Business
Fed poised for $10 billion taper as Bernanke bids adieu
NEW YORK – Turmoil in emerging markets and a month of disappointing job growth at home are unlikely to deter the Federal Reserve from trimming its bond-buying stimulus on Wednesday, as Ben Bernanke wraps up his last policy meeting at the helm of the U.S. central bank.
Overall signs of improvement in the U.S. economy suggest Fed officials will stay on track to cut monthly purchases of Treasuries and mortgage-backed securities by $5 billion each, bringing the total of their monthly asset purchases to $65 billion.
The meeting is Bernanke’s last before Vice Chair Janet Yellen moves into the top spot.
Bernanke took the Fed far into uncharted territory during his eight years on the job, building a $4 trillion balance sheet and keeping interest rates near zero for more than five years to pull the economy from its worst downturn in decades.
With those efforts beginning to pay off – and concerns growing over possible harm from so much money printing – the Fed
announced plans last month to phase out the bond buying by late this year unless the economy takes a decided turn for the worse.
It started by trimming its monthly purchases to $75 billion from $85 billion, and on Wednesday, the U.S. central bank is expected to shave another $10 billion.
“It’s clear the Fed wants to taper,” said Eric Stein, portfolio manager at Eaton Vance in Boston.
Even so, the Fed is nowhere near to making a decision to raise rates. Policymakers are expected to stick to their promise to keep rates near zero until well after the U.S. unemployment rate, now at 6.7 percent, falls to 6.5 percent. The Fed is set to announce its decision at 2 p.m. EST.
A dismal employment report for December showing businesses added far fewer jobs than expected raised some doubts about the Fed’s commitment to keep tapering its stimulus.
But largely upbeat data in recent weeks, from consumer spending and confidence to industrial production, bolstered the view of an improving economy, which forecasters estimate grew at an above-trend annual rate of 3.2 percent in the fourth quarter after notching a 4.1 percent advance in the previous quarter.
The show of strength provides a welcome backdrop for Bernanke, who steps down on Friday after an unusually tumultuous and highly experimental stint atop the world’s most influential central bank.
EMERGING DISTRACTIONS
Steep losses in emerging market assets over the past week led some to question whether the Fed might put plans to trim its bond buying on hold. Analysts said the prospect of less Fed stimulus had added to other worries, from signs of slower growth in China to political turmoil in countries from Turkey to Thailand, and helped spark investors’ flight.
But on Wednesday, Turkey’s central bank sharply raised its main interest rates, stemming both a slide in the lira and fears about cuts in U.S. monetary stimulus.
That move could make the Fed’s decision to trim its bond buying even easier, economists said.
“It would take a full-blown crisis that ensnares all (emerging market economies) to have a material effect on the U.S. economy, and I don’t think that’s what they see,” said Roberto Perli, a former Fed official who is now a Washington-based partner at economic research firm Cornerstone Macro.
“Clearly emerging-market financial markets are in turmoil for reasons that have little or nothing to do with the Fed likely tapering again.”
That is not to say the decision will be a slam dunk.
Dallas Federal Reserve Bank President Richard Fisher, who is a voter on the central bank’s policy-setting panel this year, has argued for a more aggressive withdrawal of purchases.
On the other end of the spectrum, Minneapolis Fed President Narayana Kocherlakota, also a voter, has argued for more, not less, stimulus, and that view could translate into a dissent.
Still, the Fed puts a high premium on consensus, and Kocherlakota may feel that presenting a united front on policy could be a stabilizing force for financial markets, Eaton Vance’s Stein said.
“I don’t think it’s completely pro forma,” he added, “but I do think the consensus of the committee is to taper, about in line with the last meeting.”
– REUTERS
The World Bank has uncovered $32 million in unaccounted funds linked to a water infrastructure project in Nigeria, raising concerns about financial mismanagement in donor-funded initiatives.
The discovery was highlighted in the bank’s recently published FY2024 Sanctions System Annual Report, which revealed significant discrepancies in the project’s financial records.
READ MORE: #OndoDecides2024: Police Chief Tours Polling Units, Collation Centres
The missing funds were earmarked to bolster Nigeria’s water infrastructure, but irregularities in accounting prompted an investigation by the World Bank’s Integrity Vice Presidency (INT).
“INT followed up on risks identified regarding a project in Nigeria’s water sector and flagged to operations the risk, which was associated with $32 million of unaccounted funds,” the report noted.
In response, the World Bank engaged with key stakeholders, including the project’s task team leader, operations manager, and financial management specialist, to recover the funds and safeguard the project’s integrity.
As part of the resolution, the Central Bank of Nigeria has been requested to reimburse $22 million. Meanwhile, $6 million remains in the project’s account to cover ongoing operational costs.
The findings underscore the importance of transparency and robust financial oversight in large-scale infrastructure projects, particularly those funded by international institutions.
The Central Bank of Nigeria (CBN) has issued a stern warning to Deposit Money Banks (DMBs) over the illegal sale of mint Naira notes to currency hawkers.
The apex bank, in a circular signed by the Acting Director of Currency Operations, Mr. Solaja Olayemi, on Friday, emphasized that erring banks would face stringent penalties.
READ ALSO: Ogun State’s Abandoned 250-Bed Hospital To Open In 2025 – Gov Abiodun
As part of its efforts to curb the abuse of the national currency, the CBN announced plans to conduct nationwide checks to seize mint notes sold by hawkers.
Banks found to have released such notes will be required to pay a fine of 10% of the value of the affected cash withdrawn from the CBN on the date in question.
Subsequent violations will attract an additional penalty incrementally increased by 5%.
The CBN also reiterated its commitment to enforcing the Clean Notes Policy, warning that banks involved in hoarding, diversion, or any actions that disrupt efficient cash distribution would face appropriate sanctions.
With the festive season fast approaching, the apex bank urged DMBs to enhance internal controls to ensure transparent cash distribution.
It highlighted the need for proper utilization of Automated Teller Machines (ATMs) to ensure easy access to new notes by the public.
Furthermore, the CBN disclosed plans to intensify its mystery shopping and spot checks, working closely with law enforcement agencies to clamp down on any practices that undermine the integrity of the Naira.
Nigeria’s inflation rate surged to 33.88% in October 2024, up from 32.7% in September, according to the latest Consumer Price Index (CPI) report released by the National Bureau of Statistics (NBS) on Friday.
The month-on-month increase of 1.18 percentage points marks yet another strain on the nation’s economy, with transportation and food costs cited as the main drivers of inflation.
READ MORE: Rivers, Anambra Judges Suspended As NJC Takes Disciplinary Action
Steep Year-on-Year Increase
Compared to October 2023, when the inflation rate stood at 27.33%, the October 2024 figure reflects a significant rise of 6.55 percentage points. This sustained upward trend highlights the worsening cost-of-living crisis for Nigerians.
Month-on-Month Breakdown
Inflation on a month-on-month basis also showed an uptick, rising to 2.64% in October 2024 from 2.52% in September. The faster rate of price increases further underscores the growing economic pressure on households.
Food Inflation Soars to 39.16%
Food inflation, a major component of the headline rate, reached 39.16% in October 2024, up from 31.52% in the same month last year.
The increase was driven by higher prices of staple items, including: Cereals and Tubers: Guinea Corn, Rice, Maize Grains, Yam, Water Yam, and Coco Yam. Oils and Fats: Palm Oil and Vegetable Oil. Beverages: Milo, Lipton, and Bourvita.
On a month-on-month basis, food inflation rose by 0.30 percentage points to 2.94% in October, up from 2.64% in September.
Price hikes in Palm Oil, Vegetable Oil, Fish, Meat, and Bread categories were major contributors.
Annual Food Inflation Hits 38.12%
The average annual food inflation rate over the past 12 months climbed to 38.12%, a sharp increase of 11.79 percentage points from the 26.33% recorded in October 2023.
The consistent rise in inflation, particularly food and transportation costs, continues to erode the purchasing power of Nigerians.
COP29: Adeleke Tasks World Leaders On Climate Action
APC Spent Over N35bn Inducing Voters In Ondo – PDP
I’ll Build A Stronger Ondo – Gov Aiyedatiwa Assures Residents
JUST IN: Tinubu Departs Nigeria For G20 Summit In Brazil
Tyson, Paul Savour Moments In Ring
Why I Conferred Nigeria’s Highest Award On Modi – Tinubu
OSSG Raises Alarm Over Murder Plot By APC Chieftain
NCC, SMEDAN, NAICOM, SEC, Others Set for SUPERNEWS SMEs Conf June 13
Sahara’s Tonye Cole resigns from GPHCDA
Oando opens ultra-modern petrol station in Lagos
Niger Delta Avengers: President Buhari Reads riot Act …considers the carrot and stick option
