The supply chain imbalances and higher demand currently leading to higher inflation are transitory and the U.S. Federal Reserve has the tools to respond if inflation remains elevated for longer than anticipated, Fed Vice Chair for Supervision Randal Quarles said on Monday. Meantime, The U.S. Federal Reserve has made "substantial further progress" toward its inflation goal in order to begin tapering asset purchases, Federal Reserve Bank of Richmond President Thomas Barkin said on Monday, as he indicated U.S. employment numbers may soon follow. Barkin added that he would wait until next year to determine whether the U.S. central bank had hit its inflation and employment mandates for beginning to raise interest rates from near zero.
China central bank to make monetary policy flexible, targeted, appropriate
China will make its monetary policy flexible, targeted and appropriate, while keeping interbank liquidity reasonable, the central bank said on Monday, as authorities seek to consolidate a post-COVID-19 economic recovery. It would step up forecasts and analyses of both the domestic and global economy, seek greater international economic policy coordination and fend off external shocks to support growth. A recent move to reform the way banks calculate deposit rates and continued efforts to unleash potential from previous loan prime rate reforms will help drive a further decline in real lending rates, the PBOC said. Authorities will make use of relending, re-discounting and other monetary tools that would directly help the real economy, said the PBOC. China will increase flexibility of the yuan exchange rate.
Euro zone banks suffering from weakening credit quality: ECB
Banks in the euro zone are already recording a drop in credit quality and this trend is likely to accelerate once government support measures are removed, European Central Bank Vice President Luis de Guindos said on Monday. "There are already some early signs of weakening credit quality, for example the share of loans reported as subject to heightened credit risk has risen significantly and asset quality is likely to deteriorate once support measures are phased out," de Guindos said in a speech. "The deterioration is most visible in sectors that were hit harder by the pandemic, such as services, while loan performance problems are less prevalent in manufacturing," he added.
Dollar bides time below two-month highs before payrolls test
The 10-year government bond yield (interpolated) on the previous trading day was 1.80, -1.00 bps. The benchmark government bond yield (LB31DA, 10.5 years) was 1.78, +0.50 bps. LB31DA could be between 1.75-1.82. Meantime, the latest closed US 10-year bond yields was 1.49%, -5.00bps. USDTHB on the previous trading day closed around 31.95 Moving in a range from 31.90-32.04 this morning. USDTHB could be closed between 31.98-32.08 today. Meantime, The dollar hovered below a two-month high versus major counterparts on Tuesday, with traders largely sidelined ahead of a closely watched U.S. jobs report, which could sway the timing of an exit from Federal Reserve stimulus.
Sources : Bloomberg, CNBC, Investing, CEIC
