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Key ECB Policy Makers Are Said to Have Challenged QE Pledge

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Mario Draghi
  • Key ECB Policy Makers Are Said to Have Challenged QE Pledge

Three of the European Central Bank’s top policy makers pushed last month to alter a commitment to keep buying bonds until inflation improves, signaling challenges ahead for President Mario Draghi as the bank seeks to slow quantitative easing.

Board member Benoit Coeure, Bundesbank President Jens Weidmann and Bank of France Governor Francois Villeroy de Galhau were the heavyweights who recommended tying the overall level of monetary stimulus — rather than just asset purchases — to the outlook for prices, according to euro-area central-bank officials familiar with the matter.

The policy-setting Governing Council chaired by Draghi eventually decided on Oct. 26 to stick to its pledge to buy debt until it sees a sustained adjustment in the path of inflation toward its 2 percent goal. The broadening of the language that Weidmann and others sought would have potentially meant that bond purchases could be terminated even if consumer prices fail to pick up.

Peter Praet, the board member who formulates the proposals, opposed revising the stance, the officials said, asking not to be named because the meeting was confidential. Spokespeople for the ECB, Bundesbank and Bank of France all declined to comment.

The euro pared losses on the report, rebounding two-tenths of a cent. It traded down 0.4 percent at $1.1569 at 12:59 a.m. Frankfurt time.

The argument is an indication of how hard the 25-member council may find it to agree on stimulus next year. It intends to buy debt until next September, but has maintained the option to extend or increase the program if needed.

The central bank’s own projections don’t foresee inflation returning to the goal of just under 2 percent until at least late 2019. While that feeble consumer-price growth justifies pumping more liquidity into the economy, accelerating growth as well as concerns about financial stability and a limited supply of bonds to buy could justify a more cautious approach.

The calls for a change to the ECB’s guidance may not have won the day, but they still carry significant weight. Coeure is the ECB’s markets chief and was one of the architects of QE in the euro area; Weidmann and Villeroy de Galhau head the central banks of the bloc’s two biggest economies.

While the Governing Council wasn’t ultimately swayed, it did acknowledge the debate in a new sentence added to its statement, highlighting how central-bank stimulus is the result of several tools.

“This continued monetary support is provided by the additional net asset purchases, by the sizable stock of acquired assets and the forthcoming reinvestments, and by our forward guidance on interest rates.”

Draghi acknowledged after the meeting that the decision not to set a firm end-date for purchases wasn’t unanimous. Coeure didn’t oppose that outcome, according to the officials, but he said in an interview published on Oct. 29 that he hopes “this will be the last extension.”

Weidmann revealed his dissent a day after the meeting and Executive Board member Sabine Lautenschlaeger, also a German national, told Bloomberg Television on Tuesday that she wanted a “clear exit” from the program.

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.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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