The government says the South Korea's headline inflation is trending down toward the central bank's target of 2 percent.

And yet, the prices of everything, especially food, remain just as high.

This is because the prices of frequently purchased daily staples have remained elevated since in the pandemic years, according to economists, Tuesday.

“A large number of consumers feel that prices are still high, despite government efforts to reassure them otherwise,” Joo Won, director of the Hyundai Research Institute, said.

According to Statistics Korea, Korea experienced a 2-percent increase in headline inflation last month compared to a year ago. This marks the lowest level since a 1.9 percent increase in March 2021.

Still, the cost of living remains high.

The fresh food index rose 3.2 percent in August compared to the previous year. The index for agricultural produce, livestock, and seafood increased 2.4 percent.

Prices of pears and apples rose 120 percent and 17 percent, respectively. Additionally, the prices of cabbages and radish, key ingredients for kimchi, jumped 94.6 percent and 58.6 percent.

The Bank of Korea (BOK) noted that the prices of necessities such as clothing, food, and housing are higher in Korea compared to other countries — about 55 percent above the average for OECD member countries.

The high prices, which result from structural issues such as closed markets, especially burden vulnerable groups like low-income households and senior citizens,who spend a larger portion of their income on daily necessities, the central bank explained.

Also straining household finances are high debt service costs resulting from rapid monetary tightening after the pandemic, Joo points out.

“Years of high borrowing costs have left households strapped for spending. An easing by the central bank should help stimulate the subdued growth in consumption," he said.

In an economic outlook report released,last Sunday, Joo said the recent strong rebound in exports will not be sufficient to offset the weak domestic demand.

“The strong export performance driven by the semiconductor industry and stagnant domestic consumption will tell two different stories, depending on who you ask. The impressive results of a few leading IT exporters may not necessarily reflect a stronger purchasing power for the average consumer,” the report read.

The report also showed the monthly increase in debt service costs per household averaged 121,000 won ($90) in the first three months of this year. This represents a more than 40 percent rise from the April-June period of 2022.

“It marked the sixth consecutive quarter of double-digit increases since the third quarter of 2022,” he said.

Korea’s household surplus has been decreasing for the past eight quarters. The surplus represents the amount of money remaining after accounting for disposable income and consumption.

Disposable income refers to the amount remaining after deducting non-consumption expenditures, such as interest payments and social security premiums.

As of the second quarter, Korean households reported a monthly surplus of approximately 1 million won, down 18,000 won, or 1.7 percent, from the previous year.

Over the past two years, real household income has decreased by as much as 3.9 percent.

Market watchers say that stagnant private consumption is unlikely to see a breakthrough unless the BOK lowers key rate to end years of sustained high borrowing costs.

Source: Koreatimes

Bank of Japan (BOJ) officials see little need to raise the benchmark rate when board members gather next week, as they are still monitoring lingering volatility in financial markets and the impact of the July hike, according to people familiar with the matter. 

The BOJ is likely to keep borrowing costs unchanged at 0.25% at the Sept. 20 conclusion of its two-day gathering, according to the people. The bank needs to carefully monitor financial markets given recent ructions that include the Nikkei 225’s biggest plunge in history on Aug 5, just days after the central bank raised its rate, the people said. 

Most economists surveyed after the sharpest market moves in August expect the central bank to wait until December or January before raising rates again.

The BOJ’s board will meet after revised economic data showed that the second-quarter expansion was a tad slower than the initial estimate but still strong enough to keep authorities on track to adjust policy settings that remain ultra-easy by global standards even after two rate hikes this year. 

For that reason, even with one eye on the markets, officials are likely to retain their stance that they should raise rates if the economy and inflation continue to meet expectations, the people said. 

Recent market turmoil has so far had no major impact on the bank’s view set out in its quarterly outlook report in July, they said. So officials aren’t ruling out another rate hike later this year or in early 2025, depending on the state of the economy and financial markets, the people added.

Deputy governor Shinichi Uchida last month said the bank won’t raise rates when financial markets are unstable. Another deputy, Ryozo Himino, said the BOJ’s primary task for now is to closely monitor markets.

The possibility that the US economy may prove weaker than expected is a factor officials are keeping an eye on and that suggests the bank shouldn’t rush toward its next rate hike, they said.

BOJ officials are also closely watching domestic political developments as Japan is poised to get a new premier, according to the people. The ruling Liberal Democratic Party’s Sept 27 leadership election is all but certain to determine who will succeed Fumio Kishida as the prime minister, given the party’s dominance in Parliament. 

BOJ officials don’t expect the new leader to push for drastic change in monetary policy as the ruling party is on board with the bank’s pursuit of its stable inflation target, they said.

As the BOJ raises rates, officials are carefully trying to determine the most appropriate level by examining the impact of each individual rate hike, the people said. For now it’s fine if market participants take the view that the central bank views the nominal neutral rate of interest for the economy at least around 1%, as indicated by a recent BOJ paper, the people said. 

The BOJ’s nine-member policy board will kick off its meeting just hours after the Federal Reserve is widely expected to cut interest rates, joining the European Central Bank in a long-awaited policy pivot to easing.

Lower interest rates in the US would narrow the differential with interest rates in Japan, offering support for the yen. BOJ officials will monitor the immediate market reaction with great interest while also checking to see if a US rate cut helps restore stability in the market, the people said. 

Source: Theedgemarkets

Bank of England treading more cautiously than the Fed

Services CPI has been thrown around by some volatile components

The bar to a September cut seems fairly high

Wage growth expectations are cooling down

Faster cuts are coming beyond November

Gilt yields lower by the fall in US yields, but could go lower still

Gilt yields are now above USTs, which could be unsustainable

Sterling may struggle to push much further ahead

Source: ING

The US Securities and Exchange Commission will vote next week on some of the biggest revisions to stock-market rules in almost two decades, including how trades are priced and processed.

The SEC’s commissioners are scheduled to decide Wednesday whether to finalize measures that would alter the way brokers, market makers and exchange businesses operate. One would change the way stock exchanges negotiate rebates with brokers to attract more volume to their exchanges. Another would tweak minimum pricing increments for stock trades, according to the agency’s agenda.

The SEC unveiled the proposals in a package in December 2022 that’s aimed at making the market more fair and transparent. The effort was largely in response to the meme-stock-trading frenzy.

A disclosure proposal was finalized in March, forcing retail brokerages to release data similar to exchanges, wholesale firms and alternative trading systems.

But the most controversial measure isn’t on Wednesday’s agenda. That proposal would require market-making firms and major stock exchanges to engage in auctions for the right to process equity orders within milliseconds. It drew criticism from the likes of market makers Virtu Financial Inc. and Citadel Securities — wholesalers that take in a significant amount of brokers’ trade orders.

Source: Theedgemarkets

Malaysia’s goal of boosting investments in its growing technology export sector is unlikely to be affected by the results of the US election, according to Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz.

“We built a strong ecosystem around the semiconductor industry, and it has been a major part of our exports,” Zafrul said in an interview with Bloomberg Television’s Haidi Stroud-Watts and Shery Ahn on Friday. 

Companies based in Malaysia hadn’t seen major disruptions in the sector during the last change in US leadership, “and I don’t foresee that continuing to change when there is a new — if there is a new policy change in the US administration”, he said. 

Southeast Asia, including Malaysia, has benefited from geopolitical tensions that spurred more investments in the region, the minister said, adding that the country continues to engage both US and China, he added.

Investors are flocking to Malaysia once again amid a booming artificial intelligence sector and improving political stability. After a rapid turnover of leaders, Prime Minister Datuk Seri Anwar Ibrahim has consolidated his power, enacted reforms and launched economic plans to improve the country’s outlook since coming into power in late 2022.

Tech giants including Microsoft Corp, Nvidia Corp and Amazon.com Inc have pledged to invest billions of dollars in the country’s infrastructure, as Anwar bets on the country’s non-aligned stance and resilient economy to weather it through any geopolitical storm.

The country’s semiconductor sector, in particular, is set to benefit regardless who wins in the coming US election, due to supply chain shifts and trade diversions, according to CIMB Group Holdings Bhd economist Vincent Loo in a research note on Sept 6. Such products make up the lion’s share of Malaysia’s overseas shipments, account for 53% of exports to the US and 36% to China in the first five months of the year, he said.

International funds turned net buyers of Malaysian equities in 2024, while Kuala Lumpur became the busiest location for listings in Southeast Asia. The ringgit has recovered from a 26-year low against the dollar reached in February, emerging as the top gainer across developing markets this year.

Malaysia is encouraging companies to invest as it focuses on five sectors — electrical and electronics, the digital economy, chemical and petrochemical, healthcare and aerospace — Zafrul said. The nation is seeking green and digital investments, he added.

Source: The edge markets