partner at Cornerstone Macro LLC in Washington and a former Fed economist.

At their Sept. 20-21 session, the Federal Open Market Committee voted 7-3 to leave interest rates unchanged. Minutes released Wednesday showed “several” of those who supported the decision to wait on tightening policy said the decision was a “close call.” Several also indicated it would be appropriate to raise rates “relatively soon.”

Following the minutes’ release, investors continued to see about a two-thirds chance of a rate increase in December, based on prices in federal funds futures contracts. They assigned a 17 percent chance to a move in November, when the Fed meets a week before the U.S. presidential election.

Investors will get a chance to hear directly from Yellen on Friday when she speaks at a Boston Fed conference. The official title of her remarks is “Macroeconomic Research After the Crisis,” which leaves open the question of whether she will comment on the outlook for the economy and monetary policy.

Sharpening Debate

The record of the September FOMC meeting revealed a sharp debate over the potential impact of keeping rates ultra-low on the labor market and inflation. One camp warned this risked driving unemployment too low, possibly triggering much higher inflation and forcing the Fed to raise rates more drastically, a tack that has historically led to a recession.

An opposing group argued that more slack remains for the labor market outside the official measure of unemployment. Holding off on an increase, they claimed, could help draw people who had previously given up looking for jobs back into the work force. That would allow for continued job growth without a surge in wages and inflation.

Thomas Costerg, senior U.S. economist at Standard Chartered Bank in New York, said the latter camp can point to the fact that through most of 2016, measures of unemployment remained essentially flat and the participation rate modestly climbed, even as the economy added jobs at a healthy clip. The participation rate is the proportion of working-age people employed or actively looking for jobs.

“The biggest surprise recently is this increase in the labor force participation rate,” Costerg said. “The doves say: ‘Look, there’s more running room there.’ And I think the hawks are a bit disoriented and don’t know what to do, how to interpret this.”

It also helped the doves that they had Yellen in their corner. The argument against a hike laid out in the minutes echoed Yellen’s comments at her Sept. 21 press conference following the FOMC meeting. She stressed that recent steadiness in labor force participation suggested the job market recovery has room to run.

“That argument is prominent in these minutes,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “It does feel like it has her fingerprints on it.”

That doesn’t mean Yellen will necessarily be working to hold her colleagues back from a move in December.

“I don’t think it’s a, ‘Let’s stay on hold for six months to year’,” said Omair Sharif, senior U.S. economist at Societe Generale in New York. “It’s, ‘Let’s hold our fire for two more months so we can make a little more progress on discouraged workers.”’

Perli, at Cornerstone Macro, added the September decision may even have been a close call for Yellen herself.

He pointed to a portion of the minutes that read: “It was noted that a reasonable argument could be made either for an increase at this meeting or for waiting for some additional information on the labor market and inflation.”

Perli said the “it was noted” language frequently reflects a comment from the chair. That suggested Yellen could have gone either way, “but in a close call, like several others, she leaned toward staying on hold for now,” he said.

 

 

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Naira

Naira Exchange Rates; Tuesday, May 18, 2021

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nigerian currency - Investors King

Nigerian Naira opened at N484 to a United States Dollar on Tuesday at the parallel market, popularly known as the black market. Against the British Pound, it exchanged at N678 and N581 to a single Euro.

Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
18/05/2021 480/484* 670/678* 577/581* 62/68 390/402 292/320
17/05/2021 480/484 670/678 577/581 62/68 390/402 292/320
14/05/2021 480/484 670/680 576/581 62/69 390/400 292/320
13/05/2021 479/483 665/673 576/581 62/69 391/402 292/320
12/05/2021 479/483 665/673 576/581 62/69 395/400 292/320

Bureau De Change Naira Rates

Date USD GBP EURO
NGN BUY/SELL BUY/SELL BUY/SELL
18/05/2021 475/482 670/677 575/584
17/05/2021 475/482 670/677 575/584
15/05/2021 475/482 670/677 575/584
14/05/2021 475/482 670/677 575/584
13/05/2021 475/482 665/674 573/584
12/05/2021 475/482 665/674 573/584

Central Bank of Nigeria’s Official Naira Rates

Date Currency Buying(NGN) Central(NGN) Selling(NGN)
5/10/2021 US DOLLAR 379 379.5 380
5/10/2021 POUNDS STERLING 535.4891 536.1956 536.902
5/10/2021 EURO 461.3946 462.0033 462.612
5/10/2021 SWISS FRANC 421.8141 422.3706 422.9271
5/10/2021 YEN 3.4868 3.4914 3.496
5/10/2021 CFA 0.6777 0.6877 0.6977
5/10/2021 WAUA 543.4332 544.1502 544.8671
5/10/2021 YUAN/RENMINBI 58.9792 59.0574 59.1357
5/10/2021 RIYAL 101.0451 101.1784 101.3117
5/10/2021 SOUTH AFRICAN RAND 26.8863 26.9218 26.9572

 

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Naira

Naira Exchange Rates; Monday, May 17, 2021

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Naira - Investors King

The Nigerian Naira opened the week at N484 to a United States Dollar on Monday at the parallel market. The local currency remained stable against the  British Pound at N678 and N581 to a single Euro.

Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
17/05/2021 480/484 670/678 577/581 62/68 390/402 292/320
14/05/2021 480/484 670/680 576/581 62/69 390/400 292/320
13/05/2021 479/483 665/673 576/581 62/69 391/402 292/320
12/05/2021 479/483 665/673 576/581 62/69 395/400 292/320

Bureau De Change Naira Rates

Date USD GBP EURO
NGN BUY/SELL BUY/SELL BUY/SELL
17/05/21 475/482 670/677 575/584
15/05/21 475/482 670/677 575/584
14/05/21 475/482 670/677 575/584
13/05/21 475/482 665/674 573/584
12/05/21 475/482 665/674 573/584

Central Bank of Nigeria’s Official Naira Rates

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Forex

Nigeria’s Diaspora Remittances Decline by 28 Percent to $16.8 Billion in 2020

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US dollar - Investors King

Nigeria’s diaspora remittances declined by 27.7 percent or $4.65 billion from $21.45 billion in 2019 to $16.8 billion in 2020, according to the World Bank Migration and Development report.

A critical look into the report shows remittances to sub-Saharan Africa declined by 12.5 percent in 2020 to $42 billion. This was largely due to the 27.7 percent recorded by Africa’s largest economy, Nigeria, which accounted for over 40 percent of the total remittance inflows into the region.

The report noted that once Nigeria’s remittance inflows into the region are excluded, remittances grew by 2.3 percent in 2020 with Zambia recording 37 per cent.

Followed by 16 percent from Mozambique, 9 percent from Kenya and 5 percent from Ghana.

The decline was a result of the global lockdown that dragged on the livelihood of most diaspora and unclear economic policies.

In an effort to change the tide, the Central Bank of Nigeria (CBN) introduced a Naira 4 Dollar Scheme to reverse the downward trend and boost diaspora inflows into the economy.

However, the reports revealed that other external factors like insecurities, global slow down, weak macroeconomic fundamentals, etc continue to discourage capital inflows.

On Tuesday, the CBN, in a new directive, announced it has halved dollar cash deposit from $10,000 to $5000 per month.

The move is geared towards discouraging overreliance on the United States Dollar and encourage local patronage and production.

Mr. Guy Czartoryski, Head of Research at Coronation Asset Management, had said in the report, “We looked at the top 10 banks and the breakdown of their deposits showed that 40 per cent of their deposits are in dollars and it is quite astonishing.”

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