China’s money rates slightly up on central bank-led cash drain
China’s primary money rates were slightly up for the week after the central bank drained some cash out of the market, though liquidity stress seen in June has abated and helped check any sharp moves. Traders said market sentiment was unaffected by the small cash drain through open market operations, and they were able to square their books. The volume-weighted average rate of the benchmark seven-day repo traded in the interbank market, considered the best indicator of general liquidity in China, closed at 2.8373 percent on Friday, around 5 basis points above the previous week’s closing average rate at 2.7879 percent. For the week, the People’s Bank of China drained a net 30 billion yuan ($4.50 billion) from the market via its reverse bond repurchase agreements, compared with a net drain of 40 billion yuan a week earlier. One trader at a Chinese bank said the central bank’s relatively neutral bias in recent open market operations has relieved the market, as it suggested the PBOC would inject some fresh funds if signs of liquidity stress emerge. Two batches of medium-term lending facility (MLF) loans are due to mature next Tuesday, with a total volume of 287.5 billion yuan, and most market players expect the PBOC to roll over the
U.S. economic expansion to last another two years or more: Reuters poll
The U.S. economic expansion will last at least another two years, according to a majority of economists polled by Reuters who also forecast growth will not accelerate the way the Trump administration has predicted. The recovery from the devastating 2007-2009 financial crisis has been unusually lengthy. The latest growth stretch has already lasted 96 months, and if the poll predictions come true it would mark the longest economic expansion in more than 150 years. Growth has still not picked up as quickly as thought recently, leading forecasters to lower expectations again slightly in the poll of more than 100 economists taken Aug. 7-10. Still, the U.S. expansion has more than two years to go, according to 34 of 57 economists who answered an additional question on the business cycle. Of those economists, 21 said it would last two to three years and 13 said more than three years. “Expansions don’t go on forever,” said Sam Bullard, senior economist at Wells Fargo, who said there was another two to three years to go. “Steady, moderate growth looks like it could stay in place for a while.” The remaining 23 respondents said the expansion would only last one to two years. None of the economists, based in the United States, Canada and Europe, expected it to end within a year.
ECB slightly more likely to announce QE change in September vs. October: Reuters poll
The European Central Bank is slightly more likely to announce a change to its asset purchases program in September than October, a Reuters poll found. The central bank left its ultra-easy monetary policy unchanged in July and said it had not discussed anything on its 60 billion euros of monthly asset purchases, but signalled the discussions would come “this autumn”. Twenty-eight of 50 economists surveyed Aug 7-9 said they expect the central bank to make an announcement in September, while 15 said it would wait until October. Most of the remaining said sometime in early 2018. “The ECB has flagged ‘autumn’ as the period in which they will decide on the asset purchase program,” said Elwin De Groot, senior market economist at Rabobank. “We believe this means that the Governing Council will outline the intentions it has beyond this year in September or possibly October, whilst leaving the December meeting for any details, such as the exact amount of the initial adjustment.” ECB policymakers see October as the most likely month to decide on its quantitative easing program and flagged December as too late, based on four sources with direct knowledge of a discussion, published shortly after the July meeting.