Raghuram Rajan: The independence of the central bank

I enjoyed reading this speech from the now former head of the RBI, it does give a quick insight into the thinkings of a central banker.

To bolster the value of the rupee, we had to give investors more certainty that future inflation would be low. After all, it was primarily India’s higher inflation with respect to the rest of the world that led to periodic abrupt falls in rupee value. Then Deputy Governor and now my successor, Dr. Urjit Patel, agreed to prepare a report on how we could move to a new inflation-focused monetary regime. That would help very much in the medium term, but in the short run we had to establish that we were not heading towards crisis. The easiest way to demonstrate that was to show we could raise plenty of foreign exchange.

This mission, however, exposes the central bank to criticism. If we try and bring down inflation, interest rates will remain higher than borrowers desire. If inflation comes down, the currency will depreciate less than some exporters desire. If we push the banks to clean up, banks may be less tolerant towards habitual non-payers. Whatever we do, someone will object. The RBI then becomes the favorite scapegoat for underperformance – if exports are not picking up, it is because interest rates are too high and because the exchange rate is too strong.

Source: BIS

WHTW: Top 10

  •  Fixing of structural issues urged. THE ECONOMY has the potential to grow by 4.5-5.5 per cent a year if the country addresses hindering structural issues, said Bank of Thailand Governor Veerathai Santiprabhob. (The Nation, 7/9/16)
  • Nod for Gold Line monorail, but impact study requested. THE BT3.8-BILLION Gold Line monorail project for western Bangkok along the Chao Phraya River was given the green light by the Cabinet yesterday, with the line expected to be in service in 2018. (The Nation, 7/9/16)
  • CAT Telecom’s 4G service scheduled for My brand launch next month. CAT TELECOM plans to launch 4G service as part of its My brand mobile phone operations next month, Viroj Tocharoenvanith, senior executive vice president for wireless business, said yesterday. The new 4G service will mainly utilise the True Move H network of True Corp, after CAT and True reached a network-roaming deal recently. Viroj said CAT was currently testing the roaming and technical aspects the 4G service, which would be officially launched next month. The roaming 4G network with True – part of CAT’s recent agreement with True Move H Universal Communication (TUC) – would see TUC paying a rental fee of Bt9.3 billion to CAT for using the state agency’s 3G-850MHz network to provide wireless broadband service. (The Nation, 7/9/16)
  • Govt to issue benchmark bonds. THE government plans to raise more than half of the estimated Bt957.72 billion under its fund-mobilisation plan through benchmark bond issues in the next fiscal year starting next month, according to the Public Debt Management Office (PDMO). (Bangkok Post, 9/9/16)
  • US created 151,000 jobs in August vs. 180,000 jobs expected — Nonfarm payrolls increased just 151,000 for the month, extending the futility August has experienced over the years. This is now the 10th time in the past 13 years the month whiffed on market expectations. Wall Street economists were expecting the nonfarm payrolls report to show a gain of 180,000 in August, with the unemployment rate ticking down one-tenth to 4.8 percent. Wage growth slowed. In addition to the below-expectation number, wage growth actually took a step back, with hourly earnings up just 3 cents and an annualized pace of 2.4 percent. The average work week declined 0.1 percent to 34.3 hours. (CNBC, 5/9/16)

Continue reading WHTW: Top 10

Stocks in the news (aav, bay, bigc, centel, ck, com7, cpf, cwt, gold, ichi, ocean, uwc) 09.09.16

AAV expects 3Q16 to grow 20%, driven by Chinese tourists. It plans to open four more routes after already adding 10 routes this year. It is ready for the AOC assessment on Sept 12. (Thun Hoon, 7/9/16)
Comment: A discussion with the founder, T.F., indicates that he’d like to take back all of the Air Asia’s that aren’t fully under his control. I wonder what the outcome shall be for Air Asia Thailand
BAY goes for home loans with interest rates of 4-5% for seven years. It targets new home loans to grow from Bt52bn to Bt65bn and limited NPLs at 2.5-2.6%. (Khao Hoon, 9/9/16)
Comment: This is an amazing movement, don’t be surprised to see more and more clients shift to BAY
BIGC to renovate Mahachai branch for Bt100mn. It plans to expand the area by 15,920 square meters. (Khao Hoon, 9/9/16)
CENTEL expects to perform well in 2H16, driven by its food business. It plans to expand its business abroad and buy a hotel in Dubai. (Thun Hoon, 7/9/16)
CK increases revenue target to Bt44-45bn from Bt35-38bn. It plans to bid in the Bt200bn government project bids, lifting its backlog above Bt100bn. It says 2016 earnings will be better than 2015. (Thun Hoon, 7/9/16)
COM7 expects iPhone7 to boost sales. The iPhones will be available at stores around October this year. (Khao Hoon, 9/9/16)
Comment: It had a little pop pre the iPhone7 announcement but the market just took it down with everything else.

Continue reading Stocks in the news (aav, bay, bigc, centel, ck, com7, cpf, cwt, gold, ichi, ocean, uwc) 09.09.16