Interest rate – Bobs Birdhouse http://bobsbirdhouse.com/ Tue, 11 Jan 2022 16:10:39 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://bobsbirdhouse.com/wp-content/uploads/2021/06/cropped-icon-32x32.png Interest rate – Bobs Birdhouse http://bobsbirdhouse.com/ 32 32 George of the Fed calls for faster withdrawal of $ 8.5 trillion in assets and a “more normal” interest rate strategy https://bobsbirdhouse.com/george-of-the-fed-calls-for-faster-withdrawal-of-8-5-trillion-in-assets-and-a-more-normal-interest-rate-strategy/ Tue, 11 Jan 2022 15:04:00 +0000 https://bobsbirdhouse.com/george-of-the-fed-calls-for-faster-withdrawal-of-8-5-trillion-in-assets-and-a-more-normal-interest-rate-strategy/ The Kansas City Federal Reserve Chairman said on Tuesday that the central bank should quickly cut its massive $ 8.5 trillion stack of bonds to help curb US inflation, the highest in nearly 40 years. Esther George said the Fed’s efforts to reduce inflation would be more effective if the bank reduced its holdings of […]]]>

The Kansas City Federal Reserve Chairman said on Tuesday that the central bank should quickly cut its massive $ 8.5 trillion stack of bonds to help curb US inflation, the highest in nearly 40 years.

Esther George said the Fed’s efforts to reduce inflation would be more effective if the bank reduced its holdings of long-term bonds even as it gradually raised short-term interest rates. She made his remarks in a virtual speech at the Central Exchange.

George said the bank is expected to shrink its balance sheet at a faster pace than it did at a similar pivotal moment nearly a decade ago, as the United States recovered from a another strong recession.

“Overall, I think it will be appropriate to take stock earlier than the last round of tightening,” she said.

The Fed bought trillions of treasury bills and mortgage-backed bonds during the pandemic to lower long-term interest rates to record highs and stimulate more borrowing and spending.

Yet the economy has largely recovered, and the pace of inflation recently peaked at nearly 7% in 39 years – in part, some economists say, due to excessive stimulus from the Fed and the United States. the White House.

George said the economy didn’t need a lot of help anymore.

“Even if the pandemic continues to influence economic activity, the time has come to shift monetary policy from its current crisis position to a more normal posture in the interest of long-term stability,” he said. she declared.

The Fed is preparing to raise its benchmark short-term interest rate, which is now close to zero for the first time since 2018, and to determine how quickly to reduce its balance sheet. President Jerome Powell, in his nominating testimony Tuesday, pledged to keep inflation from taking hold.

If the Fed hiked short-term rates but were slow to shrink its balance sheet, George argued, the yield curve could reverse and lead to excessive risk-taking.

A reversal occurs when short-term interest rates exceed long-term rates. Low long-term rates can cause investors to seek higher returns on riskier investments.

“With robust demand, high inflation and a tight labor market, policymakers will need to tackle the appropriate speed and scale of adjustment across multiple policy tools as they work to achieve their long-term goals. in employment and price stability, ”said George. . “This transition could be bumpy. “

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Weighted average interest rates on customer deposits, credit facilities fell in Qatar in 2020: QCB https://bobsbirdhouse.com/weighted-average-interest-rates-on-customer-deposits-credit-facilities-fell-in-qatar-in-2020-qcb/ Sun, 09 Jan 2022 17:55:00 +0000 https://bobsbirdhouse.com/weighted-average-interest-rates-on-customer-deposits-credit-facilities-fell-in-qatar-in-2020-qcb/ Weighted average interest rates on customer deposits in Qatar at the end of 2020 have fallen within a range of 126 to 148 basis points (1.26% to 1.48%) on all maturities compared to corresponding levels at the end of 2019, according to QCB.With the cuts in key rates, in particular the QCB deposit rate (QCBDR) […]]]>

Weighted average interest rates on customer deposits in Qatar at the end of 2020 have fallen within a range of 126 to 148 basis points (1.26% to 1.48%) on all maturities compared to corresponding levels at the end of 2019, according to QCB.
With the cuts in key rates, in particular the QCB deposit rate (QCBDR) of 100 basis points (1%) in 2020, interest rates on customer deposits have fallen on all maturities.
The drop in deposit rates has also impacted interest rates across all credit facilities / maturities, albeit to a lesser extent, the QCB said in its latest financial stability report.
Thus, the weighted average rate on credit facilities fell within a range of 49 to 120 basis points (0.49% to 1.2%) at the end of 2020 compared to the corresponding levels at the end of 2019, note The report.
According to QCB, interest rate movements in 2020 continued to reflect changes in key rates by QCB in line with the US Federal Reserve and changes in domestic liquidity conditions.
Money market interest rates have fallen considerably alongside the sharp declines in the QCBDR in March. An abundant supply of primary liquidity in the system also pushed down money market interest rates.
In this regard, the injection of liquidity by QCB via special zero-rate pensions played a role. The overnight average interbank rate (AOIR) fell in line with the QCBDR declines.
However, due to the abundant primary liquidity mentioned above, the AOIR remained significantly lower than the QCBDR from April.
Overall, AOIR in 2020 averaged 0.62% and ranged between 0.10 and 2.01% from an average
of 2.25% and a range of 1.94 to 2.47% in 2019.
The volatility of AOIR in 2020 has been multiplied by several compared to that of the previous year.
However, QCB noted that this was “mainly a reflection” of the decline in key rates, made worse by abundant liquidity which pushed AOIR down well below the level that prevailed before the rate cuts. March.
The interbank rate on all maturities fell in 2020 in line with the cuts in the QCBDR, but was more pronounced overnight.
Thus, the range of 0.1% to 2.75% in 2020 on different maturities was wider than the range of 1.94% to 3.7% during
2019.
The cuts in key rates and liquidity conditions which became very easy from March 2020 were also reflected in the evolution of yields on Treasury bills of all maturities.
Yields on three-maturity treasury bills fell by more than half between February and March. Subsequently, while large liquidity surpluses continued to prevail throughout the year, Treasury bill yields continued to depreciate across all maturities, before stabilizing at a very low level at the end of the year. Q4-2020.
Overall, Treasury bill yields across all three maturities fell from a range of 1.41% to 1.49% in January to a range of 0.07% to 0.14% in December.
The Qatar Interbank Offered Rate (QIBOR) was introduced in May 2012 with the aim of giving banks an indicative role in determining interbank rates.
Even though the QIBOR and average overnight interbank rates generally move in the same direction, the very easy liquidity conditions have led to a divergence between the two in 2020.
As the QIBOR continued to move closer to the QCBDR, the average overnight interbank rate fell close to zero due to the easy liquidity conditions that prevailed.
“QCB’s liquidity management operations strategy continued to ensure a stable interest rate regime by guiding market rates to the desired level in order to support diversified economic growth,” said the Financial Stability Review.


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As unemployment falls, interest rates rise more and more https://bobsbirdhouse.com/as-unemployment-falls-interest-rates-rise-more-and-more/ Sat, 08 Jan 2022 00:13:47 +0000 https://bobsbirdhouse.com/as-unemployment-falls-interest-rates-rise-more-and-more/ New data showing the unemployment rate is falling and wages rising should cement – and possibly accelerate – the Federal Reserve’s plan to start raising interest rates this year as it tries to curb high inflation. The unemployment rate fell to 3.9% in December, based on data collected in a period well before the worst […]]]>

New data showing the unemployment rate is falling and wages rising should cement – and possibly accelerate – the Federal Reserve’s plan to start raising interest rates this year as it tries to curb high inflation.

The unemployment rate fell to 3.9% in December, based on data collected in a period well before the worst of the virus wave caused by Omicron.

Unemployment has peaked at 14.8% in April 2020, and had hovered around 3.5% for months before the start of the pandemic. The fact that it is returning to near normal levels so quickly has led many central bankers to determine that the United States is getting closer to what they believe to be “full employment,” even though millions of former employees have not yet re-entered the workforce. .

“This confirms the Fed’s conclusion,” said Diane Swonk, chief economist at Grant Thornton, after the report. “It’s a hot job market. “

Signs abound that jobs are plentiful but workers are hard to find: Job vacancies are at high levels, and the proportion of people leaving their jobs has just hit an all-time high. Employers complain that they are having trouble hiring, and a shortage of workers has led many companies to cut hours or cut back on services.

As a result, employers started paying more to retain employees and attract new candidates. Average hourly wages rose 4.7% in the year through December, faster than economists in a Bloomberg survey expected and much faster than the typical rate of advance before the pandemic , which hovered around 3%.

These rapid wage gains are a signal to Fed officials that people who want a job and are available for work are usually able to find it – that the job market is what economists call “tight” and that workers potentials are relatively scarce – and that wages could start to pass on to prices. When businesses pay more, they can also charge their customers more to cover their costs.

Some Fed officials fear that rising wages and limited output could help keep inflation high – now at its highest level in nearly 40 years. The combination of a healing labor market and the threat of price increases spiraling out of control has prompted central bankers to speed up their plans to withdraw political aid to the economy.

Fed officials are already slowing down the big bond purchases they used to support the economy. On top of that, they could hike rates three times in 2022, based on their estimates, and economists believe those increases could start as early as March. This would make loans for cars, homes and business expansions more expensive, slowing spending, hiring and growth.

“It makes sense to start as soon as possible,” said James Bullard, chairman of the Federal Reserve Bank of St. Louis, on a call with reporters Thursday, suggesting the measures could come very soon. “I think March would be a definite possibility.”

And officials have signaled that once the rate hikes begin, they could quickly start shrinking their balance sheets – where they hold the bonds they bought to fuel growth throughout the pandemic downturn. This would help raise long-term interest rates, strengthen rate hikes, and further slow lending and spending.

Economists speculated after Jobs reported that the new figures made an imminent rate hike even more likely and that the central bank might even be prompted to withdraw economic support more quickly as wages take off.

“We believe today’s report strengthens the case for the Fed launching its hike cycle in March,” Bank of America researchers wrote. “The economy appears to be operating below the maximum employment rate and inflation remains stable.”

Krishna Guha, economist at Evercore ISI, argued that the combination of rapidly falling unemployment and skyrocketing wages could even prompt central bankers to raise interest rates faster than once every three months – the fastest pace in their latest round of interest rate hikes, which ran from 2015 to 2018.

“The Fed may end up having to increase at a faster rate than the base of a quarterly increase,” Guha wrote.

New data released next week could further intensify that pressure: The consumer price index is expected to reach 7% in the year through December, according to a Bloomberg survey of economists, which would be the pace fastest increase since June 1982.

The White House is doing what it can to promote competition, unravel supply chains and lower prices at the margin, but inflation control is primarily the responsibility of the Fed, President Biden said in a statement. press conference Friday.

“I have no doubts that the Federal Reserve will act to achieve its twin goals of full employment and stable prices, and ensure that price increases do not take hold over the long term,” Biden said.

Investors will have the opportunity to hear first-hand from key Fed officials next week. Jerome H. Powell, whom Biden has re-appointed as Fed chairman, has confirmation audience Tuesday before the Senate Banking Committee. Lael Brainard, now Fed governor and Mr. Biden’s choice to be vice president, has a hearing Thursday.

Both are likely to highlight the inequality of the recovery and recognize that millions of workers remain out of the workforce thanks to care responsibilities, virus fears and other pandemic barriers, as they have. done throughout the recession.

They will also probably note that overall hiring slowed in December: employers added 199,000 jobs, the weakest performance of the year, as they struggled to find workers. And Omicron poses a further downsizing risk, as November’s data predates the recent surge in virus cases that have kept restaurant diners at bay and shut down live performances.

But at the end of the day, it’s the falling unemployment rate that should remain the focus of the Fed’s concerns as it considers its next steps, economists believe.

“A rate hike in March seems pretty likely at this point,” said Julia Coronado, founder of research firm MacroPolicy Perspectives. When asked if there was a takeaway from the new data, she replied, “It’s just a tightening labor market. That’s it.”


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Australia and New Zealand dlrs backtrack, bonds encircled by bets on US rates https://bobsbirdhouse.com/australia-and-new-zealand-dlrs-backtrack-bonds-encircled-by-bets-on-us-rates/ Thu, 06 Jan 2022 02:07:00 +0000 https://bobsbirdhouse.com/australia-and-new-zealand-dlrs-backtrack-bonds-encircled-by-bets-on-us-rates/ SYDNEY, Jan.6 (Reuters) – The Australian and New Zealand dollars retreated as bonds were beaten on Thursday as markets reduced the chances of an early rise in US interest rates and a faster pace withdrawal of stimulus measures. The Aussie faded to $ 0.7210, after leveling again at $ 0.7273 overnight. The currency has spent […]]]>

SYDNEY, Jan.6 (Reuters) – The Australian and New Zealand dollars retreated as bonds were beaten on Thursday as markets reduced the chances of an early rise in US interest rates and a faster pace withdrawal of stimulus measures.

The Aussie faded to $ 0.7210, after leveling again at $ 0.7273 overnight. The currency has spent the past two weeks zigzagging between $ 0.7184 and $ 0.7276 and a sharp breakout of either could trigger a big move.

The Kiwi dollar fell to $ 0.6788, after falling to $ 0.6836 overnight. Major resistance is still looming at 0.6855 / $ 57 with support around $ 0.6766.

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Both lost ground after minutes from the last Federal Reserve meeting hinted they could hike rates as early as March, when analysts thought May or June were more likely start dates. Read more

Futures quickly moved to imply an almost 70% chance of a 0.25% hike at the March Fed meeting and rates of at least 0.75% by the end of the year.

This raised the yields of the Treasury and the US dollar, while hurting stocks and leveraged currencies.

“The FOMC minutes suggested not only a faster pace of rate hikes, but also an accelerated contraction of the Fed’s balance sheet,” RBC Capital Markets analysts noted.

“The combination of a reduction in equity risk as yields continue to rise would be attractive if it persists and should be broadly favorable to the US dollar.”

This has certainly put pressure on Australian bonds as 10-year yields jumped to 1.835%, from 1.55% a week ago and the highest since mid-November.

The Reserve Bank of Australia (RBA) has repeatedly insisted that a domestic rate hike is not likely until 2023, but markets suspect it may have to follow the Fed and go down to 0. 25% by June.

A positive sign globally was an optimistic reading of the Chinese economy of the Caixin Services Index which reached 53.1 in December. Read more

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Editing by Ana Nicolaci da Costa

Our standards: Thomson Reuters Trust Principles.


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Interest rate movements are set to determine where the GBP / USD goes https://bobsbirdhouse.com/interest-rate-movements-are-set-to-determine-where-the-gbp-usd-goes/ Mon, 03 Jan 2022 23:58:09 +0000 https://bobsbirdhouse.com/interest-rate-movements-are-set-to-determine-where-the-gbp-usd-goes/ gBP / USD started 2021 under downward pressure. At the start of 2021, interest rate markets forecast negative interest rates for the Bank of England’s official spot rate (bank rate) due to the extreme weakness of the UK economy (see graph ). The British government made the decision to lock down the British economy in […]]]>

gBP / USD started 2021 under downward pressure. At the start of 2021, interest rate markets forecast negative interest rates for the Bank of England’s official spot rate (bank rate) due to the extreme weakness of the UK economy (see graph ). The British government made the decision to lock down the British economy in early January. The Bank of England subsequently advised banks and building societies to prepare for the “possibility” of negative interest rates.

The British pound then started to strengthen in mid-February as the UK economy picked up momentum. The British pound gained further ground in the first half of 2021 and hit its 2021 high at 1.4250 on June 1, as the prospect of negative interest rates from the BoE dissipated, online with the improvement of the UK economy.

In the second half of 2021, the pound started to weaken. The weakness of the GBP was most noticeable against the strengthening of the dollar and the appreciation of the CNY. As we move into the last quarter of 2021, the pound has moved to a negative annual performance against these two currencies. Part of the depreciation of the pound was reversed following an unexpected interest rate hike by the Bank of England at the December 16 meeting. The BoE raised the discount rate from 0.15% to 0.25%.

The depreciation of the GBP against the USD and CNY in the second half of 2021 reflects more the strength of the USD and CNY currencies, rather than the weakness of the GBP per se. The GBP held onto most of its 2021 gains against the JPY, EUR, AUD and NZD.

It helps to recognize that when the USD started to strengthen against most currencies in mid-2021, the GBP / USD fell less than the AUD / USD and the NZD / USD in the second. half of 2021. The fact that the UK government reduced Covid restrictions earlier than the Australian and New Zealand governments explains the relative strength of the pound sterling.

The GBP also rose against the AUD because the RBA “disappointed the market”, which sought a more hawkish stance from the RBA at its November monetary policy meeting. Low Australian core inflation (2.1%) and a more subdued outlook for wage growth and the Australian economy justified the RBA’s policy.

The GBP also rose against the NZD in the fourth quarter due to a slowing New Zealand economy. The Reserve Bank of New Zealand had previously raised interest rates. However, retail activity, consumer spending and business confidence in New Zealand had started to ease as covid restrictions impacted New Zealand’s economic activity. . After strong GDP growth in the second quarter, New Zealand’s economy contracted 3.7% in the third quarter.

In summary, the most notable feature of the UK economy, and reflected in the performance of the British pound during 2021, has been the fairly drastic change in market prices for the Bank of Canada’s interest rate changes. ‘England. From pricing Bank of England interest rate cuts and negative interest rates in early 2021, the interest rate market has shifted to pricing interest rate hikes in the fourth quarter. 2021, which the Bank of England subsequently delivered.

The outlook for GBP / USD over 2022 is expected to be determined in part by market-set interest rate hikes for both the Bank of England and the US Federal Reserve. As the Bank of England downgraded its forecast for UK real GDP growth for the fourth quarter of 2021 and the first quarter of 2022, it noted that “experience since March 2020 suggests that the waves successive Covid campaigns seem to have had less impact on GDP “. However, unlike the US economy, the UK economy has not yet recovered to its pre-pandemic level in March 2020 (see graph).

The USD into 2022 will be guided by the extent to which the Fed believes it needs to raise interest rates. At present, there appears to be a greater risk that the Fed will raise interest rates more than the Bank of England over 2022. However, there will almost certainly be times when the British Pound appreciates against the Bank of England. the USD. When this strength in the GBP inevitably occurs, it should be borne in mind that the GBP / USD has struggled to spend much time above 1.4200 since the UK decision on Brexit at the mid-2016.

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National Bank of Punjab revises interest rates on national savings accounts and NRIs https://bobsbirdhouse.com/national-bank-of-punjab-revises-interest-rates-on-national-savings-accounts-and-nris/ Sun, 02 Jan 2022 06:32:10 +0000 https://bobsbirdhouse.com/national-bank-of-punjab-revises-interest-rates-on-national-savings-accounts-and-nris/ Business oi-Vipul Das | Posted: Sunday January 2nd, 2022 12:02 PM [IST] Public sector lender Punjab National Bank revised its interest rates on national savings accounts and NRIs. According to the bank’s official website, the new rates are effective January 1, 2022. Customers will now receive an interest rate of 2.80% per annum on account […]]]>

Business

oi-Vipul Das

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Public sector lender Punjab National Bank revised its interest rates on national savings accounts and NRIs. According to the bank’s official website, the new rates are effective January 1, 2022. Customers will now receive an interest rate of 2.80% per annum on account balances below Rs. 10 lakh, 2.85 % pa on account balances of Rs.10 lakh and more below Rs.500 crore, and 3.25% pa on account balances of Rs.500 crore and more, following the most recent revision.

2022 National Bank of Punjab Savings Account Interest Rate

The current interest rates for Punjab National Bank National Savings Accounts and NRIs are listed below (WEF January 1, 2022).

Balance Interest rate
Savings fund account balance less than Rs. 10 lakh 2.80% per year
Savings fund account balance of Rs. 10 Lakh and above Rs. 500 Crore 2.85% pa
Savings fund account balance of Rs. 500 Crore and above 3.25% per year
Source: Bank website

Customers can choose from a variety of bank savings account products. PNB offers savings account plans that meet a wide range of financial and banking requirements of its clients, such as PNB Unnati savings account, PNB savings account product for premium clients, the system deposit PNB SF Prudent Sweep for individuals, PNB SF Prudent Sweep for Institutional accounts, PNB Junior Sf Account, Basic Saving Bank Deposit Account (BSBDA), PNB Rakshak Scheme, Scheme For Fournir Overdout Facility To Pensions, PNB Power Savings, PNB Samman Saving Account, PNB MySalary Account, Premium Saving Account PNB Best Customer, PNB Pratham Savings account and “Select” savings account PNB.

PNB, on the other hand, recently launched a “New Year Bonanza” offering for its customers. The bank announced on its Twitter account that “It’s a good year with a good year. Apply for loans at attractive rates and start your year on a high note! As part of the ‘New Year Bonanza’ offer, the bank promises an interest rate of 6.50% on home loans, 6.65% on car loans and 8.90% on personal loans. Customers can give a missed call at 1-800-180-8888 to learn more about the bank’s loan products.

Article first published: Sunday, January 2, 2022, 12:02 p.m. [IST]


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Interest rate on small savings plans unchanged for the fourth quarter of fiscal year 2021-2022: government https://bobsbirdhouse.com/interest-rate-on-small-savings-plans-unchanged-for-the-fourth-quarter-of-fiscal-year-2021-2022-government/ Fri, 31 Dec 2021 15:14:18 +0000 https://bobsbirdhouse.com/interest-rate-on-small-savings-plans-unchanged-for-the-fourth-quarter-of-fiscal-year-2021-2022-government/ Small savings interest rates are released quarterly. New Delhi: On Friday, the government kept interest rates on small savings plans, including NSC and PPF, unchanged for the fourth quarter of 2021-2022 amid growing cases of the more contagious variant of the Omicron coronavirus and a high level of inflation. The decision also comes ahead of […]]]>

Small savings interest rates are released quarterly.

New Delhi:

On Friday, the government kept interest rates on small savings plans, including NSC and PPF, unchanged for the fourth quarter of 2021-2022 amid growing cases of the more contagious variant of the Omicron coronavirus and a high level of inflation.

The decision also comes ahead of parliamentary elections in five states – Uttar Pradesh, Uttarakhand, Punjab, Himachal Pradesh and Goa. The election schedule is expected to be announced early next month.

The Public Provident Fund (PPF) and National Savings Certificate (NSC) will continue to bear an annual interest rate of 7.1% and 6.8%, respectively, in the fourth quarter as well.

“The interest rates of the various small savings plans for the third quarter of fiscal year 2021-2022 beginning on January 1, 2022 and ending on March 31, 2022, will remain unchanged from the current rates applicable for the third quarter ( October from 1, 2021 to December 31, 2021) for the 2021-22 fiscal year, “the Ministry of Finance said in a notification.

Analysts say the government has kept rates intact for the upcoming parliamentary elections in five states.

Uttar Pradesh is the second largest contributor to the small savings plan after West Bengal. Earlier this year, in the West Bengal assembly election, the Center decided to cut the interest rate. But the finance ministry quickly canceled a sharp cut in interest rates of up to 1.1% for the first quarter on small savings plans, citing surveillance.

As a result, the rates for the first quarter were maintained at the level of the fourth quarter of the previous year. The cut has been touted as the steepest cut for many decades. Small savings interest rates are released quarterly.

The one-year term deposit plan will continue to earn an interest rate of 5.5% in the second quarter of the current fiscal year, while the Sukanya Samriddhi Yojana account of the girls’ savings plan will gain 7.6%.

The interest rate for the five-year senior savings plan would be maintained at 7.4%. The interests of the senior citizens’ scheme are paid quarterly. The interest rate on savings deposits will remain at 4% per annum.

One- to five-year term deposits will carry an interest rate in the range of 5.5 to 6.7 percent, payable quarterly, while the interest rate on five-year recurring deposits will pay off. 5.8 percent higher interest.


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The religious roots of the currency crisis in Turkey https://bobsbirdhouse.com/the-religious-roots-of-the-currency-crisis-in-turkey/ Wed, 29 Dec 2021 23:13:00 +0000 https://bobsbirdhouse.com/the-religious-roots-of-the-currency-crisis-in-turkey/ A bureau de change counts Turkish lira banknotes at a bureau de change in Ankara, Turkey on September 27. Photo: CAGLA GURDOGAN / REUTERS As the Turkish economy collapses due to the collapse of its currency, the Lira, investors and economists wonder why President Recep Tayyip Erdogan continued the eccentric economic policies that caused this […]]]>

A bureau de change counts Turkish lira banknotes at a bureau de change in Ankara, Turkey on September 27.


Photo:

CAGLA GURDOGAN / REUTERS

As the Turkish economy collapses due to the collapse of its currency, the Lira, investors and economists wonder why President Recep Tayyip Erdogan continued the eccentric economic policies that caused this crisis. He specified that his motivation is above all religious.

Mr Erdogan dominated Turkish politics for almost 20 years in various roles: leader of the Justice and Development Party, prime minister and president. Two notable features marked the first half of his reign: the constant concern that the staunch secular military leadership was staging a coup and extraordinary economic growth.

Everything changed in July 2011, when Mr. Erdogan forced the chief of military staff to resign, as well as the heads of the army, navy and air force, giving him control of the armed forces. . No longer afraid of a coup, he was finally able to fully pursue the Islamist ideology that secular officers had tempered.

This ideology emerged quickly. Mr. Erdogan supported other Islamists in Syria and Egypt in 2011, sparked tensions with Israel and the West, and flirted with the abandonment of the North Atlantic Treaty Organization in favor of the ‘Shanghai Cooperation Organization dominated by Russia and China in 2012. Domestically, Turkey’s government has increased alcohol taxes and limited sales and advertising, and religious schools have become more common and better funded.

When Mr Erdogan took full control of Turkey’s central bank in 2018, he demanded, unlike the practice of all other central banks, that it fight high inflation by cutting interest rates. At first he tried to hide his motives. During a monetary crisis of 2018, Mr. Erdogan’s advisor, Cemil Ertem, summoned the ghost of the great Yale economist Irving Fisher (1867-1947) to justify the policy of low interest rates. Mr. Ertem even asserted that Mr. Erdogan’s views “are today the subject of contemporary scientific economic theory”.

When media ridicule ensued, Erdogan and his aides fell silent, offering no further explanation for the low interest rates as the Turkish lira steadily declined in value. This year, despite massive purchases of foreign currency by the Turkish central bank, the lira has fallen from 7 per US dollar in February to around 18 in mid-December. (A short-term fix moved the exchange rate to 13, but the market doesn’t seem convinced.)

On December 19, Erdogan explained that he is developing a policy on his interpretation of the Quran’s commandment against paying interest on money: “They are complaining that we keep lowering the interest rate. Don’t expect anything else from me. As a Muslim, I will continue to do what our religion tells us. This is the command. This one disastrous remark immediately caused the pound to drop 12%. The realization that Mr. Erdogan’s policies were based on live commandments from the Quran, not the theories of a deceased American economist, has scared the market.

Mr Erdogan’s belief in interest rates has terrible implications for Turkey. Protests and hunger spread, and the country could follow Venezuela’s path. Duke’s economist Timur Kuran said the coming chaos gives Erdogan and his underlings “the opportunity to declare a state of emergency and stay in power despite their growing unpopularity.”

Mr. Erdogan’s statement “what our religion tells us” shows a submission to medieval notions of finance, whatever harm they cause. But medieval religious regulations do not mix well with modern finance – or with almost anything. Muslim success in the modern world requires a re-examination of Islamic laws in light of current circumstances. Quranic regulations could be interpreted to allow reasonable interest payments while prohibiting usurious interest.

500 years ago, Jews and Christians shared a hostility to interest payments with Muslims, but they came to accept this financial necessity. Muslims must follow suit or risk further instability, repression and poverty in Turkey and other Muslim-majority countries.

Mr. Pipes is President of the Middle East Forum.

Journal Editorial Report: The Worst Years of Kim Strassel, Bill McGurn, Mary O’Grady and Dan Henninger. Images: AFP / Getty Images Composite: Mark Kelly

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8


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How to calculate principal and interest https://bobsbirdhouse.com/how-to-calculate-principal-and-interest/ Mon, 27 Dec 2021 20:36:43 +0000 https://bobsbirdhouse.com/how-to-calculate-principal-and-interest/ If you’re a homeowner, you probably know that a portion of what you pay the lender each month goes towards the original loan amount, while a portion is applied to interest. But understanding how banks actually allocate them can seem confusing. You may also be wondering why your payment remains remarkably consistent even though your […]]]>

If you’re a homeowner, you probably know that a portion of what you pay the lender each month goes towards the original loan amount, while a portion is applied to interest. But understanding how banks actually allocate them can seem confusing.

You may also be wondering why your payment remains remarkably consistent even though your outstanding balance keeps dropping. If you understand the basic concept of how lenders calculate your payment, the process is easier than you might think.

Key points to remember

  • Mortgage payments are made up of two parts. The principal is the loan amount itself and the interest is the monthly amount that the lender charges you in addition to the principal.
  • With fixed rate mortgages, your monthly payment is consistent due to a process called amortization.
  • In addition to the principal and interest you pay the lender, your monthly payment may also include other expenses such as mortgage insurance premiums and escrow taxes.

Principal and interest

Every mortgage payment you make is made up of two main components: principal and interest.

The principal is the initial amount of the loan. Suppose you buy a house for $ 350,000 and deposit $ 50,000 in cash. This means that you are borrowing $ 300,000 in principal from the lender, who of course wants you to pay that money back.

But the bank also charges a fee for lending you these funds, which is represented by the interest portion of your payment. Let’s say you pay off a 30-year mortgage with an annual interest rate of 4%.

Since you make monthly rather than annual payments throughout the year, this interest rate is divided by 12 and multiplied by the outstanding principal on your loan.

In this example, your first monthly payment would include $ 1,000 of interest ($ 300,000 x 0.04 annual interest rate ÷ 12 months).

How amortization works

You might be wondering why your mortgage payment, if you have a fixed rate loan, stays the same month to month. In theory, this interest rate is multiplied by a decreasing principal balance. So, shouldn’t your monthly bill go down over time?

The reason this isn’t is because lenders use amortization when calculating your payment, which is a way to keep your monthly bill consistent. The Mortgage Manager compensates for the fact that you pay higher interest charges in your early years by allowing you to make a lower payment on the principal.

If you plug your purchase price, down payment, loan term, and APR (see below under “Interest rate vs APR”) into the Investopedia mortgage calculator, you will see that your monthly payments to the lender would equal at $ 1,432.25. (You can also pay for things like mortgage insurance and property taxes held in escrow, although these don’t go to the actual lender.) As we noted earlier, $ 1,000 of your first installment strictly covers interest charges. This means that the remaining $ 432.25 pays off the outstanding balance or principal on your loan.

Assuming you don’t refinance, your loan payment will be the same 15 years later. But now you have reduced your main balance. You now owe approximately $ 193,000 of your loan principal. When you multiply that balance by your interest rate (0.04 12 months), you will find that the interest portion of your payment is now only $ 643.43. But you pay back a larger portion of your principal: $ 786.82.

Over the last few years of your mortgage, you pay even more principal off each month as your interest costs go down. By leveling your payments this way, lenders make your payments more manageable. If you’ve paid the same principal amount over the course of the loan, you’ll need to make much higher monthly payments right after you take out the loan, and then see those amounts drop when the repayment is complete.

If you’re wondering how much you’ll pay for principal versus interest over time, the Investopedia Mortgage Calculator also displays the breakdown of your payments over the term of your loan.

Variable rate mortgages


If you take out a fixed rate mortgage and pay only the amount owed, your total monthly payment will stay the same for the life of your loan. The portion of your payment allocated to interest will gradually decrease as more of your payment is allocated to principal. But the total amount you owe won’t change.

However, it doesn’t work that way for borrowers who take out an adjustable rate mortgage, or ARM. They pay a given interest rate during the initial period of the loan. But after a certain amount of time — say, a year or five years, depending on the loan — the mortgage “resets” to a new interest rate. Often times, the initial rate is set below the market rate at the time you borrow and then increases after the reset.

Suddenly you will notice that your monthly payment has changed. This is because your unpaid principal is multiplied by a different (usually higher) interest rate.

Interest rate vs APR


When you receive a loan offer, you may come across a term called an annual percentage rate, or APR. The APR and the actual interest rate the lender charges you are two separate things, so it’s important to understand the distinction.

Unlike the interest rate, the APR takes into account the total annual cost of underwriting the loan, including fees such as mortgage insurance, points of call, loan origination fees, and some closing costs. It averages the total cost of the loan over the life of the loan.

It’s important to understand that your monthly payment is based on your interest rate, not the annual percentage rate. However, lenders are required by law to disclose the APR on the loan estimate they provide after submitting an application, so that you can get a more accurate idea of ​​how much you are actually paying to borrow that money.

Some lenders may charge you a lower interest rate but charge a higher upfront fee. Therefore, the inclusion of the APR helps to provide a more comprehensive comparison of different loan offerings. Because the APR includes the associated fees, it is higher than the actual interest rate.

How is my interest payment calculated?

Lenders multiply your outstanding balance by your annual interest rate, but divide by 12 because you are making monthly payments. So if you owe $ 300,000 on your mortgage and your rate is 4%, you will initially owe $ 1,000 in interest per month ($ 300,000 x 0.0412). The remainder of your mortgage payment is applied to your principal.

What is depreciation?

The amortization of a mortgage loan allows borrowers to make fixed payments on their loan, even if their outstanding balance keeps falling. In the beginning, most of your monthly payment goes towards interest, with only a small percentage reducing your principal. When the repayment ends, that changes: more of your payment reduces your outstanding balance, and only a small percentage covers interest.

What is the difference between the interest rate and the APR?

The interest rate is the amount the lender actually charges you as a percentage of your loan amount. In contrast, the annual percentage rate, or APR, is one way to express the total cost of borrowing. Therefore, the APR incorporates expenses such as loan origination fees and mortgage insurance. Some loans offer a relatively low interest rate, but have a higher APR due to other fees.

The bottom line

You probably know how much you are paying the mortgage agent each month. But understanding how this money is divided between principal and interest can seem a mystery. In fact, figuring out how much interest you’re paying is as easy as multiplying your interest rate by your outstanding balance and dividing by 12. It’s only because lenders adjust the amount credited to your original loan balance that your payments remain remarkably consistent over the years.


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Federal Reserve faces another difficult pandemic year with midterm elections looming https://bobsbirdhouse.com/federal-reserve-faces-another-difficult-pandemic-year-with-midterm-elections-looming/ Sun, 26 Dec 2021 11:00:00 +0000 https://bobsbirdhouse.com/federal-reserve-faces-another-difficult-pandemic-year-with-midterm-elections-looming/ This Monday, November 23, 2020, an archive photo shows the New York Stock Exchange, on the right, in New York. Seth Wenig PA This column typically highlights a key economic report or influential event in the coming week that could influence the investment markets. As the third calendar year of the COVID-19 pandemic approaches, let’s […]]]>

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This Monday, November 23, 2020, an archive photo shows the New York Stock Exchange, on the right, in New York.

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This column typically highlights a key economic report or influential event in the coming week that could influence the investment markets. As the third calendar year of the COVID-19 pandemic approaches, let’s look beyond sunset this week and 2021.

The credibility of the lender of last resort will be severely tested in 2022.

There is no argument that the Federal Reserve saved the US economy from a deep and devastating depression. He rewrote his real-time playbook in the spring of 2020, as emergency public health restrictions were put in place and consumers simply stopped spending for fear of COVID-19. The simple act of action quelled the economic terror raging in the financial markets and restored investor confidence.

The central bank has already had to change tactics in response to its misreading of price stability, one of its two terms. For months, the Fed saw high inflation as transient. Once it became evident that the pandemic-induced inflationary pressures had not abated, the bank accelerated the end of its strategy to buy US bonds. After ending this program in March, the bank’s next course of action will be to raise its target short-term interest rate.

In 2022, the Fed’s commitment to fight inflation with higher borrowing costs will be tested. Market odds are 50-50, the Fed will hike its rate as early as March, according to the CME FedWatch tool which calculates the probabilities based on the forward market interest rates. While these market ratings can change quickly, the bank is committed to maintaining its reputation and reliability for regular and deliberative action.

In the coming weeks, that dedication will be put under pressure by the omicron variant of the coronavirus. There is no appetite for 2020-type economic shutdowns, and perhaps there is no need. Vaccines have been shown to be very effective in reducing the severity of pandemic disease. Yet this latest shift will stifle some economic activity, threatening to slow the second of the Fed’s mandates – full employment.

The delicate balance for the central bank in 2022 is further complicated by politics. The coming year is a year of midterm elections with the balance of power on Capitol Hill at stake. The rising costs of borrowing for consumers, businesses and homebuyers are not politically. acceptable to those seeking re-election. Still, they may be needed to mitigate the macroeconomic effects of the Fed’s pandemic stimulus and congressional spending.

In the coming year, the Fed’s reputation for independence and integrity will be strained by headwinds in economics and politics.

Tom Hudson hosts ‘The Sunshine Economy’ on WLRN-FM, where he is vice president of news. Twitter: @HudsonsView


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