long term – Sendika12 http://sendika12.org/ Fri, 18 Mar 2022 21:20:56 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://sendika12.org/wp-content/uploads/2021/10/profile-120x120.png long term – Sendika12 http://sendika12.org/ 32 32 Bank Of Hawaii Stock: Poised To Benefit From Higher Interest Rates (NYSE: BOH) https://sendika12.org/bank-of-hawaii-stock-poised-to-benefit-from-higher-interest-rates-nyse-boh/ Fri, 18 Mar 2022 20:49:34 +0000 https://sendika12.org/bank-of-hawaii-stock-poised-to-benefit-from-higher-interest-rates-nyse-boh/ Art Bet / E+ via Getty Images As recently covered First Hawaiian (FHB), Bank of Hawaii (NYSE: BOH) stocks have been fairly flat since the last coverage. The valuation didn’t really look convincing at the time, and with the post-COVID recovery also looking a bit lackluster, I guess a quiet period here shouldn’t be so […]]]>

Art Bet / E+ via Getty Images

As recently covered First Hawaiian (FHB), Bank of Hawaii (NYSE: BOH) stocks have been fairly flat since the last coverage. The valuation didn’t really look convincing at the time, and with the post-COVID recovery also looking a bit lackluster, I guess a quiet period here shouldn’t be so surprising.

Graphic
Data by YCharts

Although the bank’s operating performance has been a bit sluggish, we are seeing at least some growth in core lending, and interest rate hikes have also been very much in evidence since the start of this week. This should serve the bank well as we move forward into 2022, although I was a bit concerned that increasingly pessimistic economic growth forecasts would put a damper on this part of the story.

These stocks still don’t look cheap on common bank valuation metrics like normalized PE and P/TBV, but again, they rarely do. While I wouldn’t rule out the quiet period here continuing in the short term, and there are other headwinds to consider, “more of the same” can work very well in the long term, with return to mid-single-digit core earnings growth and a dividend yield of 3.35% sufficient to generate acceptable returns for dividend investors.

Results still a little pedestrian

The reported numbers continue to look a little weak, with revenue nearly flat sequentially at $168.9 million in the fourth quarter. Within this, net interest income (“NII”) decreased by a shade sequentially on a reported basis, primarily due to lower interest income from the Paycheck Protection Program as these loans continue to decline in the balance sheet.

Bank of Hawaii quarterly net interest income

Bank of Hawaii Quarterly Net Interest Income (Bank of Hawaii Quarterly Earnings Release)

Non-interest expense also increased, rising more than 5% sequentially and 3% year-on-year to $101.7 million in the fourth quarter, driving the efficiency ratio above 60% for the quarter.

With revenue still sluggish and expenses rising, quarterly operating income before provision (“PPOP”) was also predictable, falling 6% sequentially to $67.3 million. And that was pretty much the story for 2021 as a whole – rather weak income, due to a combination of low interest rates and sluggish non-interest income, facing spending higher operating. Unsurprisingly, PPPP for the full year was also low, as expected, at $275 million versus $306.9 million in 2020.

Bank of Hawaii quarterly operating profit before provision

Bank of Hawaii PPPO (Bank of Hawaii quarterly earnings release, author’s calculations)

The provisioning, however, continued to be a boon to net income, with the releases contributing $9.7 million to pretax profit in the fourth quarter and $50.5 million for the whole of year. This contributed to annual EPS of $6.25, compared to $3.86 in 2020.

Ongoing core loan growth

Although the numbers released by the bank make the recovery here a little slow, we are at least seeing signs of underlying growth. Core loans (i.e. excluding PPP balances) rose again for one, rising 2.8% sequentially and 6.2% year-on-year in the fourth quarter to 12.1 billion. dollars. It was also the third consecutive quarter of accelerating core loan growth – with core loans posting sequential growth of 2.4% and 1% in Q3 and Q2 respectively.

This resulted in a slight increase in the “base” NII (i.e. excluding PPP interest income and certain one-time charges), which increased 2.2% sequentially to $121.5 million in the fourth trimester. With PPP loan balances down to just $126.8 million at the end of last year (about 1% of total end-of-period loans), this run-off should present only a modest headwind. in 2022.

The economic recovery is fairly well established at this point, having experienced a slight wobble due to the impact of the Omicron wave on the state’s tourism economy. COVID restrictions are easing to the point of non-existence for domestic visitors, while the resumption of international travel is expected to accelerate later in the year. The state’s housing market also continues to look very strong. All told, I expect core loan growth (and subsequent NII growth) to show through in the results released this year.

Ready to benefit from higher interest rates

Loan growth should be a boon for the NII this year, but the bank will also see an increase in interest rates now that the tightening has really begun. Fixed rate loans make up a large part of the mix here (around 65%), but the bank has a very sticky deposit base which will give it the ability to capture higher margins. Moreover, a current loan-to-deposit ratio of 60% combined with the ongoing maturing of loans/investment securities suggests that it will have no problem recycling capital into higher-yielding assets.

The bank’s standard sensitivity disclosure indicates an immediate 100 basis point hike in rates, resulting in an annual rise of about 7.9% in the NII, with a more gradual change of the same magnitude resulting in an increase of 3. 1% of the NII.

Perspectives

While I expect to see tangible improvement in the NII based on a combination of loan growth and higher interest rates, there are some headwinds to consider, at least in the short term.

First, and like many banks, management expects a significant increase in annual operating expenses this year – somewhere in the 6% zone, as inflation ripples through wage growth and bank invests in technology. The latter should at least support future growth, but in the short term it will weigh somewhat on the PPPP and net profits.

Second, supply obviously won’t provide the same pop to the bottom line as last year. The bank’s allowance for credit losses is still about 30 basis points above immediate pre-COVID levels (1.29% vs. a “day 1” ACL of 0.99%), so there is room to maintain small impairment charges in the future, but vis-à-vis 2021 this line will obviously be a drag on net income and EPS this year.

Still a good choice for dividend investors

The immediate term might continue to be a little disappointing in terms of revenue, but that’s not something I see continuing in the medium term. On the one hand, the bank has always been very strong in terms of expense control, registering a CAGR of around 3% in the five years before COVID. Growth in operating expenses should moderate in 2023, returning to its historical trend thereafter. A corporate tax hike also seems out of place – something I was a bit cautious about last time.

With that, I expect annualized growth in the dividend per share of at least 5-6% over the next five years, consisting of the following:

  • Mid-single-digit annualized revenue growth, driven by mid-single-digit annualized loan growth, higher interest rates and modest non-interest revenue growth.
  • Operating expenses are expected to increase 6% in FY22, slow to 4% in FY23 and return to more moderate historical growth levels thereafter.
  • The above will lead to single-digit annualized PPOP growth – broadly in line with pre-COVID trends – with lower net income and EPS growth due to the normalization of provision levels from FY22, offset to a small extent by the cumulative effect of share buybacks (in the case of EPS).
  • The above will lead to EPS of around $7.40 by 2026, with a dividend payout ratio of around 50% – broadly in line with its historical level.

While not the most exciting outlook in the world, the above works out pretty well for income investors given the current yield of 3.35%. To buy.

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Irish mortgage interest rates double eurozone average https://sendika12.org/irish-mortgage-interest-rates-double-eurozone-average/ Wed, 09 Mar 2022 11:53:33 +0000 https://sendika12.org/irish-mortgage-interest-rates-double-eurozone-average/ Average Irish mortgage interest rates are double the Eurozone average. Central Bank figures show the rate was 2.76% in Ireland in January, compared to 1.31% in the euro zone. The number of first-time buyers opting for variable rate mortgages has declined. Bonkers.ie analysis suggests they are opting for more expensive long-term fixed rates, due to […]]]>

Average Irish mortgage interest rates are double the Eurozone average.

Central Bank figures show the rate was 2.76% in Ireland in January, compared to 1.31% in the euro zone.

The number of first-time buyers opting for variable rate mortgages has declined.

Bonkers.ie analysis suggests they are opting for more expensive long-term fixed rates, due to recent speculation that the European Central Bank may start raising rates.

The website’s Darragh Cassidy tried to explain the change and said:

“Mortgage rates have been falling slowly but steadily in Ireland over the past few years. And they are still falling – for now at least. Today’s news that the average rate has risen suggests that more first-time buyers could opt for longer-term loans, more expensive fixed rates than before, which is not surprising since there has been talk in recent months of a rate hike by the ECB.

“Rapidly rising property prices could also have an effect.

“Lenders assess their mortgage rates based on the equity in the home or the size of the down payment they have against the loan. This is commonly referred to as the loan-to-value (LTV) ratio. The larger the deposit a home buyer has, the better the rate they will be offered by most lenders.

“However, rapidly rising property prices mean that buyers who previously could qualify for a cheaper rate for those with an LTV of less than 80% are now being pushed into a higher LTV bracket.”

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Can rising interest rates really control inflation? https://sendika12.org/can-rising-interest-rates-really-control-inflation/ Sat, 05 Mar 2022 18:00:00 +0000 https://sendika12.org/can-rising-interest-rates-really-control-inflation/ Sun, Mar 6, 2022 12:00 a.m. Last updated on: Sun, Mar 6, 2022, 12:00 a.m. Treating inflation with high interest rates is like treating cancer with chemotherapy. You have to kill swathes of the economy to slow things down. Illustration: Collected “> Treating inflation with high interest rates is like treating cancer with chemotherapy. You […]]]>

Treating inflation with high interest rates is like treating cancer with chemotherapy. You have to kill swathes of the economy to slow things down. Illustration: Collected

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Treating inflation with high interest rates is like treating cancer with chemotherapy. You have to kill swaths of the economy to slow things down. Illustration: Collected

Russia’s military attack on Ukraine has unquestionably unbalanced the global economy. The newspapers are full of stories about the long-term impact of this war. Obviously, I share many of the dire predictions being made, but for this article I have chosen to address another equally burning and long-term issue: the role of rising interest rates. In simple terms, it revolves around the question, “How high should the interest rate rise to curb inflation?”

We know that the rate of interest determines the price of holding or lending money. Banks pay an interest rate on savings to attract depositors. Banks also receive an interest rate for money lent from their deposits. When interest rates are low, individuals and businesses tend to borrow more from banks, thereby increasing the money supply. As a result, inflation rises. On the other hand, higher interest rates tend to lower inflation.

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Although this is a very simplified version of the relationship, it highlights why interest rates and inflation tend to be inversely correlated.

Economists are increasingly concerned that the interest rate borrowers are paying will soon skyrocket and short-circuit the post-pandemic economic recovery. So why is the interest rate going up? How does it affect other macroeconomic variables, notably the price level? Can rising interest rates really curb inflation? I cannot answer all of these questions here for lack of space, but I hope to pique the interest of readers so that they can delve deeper into the puzzle over time.

A central bank can use changes in interest rates as a tool to fight inflation. It does this by fixing the commercial banks’ short-term borrowing rate – known as the repo rate in Bangladesh – and then these banks pass it on to consumers and businesses. This rate influences everything from credit card interest to mortgages and auto loans, making borrowing more expensive. On the other hand, it also increases savings and certificate of deposit (CD) rates and encourages saving.

In times of inflation, a central bank aims to make borrowing more expensive so that consumers delay their purchases, which dampens demand and controls prices. The biggest challenge is finding the right level so as not to raise it too high, which will stifle investment and hurt the poor.

As we see now, interest rates in countries around the world are rising after a lull in recent years. The Bank of England has started raising interest rates from historic pandemic lows and is under increasing pressure to raise the bank rate again. The US Federal Reserve is expected to begin raising the benchmark rate, known as the funds rate, at the next Board of Governors meeting on March 15-16. The European Common Bank may selectively raise rates, and there is no doubt that Asian countries will follow, although there may be a slight lag.

The novelty of this upward trend is that many central banks in North America and Europe have cut their respective interest rates to near-zero levels in an effort to meet the maximum stability targets for the economy. employment and prices. Unfortunately, inflation has recently spiked due to rising demand and supply chain bottlenecks. Central banks have now decided to curb aggregate demand and money supply to ease inflationary pressures.

The crucial question here is whether the observed movement in the two variables – interest rate and inflation – exhibits causality, or is it just coincidence? The question is immediately relevant: will the simple increase in the interest rate bring down the rate of inflation? Also, how high and how fast must the interest rate rise to have an impact on inflation? For example, if necessary, can the Fed raise interest rates to 5%, 10% or, as in the 1980s, 20%? Is it even calculable or predictable in advance? The answer to these questions is no.

Raghuram Rajan, former chief economist of the IMF and governor of the Reserve Bank of India, called interest rates a “brutal” tool in a situation where the real culprit is the creaky supply chain. The interest rate is a blunt tool also because aggregate price indices do not tell us precisely what prices are changing, for what reasons or to what effect.

“The government should take steps to protect the poorest through tougher price caps and direct financial support, while increasing investment in green projects to end our exposure to fossil fuel price volatility. and curbing demand from those who can afford it through wealth taxes,” Rajan said. adds.

Of course, it will take some time before any action taken by a central bank will have an impact on the economy and curb inflation. That’s why policymaking groups need to watch economic data carefully to decide how much and how often to raise rates.

And the biggest challenge is finding the optimal level of interest rate increases without plunging the economy into a slump. Treating inflation is like treating cancer with chemotherapy, as one expert once said. “You have to kill chunks of the economy to slow things down. It’s not nice treatment.”

Dr Abdullah Shibli is a senior research fellow at the US-based International Institute for Sustainable Development (ISDI).

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San Diego Mortgage Company offers fast approvals, loan terms and today’s low rates https://sendika12.org/san-diego-mortgage-company-offers-fast-approvals-loan-terms-and-todays-low-rates-2/ Fri, 04 Mar 2022 21:20:05 +0000 https://sendika12.org/san-diego-mortgage-company-offers-fast-approvals-loan-terms-and-todays-low-rates-2/ “San Diego Mortgage Company – Equis Mortgage Group, LLC” Check out a San Diego Mortgage Company, called Equis Mortgage Group, LLC and a San Diego Mortgage Broker, David LePari, for all your mortgage and real estate needs with fast approvals and today’s low rates. today. We were looking for a San Diego mortgage company that […]]]>

“San Diego Mortgage Company – Equis Mortgage Group, LLC”

Check out a San Diego Mortgage Company, called Equis Mortgage Group, LLC and a San Diego Mortgage Broker, David LePari, for all your mortgage and real estate needs with fast approvals and today’s low rates. today.

We were looking for a San Diego mortgage company that offers fast home loan approvalscoupled with great terms and today’s low rates, and we came across Equis Mortgage Group, LLC and San Diego mortgage broker, David LePari.

As a professional mortgage broker, Mr. LePari originates, negotiates and processes residential mortgage loans on behalf of the client. Below is a six-point guide to what services to offer and what to expect from a qualified mortgage broker representing a new local San Diego mortgage company:

1. PROVIDES ACCESS TO MOST HOME LOAN PRODUCTS

This includes the most common types of mortgages such as Conventional, FHA, Jumbo, VA, Reverse, and Refinance, as well as other eligible and non-eligible loan products listed under Additional Loan Types on their website. .

2. FIND THE MOST ADVANTAGEOUS OFFER FOR THE CUSTOMER

A solid and reputable company San Diego Mortgage Company represents its own interests rather than the interests of a credit institution.

They must act not only as an agent, but as a competent consultant and problem solver.

Having access to a wide range of mortgage products, Mr. LePari is able to offer someone the greatest value in terms of interest rates, repayment amounts and loan products.

The best mortgage brokers will go through interviews to identify their short and long term needs and goals.

Many situations require more than just using a 30-year, 15-year, or adjustable rate (ARM) mortgage, so innovative mortgage strategies and sophisticated solutions are the benefits of working with an experienced mortgage broker and M David LePari fits that. profile on the spot.

3. HAS THE FLEXIBILITY AND EXPERTISE TO MEET ITS NEEDS

When we do Equis Mortgage Group their new San Diego mortgage company, one can expect a broker who guides the client through any situation, manages the process, and mitigates obstacles in the road along the way. For example, if borrowers have credit issues, the broker will know which lenders offer the best products to meet their needs.

Borrowers who find they need larger loans than their bank has approved also benefit from a broker’s knowledge and ability to successfully secure financing, for almost any home type and circumstance.

4. SAVE ONCE

With Equis as his San Diego Mortgage Company, all it takes is one application, rather than filling out forms for each individual lender. Mr. LePari and his team can provide a formal comparison of all recommended loans, guiding you to information that accurately outlines cost differences, with current rates, points and closing costs for each loan reflected.

5. SAVE MONEY WITH NO HIDDEN COSTS

A reputable mortgage broker will disclose how they are paid for their services, along with details of the total loan costs.

6. PROVIDES PERSONALIZED SERVICE AND ADVICE

Personalized service is the differentiating factor when selecting a mortgage broker like Mr. David LePari and his team.

We should expect his San Diego Mortgage Broker to help smooth the way, be available for her needs and advise throughout the closing process.

We checked the qualifications, experience and GMB reviews of this San Diego Mortgage Company and asked for referrals and in the end we found a friendly broker and fast team that will match one to the right lender and loan with the best terms and today’s low rates so one can successfully get and quickly get approved for a home purchase or mortgage refinance.

Equis Mortgage Group, LLC NMLS #2009443 / DRE #01438695

David LePari, Broker NMLS #2027739

Media Contact
Company Name: Equis Mortgage Group, LLC
Contact: David Leparis
E-mail: Send an email
Call: (619) 368-0941
Address:11440 BERNARDO COURT WEST, SUITE 300
Town: San Diego
State: California
The country: United States
Website: equismortgagegroup.com/

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San Diego Mortgage Company offers fast approvals, loan terms and today’s low rates https://sendika12.org/san-diego-mortgage-company-offers-fast-approvals-loan-terms-and-todays-low-rates/ Fri, 04 Mar 2022 21:10:00 +0000 https://sendika12.org/san-diego-mortgage-company-offers-fast-approvals-loan-terms-and-todays-low-rates/ “San Diego Mortgage Company – Equis Mortgage Group, LLC” Check out a San Diego Mortgage Company, called Equis Mortgage Group, LLC and a San Diego Mortgage Broker, David LePari, for all your mortgage and real estate needs with fast approvals and today’s low rates. today. We were looking for a San Diego mortgage company that […]]]>

“San Diego Mortgage Company – Equis Mortgage Group, LLC”

Check out a San Diego Mortgage Company, called Equis Mortgage Group, LLC and a San Diego Mortgage Broker, David LePari, for all your mortgage and real estate needs with fast approvals and today’s low rates. today.

We were looking for a San Diego mortgage company that offers fast home loan approvalscoupled with great terms and today’s low rates, and we came across Equis Mortgage Group, LLC and San Diego mortgage broker, David LePari.

As a professional mortgage broker, Mr. LePari originates, negotiates and processes residential mortgage loans on behalf of the client. Below is a six-point guide to what services to offer and what to expect from a qualified mortgage broker representing a new local San Diego mortgage company:

1. PROVIDES ACCESS TO MOST HOME LOAN PRODUCTS

This includes the most common types of mortgages such as Conventional, FHA, Jumbo, VA, Reverse, and Refinance, as well as other eligible and non-eligible loan products listed under Additional Loan Types on their website. .

2. FIND THE MOST ADVANTAGEOUS OFFER FOR THE CUSTOMER

A solid and reputable company San Diego Mortgage Company represents its own interests rather than the interests of a credit institution.

They must act not only as an agent, but as a competent consultant and problem solver.

Having access to a wide range of mortgage products, Mr. LePari is able to offer someone the greatest value in terms of interest rates, repayment amounts and loan products.

The best mortgage brokers will go through interviews to identify their short and long term needs and goals.

Many situations require more than just using a 30-year, 15-year, or adjustable rate (ARM) mortgage, so innovative mortgage strategies and sophisticated solutions are the benefits of working with an experienced mortgage broker and M David LePari fits that. profile on the spot.

3. HAS THE FLEXIBILITY AND EXPERTISE TO MEET ITS NEEDS

When we do Equis Mortgage Group their new San Diego mortgage company, one can expect a broker who guides the client through any situation, manages the process, and mitigates obstacles in the road along the way. For example, if borrowers have credit issues, the broker will know which lenders offer the best products to meet their needs.

Borrowers who find they need larger loans than their bank has approved also benefit from a broker’s knowledge and ability to successfully secure financing, for almost any home type and circumstance.

4. SAVE ONCE

With Equis as his San Diego Mortgage Company, all it takes is one application, rather than filling out forms for each individual lender. Mr. LePari and his team can provide a formal comparison of all recommended loans, guiding you to information that accurately outlines cost differences, with current rates, points and closing costs for each loan reflected.

5. SAVE MONEY WITH NO HIDDEN COSTS

A reputable mortgage broker will disclose how they are paid for their services, along with details of the total loan costs.

6. PROVIDES PERSONALIZED SERVICE AND ADVICE

Personalized service is the differentiating factor when selecting a mortgage broker like Mr. David LePari and his team.

We should expect his San Diego Mortgage Broker to help smooth the way, be available for her needs and advise throughout the closing process.

We checked the qualifications, experience and GMB reviews of this San Diego Mortgage Company and asked for referrals and in the end we found a friendly broker and fast team that will match one to the right lender and loan with the best terms and today’s low rates so one can successfully get and quickly get approved for a home purchase or mortgage refinance.

Equis Mortgage Group, LLC NMLS #2009443 / DRE #01438695

David LePari, Broker NMLS #2027739

Media Contact
Company Name: Equis Mortgage Group, LLC
Contact: David Leparis
E-mail: Send an email
Call: (619) 368-0941
Address:11440 BERNARDO COURT WEST, SUITE 300
Town: San Diego
State: California
The country: United States
Website: equismortgagegroup.com/

Press release distributed by ABNewswire.com

To view the original version on ABNewswire, visit: San Diego Mortgage Company Offers Fast Approvals, Loan Terms and Low Rates Today

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What are the interest rates? How do they work? https://sendika12.org/what-are-the-interest-rates-how-do-they-work/ Mon, 28 Feb 2022 20:29:13 +0000 https://sendika12.org/what-are-the-interest-rates-how-do-they-work/ Interest is the price you pay to borrow money. Stocksnap from Pixabay; Cloth What are the interest rates? Contents When people need to finance major purchases like a house or car, start a business, or pay school fees, they often turn to their bank for a loan. These loans can be short-term, lasting only a […]]]>

What are the interest rates?

When people need to finance major purchases like a house or car, start a business, or pay school fees, they often turn to their bank for a loan. These loans can be short-term, lasting only a few months, but they can also be longer-term, such as mortgages, which have terms of up to 30 years.

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Low real interest rates support asset prices, but rising risks https://sendika12.org/low-real-interest-rates-support-asset-prices-but-rising-risks/ Sun, 20 Feb 2022 04:18:08 +0000 https://sendika12.org/low-real-interest-rates-support-asset-prices-but-rising-risks/ Supply disruptions coupled with strong demand for goods, rising wages and rising commodity prices continue to challenge economies around the world, pushing inflation above central bank targets . To contain price pressures, many economies began to tighten monetary policy, causing nominal interest rates to rise sharply, with long-term bond yields, often an indicator of investor […]]]>

Supply disruptions coupled with strong demand for goods, rising wages and rising commodity prices continue to challenge economies around the world, pushing inflation above central bank targets .

To contain price pressures, many economies began to tighten monetary policy, causing nominal interest rates to rise sharply, with long-term bond yields, often an indicator of investor sentiment, returning to pre- pandemic in certain regions such as the United States. states.

Investors often look beyond nominal tariffs and base their decisions on real rates, i.e. inflation-adjusted rates, which help them determine the return on assets. Low real interest rates encourage investors to take more risk.

Despite somewhat tighter monetary conditions and the recent uptrend, longer-term real rates remain deeply negative in many regions, supporting higher prices for riskier assets. Further tightening may still be needed to bring inflation under control, but this puts asset prices at risk. More and more investors could decide to sell risky assets because these would become less attractive.

Different perspectives

While short-term market rates have risen since central banks’ hawkish turn in advanced economies and some emerging markets, there is still a clear difference between policy makers’ expectations about when their benchmark rates will rise and where investors expect the crunch to end.

This is particularly evident in the United States, where Federal Reserve officials expect their main interest rate to hit 2.5%. That’s more than half a point higher than 10-year Treasury yields indicate.

This divergence between the views of markets and policymakers on the most likely path for borrowing costs is important because it means that investors can adjust their expectations of upward Fed tightening at a time more far and faster.

In addition, central banks could tighten more than they currently expect due to the persistence of inflation. For the Fed, this means that the main interest rate at the end of the tightening cycle could exceed 2.5%.

Implications of Debit Path Splitting

The path of policy rates has important implications for financial markets and the economy. Due to high inflation, real rates are historically low, despite the recent rebound in nominal interest rates, and are expected to remain so. In the United States, long-term rates are hovering around zero while short-term yields are deeply negative. In Germany and the United Kingdom, real rates remain extremely negative on all maturities.

interest rate

These very low real interest rates reflect pessimism about economic growth in the years to come, the global glut of savings due to aging societies and the demand for safe assets in a context of heightened uncertainty exacerbated by the pandemic and recent geopolitical concerns.

Unprecedented low real interest rates continue to boost riskier assets, despite the recent uptrend. Low real long-term rates are associated with historically high price-to-earnings ratios in equity markets, as they are used to discount expected future growth in earnings and cash flow. All other things being equal, the tightening of monetary policy should trigger an adjustment in real interest rates and lead to a rise in the discount rate, leading to a decline in stock prices.

Despite the recent tightening of financial conditions and worries about the virus and inflation, global asset valuations remain stretched. In credit markets, spreads are also still below pre-pandemic levels despite a slight recent widening.

After a banner year supported by strong earnings, the US stock market entered 2022 with a steep decline amid high inflation, growth uncertainty and a weaker earnings outlook. Therefore, we anticipate that a sudden and substantial rise in real rates could lead to a significant decline in US equities, especially in highly valued sectors like technology.

Already this year, the real 10-year yield has risen by almost half a percentage point. Stock volatility soared on heightened investor jitters, with the S&P 500 falling more than 9% for the year and the Nasdaq Composite measure dropping 14%.

Impact on economic growth

Our growth at risk estimates, which link downside risks to future economic growth to macro-financial conditions, could rise significantly if real rates suddenly rise and financial conditions tighten. Easy conditions have helped governments, consumers and businesses around the world weather the pandemic, but that could reverse as monetary policy tightens to curb inflation, moderating economic expansions.

In addition, capital flows to emerging markets could be threatened. Equity and bond investments in these economies are generally considered less safe, and tighter global financial conditions may lead to capital outflows, particularly for countries with weaker fundamentals.

Going forward, with persistent inflation, central banks are faced with a balancing act. Meanwhile, real interest rates remain very low in many countries. The tightening of monetary policy must be accompanied by some tightening of financial conditions. But there could be unintended consequences if global financial conditions tighten significantly.

A larger and sudden increase in real interest rates could lead to a disruptive revaluation of prices and an even larger sell-off in equities. Given that financial vulnerabilities remain elevated in several sectors, monetary authorities should provide clear guidance on the future direction of policy to avoid unnecessary volatility and preserve financial stability.

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Biden under pressure from the left on student loans https://sendika12.org/biden-under-pressure-from-the-left-on-student-loans/ Sat, 19 Feb 2022 10:45:00 +0000 https://sendika12.org/biden-under-pressure-from-the-left-on-student-loans/ Jhe student loan debate is the latest issue in which President Joe Biden finds himself caught between the centrist and liberal wings of the Democratic Party. Critics say Biden hasn’t done enough to address the $1.7 trillion student debt burden, while more conservative voices point to the need for fiscal responsibility for taxpayers who would […]]]>

Jhe student loan debate is the latest issue in which President Joe Biden finds himself caught between the centrist and liberal wings of the Democratic Party.

Critics say Biden hasn’t done enough to address the $1.7 trillion student debt burden, while more conservative voices point to the need for fiscal responsibility for taxpayers who would be responsible for any “cancellation” of the debt.

BIDEN SCRAPS RULE REQUIRING STUDENT BORROWERS TO RECOGNIZE PREVIOUS LOANS

“[The Biden administration] has been unnecessarily slow to reach out to for-profit colleges and student debt service officers and too slow to provide relief to student creditors,” said Jeff Hauser, executive director of the Revolving Door Project.

As Biden extended the student loan repayment hiatus started under former President Donald Trump until May 1, the latest controversy stems from promises by his Department of Education to reform the way it handles loan applications. bankrupt. A report from the daily poster detailed how the agency filed a bankruptcy petition against a Delaware man with epilepsy who owed nearly $100,000 and had never made any payments.

In another case, a single Alabama mother of three who owed $111,000 while earning less than $22,000 a year won a lawsuit to have the debt forgiven, but the Biden administration did appeal the decision. After the cases came to public attention, the Department of Education said it would drop both cases.

Biden played a role in making it difficult to escape student debt, even through bankruptcy, by backing a 2005 Senate bill that Hauser calls a “pro-creditor approach to bankruptcy.”

“This approach primarily prevented student loans from being discharged in a bankruptcy,” Hauser said, adding that Trump’s six bankruptcies before running for president showed the system’s hypocrisy.

OPINION: YET ANOTHER STUDY SHOWS WHY STUDENT DEBT “CANCELLATION” IS A SCAM

But there’s a good reason federal student loans are treated differently, argues Neal McCluskey of the Cato Institute — creditors are taxpayers who have no say in whether they lent money. .

“The taxpayer has to pay their taxes whether or not they agree to have it spent on these loans,” said McCluskey, director of Cato’s Center for Educational Freedom. “You have to remember that there are people who gave you that money who expect to get it back and who might need it.”

Instead, more focus should be on reducing college costs, he added, which will address the roots of the problem as a long-term solution.

According to the Education Data Initiative, the federal government holds more than $1.5 trillion in student loans, with the average borrower owing $36,510.

Liberal senators such as Elizabeth Warren and Chuck Schumer have called on Biden to “cancel” up to $50,000 in debt for each of the nation’s 43 million on loan. Biden has mentioned a $10,000 figure but wants it presented as a bill to Congress, again clashing with more liberal minds who say he can do it alone.

White House press secretary Jen Psaki was asked last week why Biden hadn’t pushed harder for taxpayers to absorb student loans.

“The president has made it known that he would be happy to sign a bill that all these members [of Congress] could work to pass off,” she replied.

A common criticism of student loan forgiveness proposals concerns who tends to hold the most student loan debt, with studies showing that it is usually wealthier people. An analysis by the Brookings Institution found that nearly a third of student debt is held by the top 20% of households, while only 8% is held by the bottom 20%. The proposals could therefore be regressive in the absence of income limits or other balancing measures.

But even some right-wing populist pundits have called on Congress to make changes, including Fox News host Tucker Carlson.

“We can change the law in all sorts of ways. We can make colleges liable for loans in default like any other loan recipients they might co-sign,” Carlson said in 2020. “We could restrict loans students at schools that let tuition rise too quickly.If you’re scamming kids, we’re not going to give you a federally guaranteed loan.

Debt could cause young people to delay marriage and children, Carlson concluded.

While avoiding sweeping proposals, Biden has embraced smaller measures, such as pledging to reform the Department of Education’s bankruptcy rules, limited debt forgiveness for victims of for-profit college fraud, and the reform of existing programs – such as the civil service. Loan cancellation plan.

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But anything less than a blanket strike may not be enough for the liberal wing of the Democratic Party and voters who backed the presidential campaigns of Warren and Vermont Sen. Bernie Sanders.

“Biden doesn’t want to massively write off loans, but also doesn’t want to say he won’t,” McCluskey said. “He doesn’t want to alienate the left.”

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Raising interest rates is fucking the workers https://sendika12.org/raising-interest-rates-is-fucking-the-workers/ Wed, 09 Feb 2022 20:12:27 +0000 https://sendika12.org/raising-interest-rates-is-fucking-the-workers/ With inflation above 5% for the first time since the financial crisis, policymakers are perplexed. The orthodox response to high inflation is to raise interest rates. The increase in the cost of borrowing is supposed to reduce spending and investment, thereby reducing the pressure on resources that can drive up prices when the economy is […]]]>

With inflation above 5% for the first time since the financial crisis, policymakers are perplexed. The orthodox response to high inflation is to raise interest rates. The increase in the cost of borrowing is supposed to reduce spending and investment, thereby reducing the pressure on resources that can drive up prices when the economy is growing rapidly.

But inflation is not always caused by high rates of economic growth colliding with limited resources. It can be caused by anything that generates a sudden imbalance between demand and supply for a particular product. Today, these raw materials are fossil fuels.

Rising oil and natural gas prices – a legacy of a pandemic in which economic activity, and therefore fuel consumption, fell to very low levels leading to a reduction in supply – are impacting on the prices of almost all other commodities. This domino effect has been particularly evident in the food sector due to the important role of fertilizers derived from natural gas.

The result has been a particularly sharp rise in inflation of imports of food, fuel and other consumer goods into the UK – exacerbated by disruptions to supply chains also caused by the pandemic. This type of inflation mainly affects the poor, and almost 5 million people are now struggling to feed themselves in the UK due to rising prices.

This unusual situation raises an important question: what are policymakers supposed to do when inflation is high, but growth and investment are weak?

Similar questions were asked in the 1970s, just at the dawn of the neoliberal revolution. In the UK, growth and investment were weak but inflation was high, again due to higher energy prices resulting from the formation of the Organization of the Petroleum Exporting Countries ( OPEC).

The breakdown of the relationship between employment and inflation that occurred during this period is now considered the death knell of the Keynesian consensus. Since inflation was not fueled by strong demand, it could not simply be solved by cutting government spending, raising interest rates, or negotiating wage moderation with the unions. The problem was energy.

Naturally, this fact gave workers in the energy sector much more power. Miners in particular organized themselves during this period to obtain wage increases and stem the decline of their industry.

At the same time, neoliberal economists have sought to use the “stagflation crisis” as an opportunity to destroy the last vestiges of the social democratic accord. They argued that inflation was fueled by irresponsible governments pumping too much money into the economy and failing to confront overly militant trade unionists demanding higher wages.

Divergent interpretations of the crisis led to an epic confrontation between capital and labor that culminated in the Winter of Discontent, the introduction of a three-day week and, ultimately, the election of Margaret Thatcher .

Thatcher immediately set out to institutionalize the neoliberal view of inflation by drastically raising interest rates. Neoliberals argued that inflation was “always and everywhere a monetary phenomenon”: in other words, when prices rose, it was because governments had lost control of the money supply. Raising interest rates—along with cutting government spending—would discourage borrowing and therefore limit money supply growth.

This theory never worked in practice. Thanks to financial deregulation, borrowing under Thatcher grew faster than at any time in history. But the drastic rise in interest rates was never intended to reduce the money supply – it was meant to create a recession that would discipline organized labor.

Monetarism quietly fell out of favor among central bankers during the 1980s as it became clear that there was no easy way to use interest rates to control the money supply. But Thatcher’s interest rate shock – echoed by the Volcker shock that took place in the United States – is remembered as a necessary and decisive step to stem the “wage-price spiral” of the 1970s.

Thatcher may have ended the slump of the 1970s, but she did it by plunging millions into poverty and creating an economy that worked for a small elite in southern England. Much of the political and economic turmoil we are experiencing today can be traced back to decisions made under his government.

In addition, inflation ended up falling in the long term due to the stabilization of oil prices, which would have happened anyway with the normalization of OPEC’s role in global energy markets.

Thatcher’s singular achievement was not in figuring out how to use monetary policy to bring inflation down; it was about figuring out how to use monetary policy to discipline the working class. Today, his descendants are trying to do the exact same thing.

Proponents of higher interest rates know that the problem we face is not the overheating of the economy, but the fallout from the shock of rising energy prices. Making borrowing more expensive will only further constrain a stagnant economy, dampening consumption and investment – ​​and therefore wages and job creation.

But just like in the 1980s, capital must discipline labor in order to protect profits. Some workers have had lots of paid time off or spent more time working from home and don’t want to return to the dismal working conditions of the pre-pandemic years.

Others have been less fortunate, spending recent years earning meager wages in dangerous conditions. But many of these workers are organizing – we are seeing an uptick in union membership and activity that could begin to reverse a decades-long decline.

We are unlikely to see Thatcher-style monetary shock therapy again. Apart from anything else, the unions remain in such a weak position that a dramatic hike in interest rates (as opposed to the one recently announced) is an unnecessary tactic given the chaos it would cause.

But the right is already trying to spread a narrative that blames workers for the current rise in inflation to justify a disciplinary response from the state. Just look at the Governor of the Bank of England’s plea for wage moderation (which has been rightly ridiculed since it emerged he was earning over half a million pounds a year).

One of the few ‘problems’ that the British economy insists on not the face is inflated salaries. British workers have experienced the longest period of wage stagnation since the 1800s. And while there have been post-pandemic wage increases in some sectors associated with shortages, these have been limited and are likely to be temporary, as workers respond by filling in the gaps.

The latest analysis from the Trades Union Congress (TUC) shows that weekly wages are now £3 lower than at the time of the financial crash of 2008. The general trajectory of wages after the pandemic is not yet clear, but early indicators suggest that wage growth – especially in lower-paying sectors – is returning to pre-pandemic levels.

In this context, the rise in interest rates will have two effects. First, it will increase the impact of inflation on poorer households by making their borrowing more expensive. In fact, it threatens to push millions of families into debt.

Second, it will discourage investment in an economy where business investment was already dangerously low before the pandemic began. This will translate into fewer jobs, lower productivity and lower long-term wage growth.

In other words, higher interest rates will mean an even lower standard of living for the millions already badly hit by high inflation. Moreover, they will not have an impact on inflation until energy prices fall, which will only happen with an increase in supply.

Rather than raising interest rates, we should argue for short-term price controls and public support for the supply of long-term necessities – perhaps through something like a national food service.

Investing in renewable energy is essential for many reasons: keeping prices low, maintaining energy security, decarbonizing, creating jobs and recovering from the pandemic.

Inflation is always political – inflation itself and the response to it benefits some groups and harms others. We cannot allow the right to get away with blaming workers for a set of problems caused by capital.

After all, we wouldn’t be facing this problem if previous governments had taken the need to invest in renewable energy sources seriously. And energy companies like Exxon Mobil and BP are posting windfall profits due to rising oil and natural gas prices.

Workers have borne the cost of every crisis for at least the past fifty years – they cannot and will not have to bear all the costs of this one.

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Terms of World Bank loans ‘acceptable’ – South African minister https://sendika12.org/terms-of-world-bank-loans-acceptable-south-african-minister/ Wed, 02 Feb 2022 04:52:30 +0000 https://sendika12.org/terms-of-world-bank-loans-acceptable-south-african-minister/ Finance Minister Enoch Godongwana said a $720 million Development Policy Loan (DPL) from the World Bank came with favorable conditions. During the virtual meeting, MPs sought to determine whether the loan was justified and what it would cost to maintain the facility. “Given its terms and conditions, which were acceptable to us, compared to what […]]]>

Finance Minister Enoch Godongwana said a $720 million Development Policy Loan (DPL) from the World Bank came with favorable conditions. During the virtual meeting, MPs sought to determine whether the loan was justified and what it would cost to maintain the facility. “Given its terms and conditions, which were acceptable to us, compared to what is available in the market, we opted for the World Bank loan,” Godongwana said.

This World Bank DPL supports the implementation of South Africa’s economic reconstruction and recovery plan. The funding is a low-interest loan that contributes to the government’s fiscal relief program while reinforcing South Africa’s decisions on how best to provide relief to the economy and those most affected by the crisis. current situation, the government said in an earlier statement.

According to, Dennis Webster of New frame, South Africa dipping its toes into the World Bank pool for the first time sends an important political signal. Having so far escaped the original sin of not being able to borrow long-term in its own currency, the country currently has low levels of borrowing in dollars. But if his chronic budget situation — he already spends more on debt repayment each year than on health care — gets worse, the potential for dollar borrowing in the future is huge, Webster wrote.

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South African currency (file photo).

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