Connect with us

Markets

Bank of England Says Smooth Brexit Could Mean Faster Rate Increases

Published

on

BOE
  • Bank of England Says Smooth Brexit Could Mean Faster Rate Increases

The Bank of England said it may need to raise interest rates faster than the market suggests, assuming that Brexit goes well.

While it didn’t say what deal would be best for the U.K., its latest forecasts are based on the assumption that the adjustment to a new relationship with the European Union is “‘smooth.” That means avoiding the so-called cliff edge where the U.K. leaves after the two-year negotiation period without transitional arrangements in place.

If the economy grows as expected, “then monetary policy will need to be tightened by a somewhat greater extent over the forecast period than the very gently rising path implied by the market yield curve underlying the May projections,” the Monetary Policy Committee said on Thursday in London.

Click here to set a reminder to watch Mark Carney’s press conference from 12:30 p.m. London time

It made the assessment alongside its latest policy decision and updated economic forecasts. The panel kept the benchmark interest rate at a record-low 0.25 percent, though Kristin Forbes dissented again, voting for an immediate increase. Others on the committee said it may not take much upside news for them to switch to her position.

In a quarterly update, officials cut their forecast for growth this year to 1.9 percent from 2 percent, though they raised it for the following two years and said expansion will remain around trend over the period.

Growth slowed to 0.3 percent in the first quarter, the weakest in a year, though the bank expects the figure to be revised up to 0.4 percent. Forbes said the initial reading exaggerated the extent of the slowdown.

Reflecting the weaker pound, the MPC lifted its 2017 inflation projection to 2.7 percent from 2.4 percent, meaning a bigger overshoot of its 2 percent target. The bank sees a slightly weaker path further out but expects inflation to be accelerating again at the end of the three-year forecast period. It also warned that domestic price pressures could be building at that time.

The pound fell against the dollar after the release of the Inflation Report and was at $1.2889 as of 12:20 p.m. London time, down 0.4 percent on the day.

“The medium-term inflation forecast is lower and that’s why markets have taken it as dovish,” Alan Clarke, an economist at Scotiabank in London, said by telephone. “All in all, it signals they’re moving no time fast.”

In addition to the crucial Brexit assumption, the latest forecasts are based on a rate increase not being fully priced in until the end of 2019. In February, the curve had priced in a hike by the first quarter of that year.

While inflation is set to reach 2.8 percent by the end of 2017, the BOE is balancing its price concerns against the threats from Brexit and weak wage growth.

It expects almost no increase in real incomes this year and sluggish consumer spending, though that will be offset by investment and exports. Wages will pick up in 2018 and 2019 as unemployment falls and the output gap closes, which will increase domestic price pressures.

The insights from the Inflation Report are the first in weeks. The snap general election called by Prime Minister Theresa May put policy makers into purdah from the middle of last month.

The MPC was short one member at this decision after Charlotte Hogg left the bank. She resigned after failing to disclose a potential conflict of interest.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Crude Oil

Nigerian Oil Theft Escalates to 400,000 Barrels a Day, Exposing Systemic Corruption

Published

on

pipleline vandalisation

A recent report has revealed that Nigeria’s daily oil losses surged to 400,000 barrels as efforts to curb crude oil theft remain ineffective.

This escalation from 100,000 barrels per day in 2013 underscores the severe and worsening challenge facing the nation’s oil sector.

The report, produced by the public policy firm Nextier, is the result of several months of in-depth investigation.

It reveals a complex web of sophisticated networks involving powerful actors, foreign buyers, security personnel, transporters, and government officials.

This elaborate system facilitates the large-scale theft of crude oil, which has been a significant drain on Nigeria’s economy.

From 2009 to 2021, Nigeria lost 643 million barrels of crude oil, valued at $48 billion, due to theft. This loss represents more than half of the nation’s national debt as of 2021.

The situation has also severely impacted Nigeria’s ability to meet its OPEC quotas, which have dwindled from 2.5 million barrels per day in 2010 to just 1.38 million barrels per day.

The report, authored by Ben Nwosu, an associate consultant at Nextier, and Ndu Nwokolo, a managing partner at Nextier, paints a grim picture of the local dynamics fueling this crisis.

It highlights the involvement of multiple small-scale artisanal actors, who are often supported by local political and security forces. These local actors contribute to the creation of underground economies, further complicating efforts to curb theft.

Environmental hazards are another grave concern. Illegal refining processes, characterized by uncontrolled heat and poorly designed condensation units, have led to numerous explosions. Between 2021 and 2023 alone, these operations resulted in 285 deaths.

Despite these dangers, illegal refineries continue to thrive due to economic necessity and systemic corruption.

Nigeria’s four refineries, which have a combined capacity of 445,000 barrels per day, are currently operating at only 6,000 barrels per day due to mismanagement and corruption.

This shortfall forces the country to rely heavily on imported refined products, further exacerbating the situation.

Massive corruption in oil importation and subsidies has led to billions of naira being unaccounted for between 2016 and 2019.

Moreover, the government’s inability to support modular refineries has perpetuated reliance on illegal operations.

Security forces are often implicated in the theft, providing protection for a fee. Although recent measures, such as the destruction of illegal refineries, have offered temporary relief, these efforts have been short-lived.

New illegal operations quickly emerge, perpetuating the cycle of theft and corruption.

The authors of the report emphasize that addressing this complex issue requires more than punitive measures. They call for a comprehensive approach that tackles the root causes, including the need for effective governance and economic opportunities for affected communities.

Continue Reading

Crude Oil

Brent Crude Falls Amid Anticipation of China’s Industrial Output Report

Published

on

Brent crude oil - Investors King

Brent crude prices fell on Monday, reversing some of last week’s gains as traders anxiously awaited the release of key economic data from China, the world’s largest importer of crude oil.

After climbing 3.8% last week — the first weekly rise in four — Brent crude edged down toward $82 a barrel. Similarly, West Texas Intermediate (WTI) crude was trading near $78 a barrel.

The market’s attention is now focused on China’s scheduled release of industrial output and crude refining figures for May, which are expected to provide crucial insights into the economic health and energy demand of the country.

China’s oil refining — known as crude throughput — is anticipated to be flat or even decline this year for the first time in two decades, excluding the downturn experienced in 2022 due to the COVID-19 pandemic. This projection is based on a survey conducted by Bloomberg among market analysts.

In 2023, China processed a record volume of crude oil as demand rebounded, but signs of robust supply and persistent concerns over Chinese demand have kept oil prices trending lower since early April.

The situation was further complicated by OPEC+’s recent decision to increase output this year, which initially unsettled the market. Key members of the cartel have since clarified that production adjustments could be paused or reversed if necessary.

“Crude has room for growth,” said Gui Chenxi, an analyst at CITIC Futures Co. “The third quarter is typically the peak season globally and should drive oil processing and demand higher.”

Market participants are keenly watching the forthcoming data, as any indications of weakening demand could weigh heavily on prices.

Conversely, stronger-than-expected industrial activity could support prices and offset some of the recent bearish sentiment.

The ongoing uncertainty has led to cautious trading, with investors reluctant to make significant moves until more concrete information is available.

This cautious approach underscores the delicate balance the oil market is trying to maintain amid fluctuating global economic signals.

As the world’s top crude importer, China’s economic performance is a key barometer for global oil demand. The data expected from China will not only influence immediate trading strategies but also provide longer-term market direction.

In the meantime, the oil market remains on tenterhooks, reflecting the broader uncertainties in the global economy.

Continue Reading

Crude Oil

Fed’s Decision to Hold Rates Stalls Oil Market, Brent Crude Slips to $82.17

Published

on

Crude Oil - Investors King

Oil prices faced a setback on Thursday as the U.S. Federal Reserve’s decision to maintain interest rates dampened investor sentiment.

The Federal Reserve’s announcement on Wednesday indicated a reluctance to initiate an interest rate cut, pushing expectations for policy easing possibly as late as December. This unexpected stance rattled markets already grappling with inflationary pressures and economic uncertainty.

Brent crude, the international benchmark for Nigerian crude oil, saw a drop of 43 cents, or 0.5% to $82.17 a barrel, reflecting cautious investor response to the Fed’s cautious approach.

Similarly, West Texas Intermediate (WTI) crude oil also slipped by 46 cents, or 0.6% to settle at $78.04 per barrel.

Tamas Varga, an analyst at PVM Oil, commented on the Fed’s decision, stating, “In the Fed’s view, this is the price that needs to be paid to achieve a soft landing and avoid recession beyond doubt.”

The central bank’s move to hold rates steady is seen as a measure to balance economic growth and inflation containment.

The Energy Information Administration’s latest data release further exacerbated market concerns, revealing a significant increase in U.S. crude stockpiles, primarily driven by higher imports.

Fuel inventories also exceeded expectations, compounding worries about oversupply in the oil market.

Adding to the downward pressure on oil prices, the International Energy Agency (IEA) issued a bearish report highlighting concerns over potential excess supply in the near future.

The combination of these factors weighed heavily on investor sentiment, contributing to the decline in oil prices observed throughout the trading session.

Meanwhile, geopolitical tensions in the Middle East continued to influence market dynamics, with reports of Iran-allied Houthi militants claiming responsibility for recent attacks on international shipping near Yemen’s Red Sea port of Hodeidah.

These incidents underscored ongoing concerns about potential disruptions to oil supply routes in the region.

As markets digest the Fed’s cautious stance and monitor developments in global economic indicators and geopolitical tensions, oil prices are expected to remain volatile in the near term.

Analysts suggest that future price movements will hinge significantly on economic data releases, policy decisions by major central banks, and developments in geopolitical hotspots affecting oil supply routes.

 

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending