•The People's Bank of China released the 2024 RMB Internationalization Report
•State Administration of Foreign Exchange: All kinds of investment in China have stabilized and improved
• The Fed's paper losses exceeded the $200 billion mark
• Japan's new prime minister "called a halt" to the central bank's interest rate hike plan
The Bank of Japan's regional economic report showed a modest recovery
【Global Central Bank Dynamics】
•The RMB Internationalization Report (2024) released by the People's Bank of China pointed out that in the next stage, it will focus on trade and investment facilitation based on market-driven and independent choice of enterprises, and steadily and solidly promote the internationalization of RMB. On the basis of "local currency priority", we will strengthen the coordination between domestic and foreign currencies. Make good use of mechanisms such as currency swaps and RMB clearing arrangements to provide stable RMB liquidity for the offshore market. Improve the long-term mechanism for the issuance of overseas sovereign bonds, and increase the supply of RMB safe assets. According to the report, as of the end of August 2024, the People's Bank of China has signed bilateral local currency swap agreements with central banks or monetary authorities of 42 countries and regions, of which 29 are valid, with a swap scale of more than 4.1 trillion yuan.
•The State Administration of Foreign Exchange issued a report pointing out that the market expects that the US and European monetary policies will continue to cut interest rates in the future, and the monetary policy adjustment of the Bank of Japan may be postponed until the end of the year. In the second half of the year, along with the overall improvement of the internal and external environment, the mainland has the foundation and conditions to maintain its own balance of payments. The monetary policies of major developed economies have entered a cycle of interest rate cuts, and the US dollar exchange rate and US bond interest rates will be adjusted, which will help improve global liquidity and financing environment, and enhance the activity of international trade, investment and financing.
• The Federal Reserve's latest report said its losses had crossed the $200 billion mark. As of last Wednesday, the Fed's earnings to the Treasury, a measure of its financial performance, had reached -$201.2 billion. The loss stems from the interest paid by the Federal Reserve to major financial institutions during the current interest rate hike cycle. In order to keep short-term interest rates at target levels, the Fed needs to pay compensation to banks and money market funds for margin deposits held with the central bank. However, Fed officials stressed that this indicator does not affect the implementation of the Fed's monetary policy.
• A look at last week's speeches by Fed officials:
St. Louis Fed President Mousalem said he supported the Fed's interest rate decision to cut rates by 50 basis points last month, but stressed that he would prefer further rate cuts to be gradual.
Atlanta Fed President Bostic said he would be open to another 50 basis point rate cut if the United States labor market weakened.
Chicago Fed President Goolsbee said that the Fed has largely reduced inflation; The economy has not yet been affected by the dock strike; The latest inflation data has reached the Fed's target; The labour market is at full employment. A 25bp cut or 50bp cut is not as important as a significant reduction in rates over the next 12 months to reach a neutral rate; Interest rates will need to fall a lot over the next 12 months.
Richmond Fed President Barkin said a 50 basis point rate cut in September was justified because interest rates were not in line with falling inflation and near sustainable levels of unemployment; The FOMC was unable to declare the end of the fight against inflation and did not expect much further decline in core PCE until next year; If the economy develops as expected, two more 25bp rate cuts this year are "reasonable paths"; Unemployment and inflation are expected to remain broadly stable for the rest of the year; The current rate cut is an appropriate readjustment of policy, but full normalization would require inflation to reach 2%.
• A summary of the speeches made by ECB officials last week:
ECB Vice President Guindos said that by the end of 2025, the ECB expects inflation and core inflation to hover around 2%, but it is too early to declare victory in the fight against inflation. Recent inflation data has been good, beating expectations, but downside risks to growth remain.
Deputy Governor Vasley said the prospect of an ECB rate cut in October could not be confirmed or ruled out; The ECB will indeed cut rates further, but it will depend on the outlook for economic data; The downward trend in inflation in the eurozone is solid and will continue.
Governing Council Villeroy said it was "likely" that interest rates would be cut in October due to the rising risk of inflation falling below the 2% target.
• Japan Prime Minister Shigeru Ishiba said he had an exchange of views with Bank of Japan Governor Kazuo Ueda; This is not the right time for further rate hikes. Kazuo Ueda said that he would support the economy through easing policies; discussed market and economic issues with Prime Minister Shigeru Ishiba; The government's agreement with the Bank of Japan is not discussed; Japan Prime Minister Shigeru Ishiba has indicated that the degree of monetary easing will be adjusted if the economic outlook is realized, but since this process will take time, careful steps will be taken to judge.
Central Bank Councillor Takeshi Noguchi said the Bank of Japan must patiently maintain an accommodative monetary policy because it will take time to dispel the public's perception that prices will not rise sharply in the future. Noguchi is a well-known Japan policy dovish, having voted against the Japan's decision to raise interest rates in July.
• The minutes of the Bank of Japan's September policy meeting showed that a member said that if the inflation outlook materialises, the level of easing will be adjusted; One member said the path of rate hikes considered would be to raise the policy rate to 1.0% as early as the second half of fiscal 2025; One member said the Japan Bank must raise interest rates and not wait too long, but the rate hike itself must have a purpose.
• The Bank of Japan's quarterly regional report raised the assessment of 2 of the 9 regions in Japan and left the assessment unchanged for 7 regions; The economy of Japan has recovered moderately, showing a trend of recovery or moderate recovery; Businesses in many regions say they must continue to raise wages due to structural labor shortages; Many regions say price increases are expanding.
• United Kingdom Bank Chief Economist Peel said bank rates will need to fall over time. The Bank of United Kingdom has good reason to remain cautious in assessing the weakening persistence of inflation; The Bank of United Kingdom still has the possibility of further cutting bank rates in the future, but it must be careful to guard against the risk of cutting rates too quickly or too much; It remains concerned that structural changes could lead to more persistent inflationary pressures.
The Brazil Brazil central bank raised its GDP growth forecast to 3.0% in 2024 and raised its growth forecast for 2025 to 1.93%, according to the Focus Report released by the central bank. The country's inflation forecast for 2024 was raised to 4.38%. Governor Neto said that inflation in Brazil is expected to rise and chose not to provide guidance on monetary policy; The pricing of the long-term debt yield curve seems a bit exaggerated.
• India's foreign exchange reserves surpassed $700 billion for the first time in history after climbing for seven consecutive weeks, mainly due to rising valuations and central bank dollar purchases. India's foreign exchange reserves stood at $704.89 billion in the week ended September 27, up $12.6 billion, the biggest weekly increase since mid-July 2023, the data showed.
【Market Watch】
• Following the release of the non-farm payrolls data, traders abandoned expectations that the Fed would cut interest rates by 50 basis points in November, further betting that the Fed would stick to 25 basis points in November and December. Economists believe the United States non-farm payrolls report for September was surprisingly strong across the board. The prospects for a soft landing for the United States economy have turned bright. Analysts at GDS Wealth Management said nonfarm payrolls were growing much faster than expected, giving the Fed the flexibility to cut rates by 25 basis points or pause them in November.
• Global foreign exchange reserve managers sold off dollar assets in the second quarter, as the dollar's rally prompted them to diversify into other currencies. According to the latest data from the International Monetary Fund (IMF), these reserve managers sold a total of $155 billion worth of dollar assets in the second quarter of this year, the largest since the third quarter of 2023. Of the eight currencies tracked by the IMF, the Japanese yen received the largest inflows, followed by the euro.
• Paul · Dyers, a macroeconomist at Capital Economics, said that United Kingdom the slight slowdown in economic growth at the beginning of the year did not make the United Kingdom central bank too worried. The revised data showed that the United Kingdom economy grew by 0.5% in the second quarter, below expectations of 0.6%. The slowdown is likely largely due to last year's higher growth base, and the United Kingdom central bank is unlikely to be overly concerned about a new recession this year. United Kingdom's GDP growth in the second half of this year will be slower than in the first half, but a deep recession or another recession will be avoided.
【This week's highlights】
•Tuesday
08:30 Minutes of the Reserve Bank of Australia's September monetary policy meeting
15:00 ECB Executive Board member Schnabel delivers a keynote speech at the ECB meeting on monetary policy
15:00 Fed Governor Coogler speaks at a meeting hosted by the European Central Bank
•Wednesday
00:45 2024 FOMC member and Atlanta Fed President Bostic speaks on the economic outlook
04:00 2025 FOMC member and Boston Fed President Collins speaks at the Community Bank Conference
07:30 Fed Vice Chair Jefferson speaks
09:00 The Reserve Bank of New Zealand announces its interest rate decision and monetary policy review
12:30 The Bank of India announces its interest rate decision
21:15 2026 FOMC member and Dallas Fed President Logan speaks on the current state of the economy
•Thursday
00:30 Fed Vice Chair Jefferson speaks
02:00 The Federal Reserve releases the minutes of its monetary policy meeting
05:00 2025 FOMC member and Boston Fed President Collins speaks
06:00 2024 FOMC member and San Francisco Fed President Daly speaks
22:30 2024 FOMC member and Richmond Fed President Barkin for a fireside chat
23:00 The Central Bank of Mexico releases the minutes of its monetary policy meeting
•Friday
21:45 2025 FOMC members, Chicago Fed President Goolsbee and Fed Governor Bowman attend the 18th Annual Community Bankers Symposium
22:45 2026 FOMC member and Dallas Fed President Logan participates in a panel discussion
Time to be determined The Bank of Korea announced its interest rate decision
Editor: Wang Shurui
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