ECB Is Said Likely to Take Small Steps in QE Exit Guidance
The European Central Bank is likely to make multiple small adjustments to its guidance on monetary policy next year rather than any major change in language as it ends quantitative easing, according to euro-area officials familiar with the thinking of policy makers. Incremental shifts in the wording used to describe the expected path of its policy would make sense and be consistent with a gradual exit from unconventional stimulus, said the people, who added that the issue hasn’t been formally discussed by the Governing Council. They asked not to be identified because the matter is confidential. An ECB spokesman declined to comment. Last month, officials coupled their slower expansion of the ECB’s QE program with the proviso that they would intensify it if needed. That’s just one of several pledges to reassure investors as it strives to end the 2.5 trillion-euro ($2.9 trillion) program and start raising interest rates without rocking markets. President Mario Draghi has made it clear that such forward guidance will remain a key policy tool. Yet the language has become more complicated as measures to support the economy have multiplied, raising the risk that investors misunderstand the central bank’s intentions if it makes wholesale changes.
Nafta Talks Sputter as Parties Reject U.S. Hard Line
The quest to renew Nafta is slowing to a crawl as Canada and Mexico tiptoe around America’s most controversial proposals, throwing into doubt the ability of the three nations to reach a quick deal. The U.S. is frustrated with the reluctance of Canada and Mexico to present counter-proposals on key issues such as regional content rules for cars, which could make or break a deal. Mexico and Canada continue to portray key U.S. demands as unworkable, and are holding out hope the Trump administration will bow to pressure from U.S. lawmakers and corporations to keep core elements of the deal alive. There has been an air of technocratic calm to the talks this week in Mexico City as bureaucrats plug away at less explosive issues. Trade chiefs from the three countries aren’t attending this round, which has dialed down rhetoric on the ground, but also left a political void for overcoming some of the sticking points. The sprint for a U.S. tax overhaul this year has overtaken the agenda in Washington, diverting some attention from Nafta. Yet there’s still no clear path to a deal on a successor to the North American Free Trade Agreement, which governs more than $1 trillion in trade and underpins the supply chains of companies from General Motors Co. to Caterpillar Inc. President Donald Trump has repeatedly threatened to pull out of the deal if the U.S. doesn’t get what it wants, and American officials want to get an agreement by next March, before a general election in Mexico and congressional midterms in the U.S. inject even more politics.
China to step up property market regulation to avoid bubble risk
China will step up financial regulation and crack down on speculation in the property market to stabilize prices and fend off bubble risks, state television CCTV reported on Tuesday, signaling renewed efforts to rein in risks from a rapid build-up in debt in the economy. The remarks from regulators at the People’s Bank of China (PBOC), the Ministry of Housing and Urban-Rural Development (MHURD) and the Ministry of Land and Resources (MLR) during a joint work meeting in central China’s Wuhan laid out short-term tasks to be achieved in real estate, CCTV said. China’s housing market has seen a near two-year boom, giving the economy a major boost but stirring fears of a property bubble, with the government taking strong measures since late 2016 to curtail speculative purchases. Despite efforts by Chinese authorities to curb speculation in the housing market, property prices have continued to climb although at a slower pace. New home prices rose at a slightly faster pace in October after gains had held steady the previous month. The regulators said China would prevent funds from being illegally channeled into the property market, and ensure capital allocation between real estate and other industries was balanced.