- New Zealand Ends Quantitative Easing
- UK Inflation Hits 3-Year High
- Democrats Agree On a $3.5 Trillion Plan
New Zealand Ends Quantitative Easing
New Zealand’s central bank said it would reduce monetary stimulus by ceasing quantitative easing. While the New Zealand Central Bank Monetary Policy Committee kept the policy rate at 0.25 percent, it said that asset purchases made under the Large Scale Asset Purchase Program would be stopped.
“Members agreed that the major downside risks of deflation and high unemployment have receded,” the RBNZ said. “The committee agreed that a ‘least regrets’ policy now implied that the significant level of monetary support in place since mid-2020 could be reduced sooner.”
While global markets focused on the exit schedule of leading central banks such as the Fed and the European Central Bank, New Zealand’s decision was recorded as one of the latest developments in this direction. The Bank of Canada and the Bank of South Korea are expected to take similar steps.
On the Fed front, where the discussions on reducing asset purchases officially started, different views continue.
St. Louis Fed President James Bullard said that the right time has come to withdraw the financial supports put into practice during the epidemic.
In an interview with the Wall Street Journal, Bullard said, “With the economy growing by 7 percent and the epidemic is getting better under control every day, it’s the right time to pull back on emergency measures.”
Stating that they are ready to act when Federal Open Market Committee members are prepared, Bullard said, “We want to do this very carefully and softly, but we are in a good position to reduce asset purchases.
UK Inflation Hits 3-Year High
According to official estimates, inflation in the United Kingdom has risen to its highest level in over three years due to increases in food and motor fuel prices.
In June, the annual rate of inflation increased to 2.5 percent from 2.1 percent the previous month, according to the Office for National Statistics. The rate in June is the highest since August 2018, when inflation reached 2.7 percent.
The median expectation of economists participating in the Bloomberg survey was that inflation would increase by 2.2 percent monthly.
With the increase in inflation, expectations that the Bank of England will start to increase interest rates next year strengthened, while the bank expected that inflation would decrease to 0.2 percent in August.
Bloomberg economists also say that the model they created indicates that the Bank of England may start raising interest rates sooner than expected.
As economies recover from the shock of the coronavirus pandemic, several countries throughout the world see a strong surge in inflation. According to government estimates, the annual inflation rate in the United States hit a 13-year high of 5.4 percent on Tuesday.
However, central banks worldwide are hopeful that the recent increase in inflation is attributable to temporary causes such as pent-up demand and supply pressures that will subside in the coming months.
Democrats Agree On a $3.5 Trillion Plan
The Democrats on the Budget Committee have reached a consensus on US President Joe Biden’s $3.5 trillion spending plan that could have implemented his economic agenda without Republican support.
Democrats on the Committee were split over the scope and size of the package. Senator Bernie Sanders has proposed a $6 trillion package that expands home care coverage for the elderly, offers immigration reform and more generous childcare services.
The adopted Plan also includes expanding coverage of care for the elderly. This is a victory for Sanders. Although the package was $2.5 trillion less than Sanders’ original proposal, Sanders said that the accepted package was the most essential proposal to pass since the Great Depression.
“What this legislation says among many, many other things … is the wealthy and large corporations are going to start paying their fair share of taxes so that we can protect the working families in this country,” Sanders told reporters.
Senator Ron Wyden told reporters that discussions are ongoing on issues such as how the payments will be made, and the details will be revealed later.
Senate Majority Leader Chuck Schumer stated that they are proud of the Plan and that services such as dental, vision and hearing, and addressing climate change will be included in the agreement.
“We are very proud of this Plan. We know we have a long road to go. We’re going to get this done for the sake of making average Americans’ lives a whole lot better for us,” Schumer said.
President Biden is expected to meet with Senate Democrats on Capitol Hill today to discuss the deal. Biden has yet to announce that the Plan has been approved publicly.