President Barack Obama called anew for overhauling the nation’s immigration laws, saying a failure to do so will lead to “misguided” efforts such as legislation passed in Arizona.
“Our failure to act responsibly at the federal level will only open the door to irresponsibility by others,” Obama said at a Rose Garden naturalization ceremony for 24 members of the U.S. military. “That includes, for example, the recent efforts in Arizona.”
The state legislature passed a bill that would make it a state crime to be in the U.S. illegally and require local police to determine the immigration status of anyone an officer suspects of being in the country without proper documentation.
Arizona Governor Jan Brewer, who is running for a new term this year, signed the bill into law at a ceremony attended by several state officials hours after Obama’s comments. Brewer said she expects the measure to face constitutional challenges.
The measure has sparked protests in the state, where Census Bureau figures show about a quarter of the population is of Hispanic descent. It also shares a border with Mexico and has an estimated 460,000 residents living there illegally, the seventh highest total in the country, according to the Department of Homeland Security.
‘Notions of Fairness’
The actions by the Arizona legislature threaten “to undermine basic notions of fairness that we cherish as Americans,” Obama said. It also may hamper trust between residents and law enforcement authorities, he said.
He said he has instructed U.S. authorities to monitor the state’s actions and to “examine the civil rights and other implications” of the legislation.
The president’s comments came at a naturalization ceremony for 24 U.S. soldiers from 16 countries who took the oath to become citizens.
Democratic congressional leaders have said an overhaul of U.S. immigration law could advance through Congress this year if Senate Majority Leader Harry Reid can pick up enough Republican support to get it through the chamber.
The last try at revamping the law to create a guest worker program and provide a path to citizenship for some of those living in the U.S. illegally was in 2007. That was blocked amid opposition from Republicans and some Democrats.
Call for Solution
“Surely we can all agree that when 11 million people in our country are living here illegally, outside the system, that’s unacceptable,” Obama said. “The American people demand and deserve a solution.”
Obama lauded the work of Senators Charles Schumer, a New York Democrat, and Lindsey Graham, a South Carolina Republican, to come up with a framework for legislation that can win bipartisan support.
Graham has said he’ll introduce legislation only after it’s finished and at least one other Republican signs on. He said this week that any effort to move immigration this year will fail badly because both parties need to “lay the groundwork” politically with tough border-control approaches first.
The president has been making calls to members of Congress, including Republicans, to win support for tackling an immigration law overhaul, White House press secretary Robert Gibbs said.
Friday, April 23, 2010
Geithner Says Bailouts Will Cost U.S. Taxpayers $87 Billion
U.S. government bailouts, including funds for Citigroup Inc. and American International Group Inc., will cost taxpayers about $87 billion, according to a letter Treasury Secretary Timothy F. Geithner sent congressional leaders.
The Troubled Asset Relief Program will lose about $117 billion, and funding related to Fannie Mae and Freddie Mac will cost taxpayers another $85 billion, Geithner said in a letter today to the Democratic and Republican leaders in the Senate and House. The government expects to make about $115 billion on Federal Reserve programs, including the purchase of mortgage- backed securities, he wrote.
Obama administration and regulator policies “have stabilized our financial system,” Geithner said. “The banking system is now better-capitalized than before the crisis.” A year ago the Treasury estimated that bailout costs could reach $500 billion, he said.
Congress authorized $700 billion for TARP in October 2008 to prevent a collapse of the U.S. financial system. The program has been criticized by lawmakers from both parties, including Senator Maria Cantwell, a Democrat from Washington state, and Representative Jeb Hensarling, a Texas Republican, for helping big banks more than average citizens.
Quick End
Treasury is ending TARP and other bailout programs “as quickly as possible,” Geithner said in the letter. The bailout costs will be less than 1 percent of gross domestic product, down from an estimate of 3.5 percent a year ago, he said.
“However, the financial and economic recovery is incomplete,” Geithner said.
Herbert Allison, the Treasury’s assistant secretary for financial stability, told Congress yesterday that TARP’s wind- down will vary by company.
“Some institutions are thriving and have the ability to repay Treasury now or in the very near future,” Allison told a House Appropriations subcommittee. “Other institutions will need more time to recover and repay Treasury, which is to be expected given the nature and impact of this financial crisis.”
General Motors Co. repaid $4.7 billion in loans to the Treasury on April 21. The company is still 61 percent owned by taxpayers as part of the financing for the automaker’s 2009 bankruptcy.
The Troubled Asset Relief Program will lose about $117 billion, and funding related to Fannie Mae and Freddie Mac will cost taxpayers another $85 billion, Geithner said in a letter today to the Democratic and Republican leaders in the Senate and House. The government expects to make about $115 billion on Federal Reserve programs, including the purchase of mortgage- backed securities, he wrote.
Obama administration and regulator policies “have stabilized our financial system,” Geithner said. “The banking system is now better-capitalized than before the crisis.” A year ago the Treasury estimated that bailout costs could reach $500 billion, he said.
Congress authorized $700 billion for TARP in October 2008 to prevent a collapse of the U.S. financial system. The program has been criticized by lawmakers from both parties, including Senator Maria Cantwell, a Democrat from Washington state, and Representative Jeb Hensarling, a Texas Republican, for helping big banks more than average citizens.
Quick End
Treasury is ending TARP and other bailout programs “as quickly as possible,” Geithner said in the letter. The bailout costs will be less than 1 percent of gross domestic product, down from an estimate of 3.5 percent a year ago, he said.
“However, the financial and economic recovery is incomplete,” Geithner said.
Herbert Allison, the Treasury’s assistant secretary for financial stability, told Congress yesterday that TARP’s wind- down will vary by company.
“Some institutions are thriving and have the ability to repay Treasury now or in the very near future,” Allison told a House Appropriations subcommittee. “Other institutions will need more time to recover and repay Treasury, which is to be expected given the nature and impact of this financial crisis.”
General Motors Co. repaid $4.7 billion in loans to the Treasury on April 21. The company is still 61 percent owned by taxpayers as part of the financing for the automaker’s 2009 bankruptcy.
Thursday, April 22, 2010
Microsoft Sales Miss Some Predictions
Microsoft Corp., the world’s largest software maker, reported third-quarter revenue that missed analysts’ most optimistic predictions, a sign that corporate customers may be putting off computer buying.
Sales rose 6.3 percent to $14.5 billion, compared with analysts’ estimates that were as high as $14.8 billion for the quarter that ended March 31. Shares fell in late trading.
While Microsoft’s Windows business has benefited from increased consumer demand for personal computers, corporations have hung back, avoiding purchases of new machines and long-term contracts. Investors held out for added evidence of a spending resurgence after chipmaker Intel Corp. last week forecast rising sales this quarter and record profit margins for 2010.
“Expectations were for more, given the strength we’ve seen in PC sales,” Brendan Barnicle, an analyst at Pacific Crest Securities, said in an interview from Portland, Oregon. He rates the shares “outperform” and said he doesn’t own them.
Microsoft fell $1.02, or 3.3 percent, to $30.37 in extended trading after the report. The shares had risen 6 cents to $31.39 at 4 p.m. New York time on the Nasdaq Stock Market. The stock fell 3.9 percent last quarter, while the Standard and Poor’s 500 Index rose 4.9 percent.
Third-quarter net income rose 35 percent to $4.01 billion, or 45 cents a share, beating the average forecast of 42 cents in a Bloomberg survey of analysts. Sales exceeded the $14.4 billion average in the survey, reflecting rising demand for Windows 7, the latest version of Microsoft’s flagship operating system.
Putting Off Orders
Still, some companies are reluctant to place orders that stretch over years. Unearned revenue, a measure of multiyear contracts, was $12.3 billion. Analysts’ average estimate was $12.8 billion, according to Katherine Egbert, an analyst at Jefferies & Co. In January, Microsoft reported second-quarter profit that beat analysts’ estimates by 15 cents.
“The deferred revenue was lower than expected, suggesting that enterprise spending is still just beginning to recover,” said Sarah Friar, a San Francisco-based analyst for Goldman Sachs Group who has a “buy” rating on Microsoft. “Enterprise spending is still making its way out of the downturn.”
Microsoft said operating expenses for the year ending June 30 will be $26.1 billion to $26.3 billion, compared with a January prediction of $26.2 billion to $26.5 billion. Microsoft no longer provides forecasts for sales and profit.
Mixed Bag
“Consumer demand is still strong, but we also saw for the first time growth in business hardware spending,” said Peter Klein, Microsoft’s chief financial officer, in an interview. Yet, it’s still taking longer to close multiyear deals. The company did have growth in billings for multiyear agreements, he said. “We are starting to fill that pipeline,” he said. “I think it will resolve itself over time.”
In the third quarter a year ago, net income was $2.98 billion, or 33 cents a share, on sales of $13.6 billion.
Technology bellwethers reporting earnings in recent weeks have given a mixed picture of the rebound in technology spending. Oracle Corp., the second-biggest software maker behind Microsoft, last month forecast the fastest sales growth for new software licenses since mid-2008. Intel, the world’s biggest chipmaker, last week indicated that recovery may be gathering steam with a forecast for rising sales this quarter.
“People had thought there would be closer correlation between what Intel said about PC demand and PC outlook” and Microsoft’s results, said Sasa Zorovic, a Boston-based analyst with Janney Montgomery Scott LLC. “That doesn’t seem to be the case.” He rates the shares “neutral.”
Office
Still, International Business Machines Corp. reported a drop in services signings, showing corporate spending on larger technology projects hasn’t picked up yet.
Microsoft Business Division revenue, mostly from Office productivity software, fell 5.9 percent to $4.24 billion as some customers held off purchases before Microsoft begins rolling out a new version next month. Server software sales were $3.58 billion, missing estimates from Goldman Sachs and UBS AG.
While sales of server computers have started to recover, it will take longer for sales of Microsoft’s related software to come back, Microsoft’s Klein said.
Information-technology spending will climb 1.7 percent in 2010, after dropping 3.1 percent last year, according to an estimate from Morgan Stanley. Personal-computer shipments rose 27 percent last quarter, according to Gartner Inc. The PC market bounced back from the year-earlier period, when the recession dragged down shipments almost 7 percent -- the worst performance since 2001, according to market research firm IDC.
Business, Bing
Revenue in Microsoft’s Business Division was reduced as the company deferred some sales to a future quarter. The company gave customers who have purchased older versions of Office the right to upgrade to the new version, Office 2010, which is available to businesses next month. It hits stores in June.
Online advertising revenue rose 19 percent as search and graphical display ad markets recovered, Klein said. Sales in the company’s online business rose 11.6 percent to $566 million.
Microsoft’s Bing search engine has increased the company’s share of searches by 3.7 percentage points since Microsoft overhauled the product in June, according to research firm ComScore Inc. Microsoft had 11.7 percent of the U.S. search market in March, compared with 65.1 percent for Google Inc. and 16.9 percent for Yahoo! Inc., according to ComScore.
Sales rose 6.3 percent to $14.5 billion, compared with analysts’ estimates that were as high as $14.8 billion for the quarter that ended March 31. Shares fell in late trading.
While Microsoft’s Windows business has benefited from increased consumer demand for personal computers, corporations have hung back, avoiding purchases of new machines and long-term contracts. Investors held out for added evidence of a spending resurgence after chipmaker Intel Corp. last week forecast rising sales this quarter and record profit margins for 2010.
“Expectations were for more, given the strength we’ve seen in PC sales,” Brendan Barnicle, an analyst at Pacific Crest Securities, said in an interview from Portland, Oregon. He rates the shares “outperform” and said he doesn’t own them.
Microsoft fell $1.02, or 3.3 percent, to $30.37 in extended trading after the report. The shares had risen 6 cents to $31.39 at 4 p.m. New York time on the Nasdaq Stock Market. The stock fell 3.9 percent last quarter, while the Standard and Poor’s 500 Index rose 4.9 percent.
Third-quarter net income rose 35 percent to $4.01 billion, or 45 cents a share, beating the average forecast of 42 cents in a Bloomberg survey of analysts. Sales exceeded the $14.4 billion average in the survey, reflecting rising demand for Windows 7, the latest version of Microsoft’s flagship operating system.
Putting Off Orders
Still, some companies are reluctant to place orders that stretch over years. Unearned revenue, a measure of multiyear contracts, was $12.3 billion. Analysts’ average estimate was $12.8 billion, according to Katherine Egbert, an analyst at Jefferies & Co. In January, Microsoft reported second-quarter profit that beat analysts’ estimates by 15 cents.
“The deferred revenue was lower than expected, suggesting that enterprise spending is still just beginning to recover,” said Sarah Friar, a San Francisco-based analyst for Goldman Sachs Group who has a “buy” rating on Microsoft. “Enterprise spending is still making its way out of the downturn.”
Microsoft said operating expenses for the year ending June 30 will be $26.1 billion to $26.3 billion, compared with a January prediction of $26.2 billion to $26.5 billion. Microsoft no longer provides forecasts for sales and profit.
Mixed Bag
“Consumer demand is still strong, but we also saw for the first time growth in business hardware spending,” said Peter Klein, Microsoft’s chief financial officer, in an interview. Yet, it’s still taking longer to close multiyear deals. The company did have growth in billings for multiyear agreements, he said. “We are starting to fill that pipeline,” he said. “I think it will resolve itself over time.”
In the third quarter a year ago, net income was $2.98 billion, or 33 cents a share, on sales of $13.6 billion.
Technology bellwethers reporting earnings in recent weeks have given a mixed picture of the rebound in technology spending. Oracle Corp., the second-biggest software maker behind Microsoft, last month forecast the fastest sales growth for new software licenses since mid-2008. Intel, the world’s biggest chipmaker, last week indicated that recovery may be gathering steam with a forecast for rising sales this quarter.
“People had thought there would be closer correlation between what Intel said about PC demand and PC outlook” and Microsoft’s results, said Sasa Zorovic, a Boston-based analyst with Janney Montgomery Scott LLC. “That doesn’t seem to be the case.” He rates the shares “neutral.”
Office
Still, International Business Machines Corp. reported a drop in services signings, showing corporate spending on larger technology projects hasn’t picked up yet.
Microsoft Business Division revenue, mostly from Office productivity software, fell 5.9 percent to $4.24 billion as some customers held off purchases before Microsoft begins rolling out a new version next month. Server software sales were $3.58 billion, missing estimates from Goldman Sachs and UBS AG.
While sales of server computers have started to recover, it will take longer for sales of Microsoft’s related software to come back, Microsoft’s Klein said.
Information-technology spending will climb 1.7 percent in 2010, after dropping 3.1 percent last year, according to an estimate from Morgan Stanley. Personal-computer shipments rose 27 percent last quarter, according to Gartner Inc. The PC market bounced back from the year-earlier period, when the recession dragged down shipments almost 7 percent -- the worst performance since 2001, according to market research firm IDC.
Business, Bing
Revenue in Microsoft’s Business Division was reduced as the company deferred some sales to a future quarter. The company gave customers who have purchased older versions of Office the right to upgrade to the new version, Office 2010, which is available to businesses next month. It hits stores in June.
Online advertising revenue rose 19 percent as search and graphical display ad markets recovered, Klein said. Sales in the company’s online business rose 11.6 percent to $566 million.
Microsoft’s Bing search engine has increased the company’s share of searches by 3.7 percentage points since Microsoft overhauled the product in June, according to research firm ComScore Inc. Microsoft had 11.7 percent of the U.S. search market in March, compared with 65.1 percent for Google Inc. and 16.9 percent for Yahoo! Inc., according to ComScore.
Bank of Japan Inflation Forecast May Fall Short of Finance Minister's Goal
Signs of a sustained Japanese economic recovery may spur the central bank to raise its growth projections and discuss predicting an end to deflation at a meeting next week, a survey of economists indicated.
Bank of Japan board members release semiannual economic forecasts after their April 30 gathering in Tokyo. Their median prediction may show an inflation rate of at least zero for the year to March 2012, up from a 0.2 percent drop, according to 14 of 16 economists surveyed by Bloomberg News.
The new projection may reinforce politicians’ calls for the central bank to expand stimulus measures after Finance Minister Naoto Kan said he wants an inflation rate of as high as 2 percent. The International Monetary Fund this week echoed the government’s concern, saying the BOJ may need to do more.
A recovery in prices “would be fragile, and Japan could tip back into deflation with changes in the foreign-exchange rate or oil price conditions,” said Takehiro Sato, chief Japan economist at Morgan Stanley in Tokyo. Political pressure “makes it all the more unlikely the BOJ would embark on an exit strategy,” he said.
Japan, the only Group of Seven nation still reporting consumer-price declines, has been easing policy just as its counterparts in Asia begin to tighten credit as their economies drive the global recovery. The BOJ doubled a lending program for banks to 20 trillion yen ($215 billion) last month and has kept interest rates at 0.1 percent since December 2008.
Hold Off
The survey indicated that Governor Masaaki Shirakawa and his colleagues will hold off on further action next week, with 13 of the 16 economists predicting no change in policy. He and Kan are in Washington for meetings with their counterparts from Group of Seven and Group of 20 nations.
Shirakawa this month said the risk of another recession has “pretty much gone” and he sees “positive signs” for prices. Deputy Governor Kiyohiko Nishimura said this week that “beams of light” are visible in overcoming deflation.
Both policy makers have said they will keep monetary policy “accommodative,” a pledge that’s likely to be affirmed in next week’s semiannual outlook, according to Ryutaro Kono, chief economist at BNP Paribas in Tokyo. The central bank will reinforce that “it won’t hesitate to provide more liquidity if needed,” Kono said.
At Odds
Any forecast by the central bank for consumer prices to stop falling next fiscal year would put it at odds with economists, whose own projections are for a 0.1 percent decline, based on the median estimate in the Bloomberg survey. Prices excluding fresh food, the bank’s key gauge, slid 1.2 percent in February from a year earlier, the 12th straight drop.
“Sure, the economy is recovering, but growth still depends on exports, domestic demand hasn’t gained momentum, and Japan is stuck in chronic deflation,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo, who sees prices sliding 0.2 percent next fiscal year.
The analysts surveyed said prices will slip 1.1 percent in the current year ending March 2011, more than the 0.5 percent decrease forecast by the central bank in January.
The policy board will also review its economic growth forecasts at the meeting.
Gross domestic product will expand 2 percent in the current fiscal year and 1.7 percent in the year ending March 2012, according to the median estimate of the 16 economists. In January, the central bank forecast growth of 1.3 percent this year and 2.1 percent in fiscal 2011.
Elpida’s Profit
Elpida Memory Inc. is among Japanese exporters benefiting from a resurgence in global demand, led by Asia. Japan’s biggest maker of computer memory chips this week reported its first annual profit in three years.
Still, politicians are putting pressure on the BOJ to spur the economy as record public debt constrains the government’s ability to provide support. Fitch Ratings said yesterday that “in the absence of sustained economic recovery and fiscal consolidation, government debt will continue to rise.”
Finance Minister Kan told reporters in Washington yesterday that concerns about Japan’s finances may ease when the government releases its fiscal rehabilitation plan in June.
The yield on Japan’s 10-year bond rose half a basis point to 1.32 percent at 9:40 a.m. in Tokyo.
Kan this week told parliament the central bank should aim for inflation of as high as 2 percent. Prime Minister Yukio Hatoyama’s Democratic Party of Japan this week said it plans to include an inflation target in its platform for the July upper house elections.
Shirakawa said in a speech in New York yesterday that central bankers shouldn’t be “too fixated on short-term price stability” because that doesn’t necessarily lead to economic stability.
“The BOJ board will probably stand pat this time,” said Masaaki Kanno, a 25-year veteran of the central bank who is now chief economist at JPMorgan Chase & Co. in Tokyo. “But it’s highly likely that the bank will ease policy further to signal its cooperation with the government in June” when the fiscal plan is released, he said.
Bank of Japan board members release semiannual economic forecasts after their April 30 gathering in Tokyo. Their median prediction may show an inflation rate of at least zero for the year to March 2012, up from a 0.2 percent drop, according to 14 of 16 economists surveyed by Bloomberg News.
The new projection may reinforce politicians’ calls for the central bank to expand stimulus measures after Finance Minister Naoto Kan said he wants an inflation rate of as high as 2 percent. The International Monetary Fund this week echoed the government’s concern, saying the BOJ may need to do more.
A recovery in prices “would be fragile, and Japan could tip back into deflation with changes in the foreign-exchange rate or oil price conditions,” said Takehiro Sato, chief Japan economist at Morgan Stanley in Tokyo. Political pressure “makes it all the more unlikely the BOJ would embark on an exit strategy,” he said.
Japan, the only Group of Seven nation still reporting consumer-price declines, has been easing policy just as its counterparts in Asia begin to tighten credit as their economies drive the global recovery. The BOJ doubled a lending program for banks to 20 trillion yen ($215 billion) last month and has kept interest rates at 0.1 percent since December 2008.
Hold Off
The survey indicated that Governor Masaaki Shirakawa and his colleagues will hold off on further action next week, with 13 of the 16 economists predicting no change in policy. He and Kan are in Washington for meetings with their counterparts from Group of Seven and Group of 20 nations.
Shirakawa this month said the risk of another recession has “pretty much gone” and he sees “positive signs” for prices. Deputy Governor Kiyohiko Nishimura said this week that “beams of light” are visible in overcoming deflation.
Both policy makers have said they will keep monetary policy “accommodative,” a pledge that’s likely to be affirmed in next week’s semiannual outlook, according to Ryutaro Kono, chief economist at BNP Paribas in Tokyo. The central bank will reinforce that “it won’t hesitate to provide more liquidity if needed,” Kono said.
At Odds
Any forecast by the central bank for consumer prices to stop falling next fiscal year would put it at odds with economists, whose own projections are for a 0.1 percent decline, based on the median estimate in the Bloomberg survey. Prices excluding fresh food, the bank’s key gauge, slid 1.2 percent in February from a year earlier, the 12th straight drop.
“Sure, the economy is recovering, but growth still depends on exports, domestic demand hasn’t gained momentum, and Japan is stuck in chronic deflation,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo, who sees prices sliding 0.2 percent next fiscal year.
The analysts surveyed said prices will slip 1.1 percent in the current year ending March 2011, more than the 0.5 percent decrease forecast by the central bank in January.
The policy board will also review its economic growth forecasts at the meeting.
Gross domestic product will expand 2 percent in the current fiscal year and 1.7 percent in the year ending March 2012, according to the median estimate of the 16 economists. In January, the central bank forecast growth of 1.3 percent this year and 2.1 percent in fiscal 2011.
Elpida’s Profit
Elpida Memory Inc. is among Japanese exporters benefiting from a resurgence in global demand, led by Asia. Japan’s biggest maker of computer memory chips this week reported its first annual profit in three years.
Still, politicians are putting pressure on the BOJ to spur the economy as record public debt constrains the government’s ability to provide support. Fitch Ratings said yesterday that “in the absence of sustained economic recovery and fiscal consolidation, government debt will continue to rise.”
Finance Minister Kan told reporters in Washington yesterday that concerns about Japan’s finances may ease when the government releases its fiscal rehabilitation plan in June.
The yield on Japan’s 10-year bond rose half a basis point to 1.32 percent at 9:40 a.m. in Tokyo.
Kan this week told parliament the central bank should aim for inflation of as high as 2 percent. Prime Minister Yukio Hatoyama’s Democratic Party of Japan this week said it plans to include an inflation target in its platform for the July upper house elections.
Shirakawa said in a speech in New York yesterday that central bankers shouldn’t be “too fixated on short-term price stability” because that doesn’t necessarily lead to economic stability.
“The BOJ board will probably stand pat this time,” said Masaaki Kanno, a 25-year veteran of the central bank who is now chief economist at JPMorgan Chase & Co. in Tokyo. “But it’s highly likely that the bank will ease policy further to signal its cooperation with the government in June” when the fiscal plan is released, he said.
Tuesday, April 20, 2010
India raises rates for second month
India raised interest rates for a second month on Tuesday in a bid to contain consumer prices that have been among the fastest rising in the world’s large economies.
It is the largest economy to tighten monetary policy with successive rate rises as its recovery from the global economic downturn gathers steam. India’s industrial production has picked up during the past six months to record double-digit growth, while the agricultural economy is expected to regain its strength this year with better seasonal rains.
EDITOR’S CHOICE
Video: India set for further tightening - Apr-20
Analysis: India: States of desire - Apr-20
Lex: Reserve Bank of India - Apr-20
Money Supply - Apr-20
Bank of Canada signals rate rise - Apr-20
Opinion: India faces new economic challenges - Apr-15
“With the recovery now firmly in place, we need to move in a calibrated manner in the direction of normalising our policy instruments,” said Duvvuri Subbarao, governor of the Reserve Bank of India, in a policy statement.
The wholesale price index, India’s most closely watched inflation measure, rose 9.9 per cent in March, similar to the previous month but the biggest rise since October 2008. Food inflation has been running at 15-20 per cent, a particular concern in a country where much of the 1.2bn population survives on meagre incomes.
Australia, which is slightly smaller in gross domestic product terms, is the only other Group of 20 nation that has tightened monetary policy with rate rises since the downturn. This month, its central bank raised interest rates to 4.25 per cent, its fifth rise since October. Within the region, Malaysia and Vietnam have also raised rates.
The Reserve Bank of India at its quarterly policy meeting on Tuesday raised the repo rate, a key lending rate, 25 basis points to 5.25 per cent and raised the cash reserve ratio, the amount of money banks are required to hold with the central bank, 25bp to 6 per cent.
In an unscheduled move last month, the bank increased the repo rate 25bp to 5 per cent. In January, it raised the reserve ratio 75bp to 5.75 per cent to soak up excess liquidity.
Economists predict steady tightening throughout the year as the government withdraws fiscal stimulus measures introduced to help the economy weather the effects of the global financial crisis. They have recommended that the central bank aggressively tackle domestically generated price pressures, which they say are not well captured by the wholesale index or consumer price index.
“While recovery in private demand needs to be stronger to reinforce the growth momentum, the already elevated headline inflation suggests that the weight of policy balance may have to shift to containing inflation, since high inflation itself will dampen recovery in growth,” the RBI said in a statement on Monday night.
In the weeks ahead of its next policy review in July, the RBI is likely to focus on the strength of the monsoon rains, on which much agricultural activity depends across south Asia.
“Provided there is a normal monsoon, agricultural production will rebound, sharply reducing food price inflation and boosting consumer confidence,” said Nikhilesh Bhattacharyya, associate economist at Moody’s Analytics. “This has been the pattern following prior food price spikes.”
Last year’s rains were the worst in 37 years. They badly hit agricultural output, which has a declining share of GDP. India rarely suffers two bad monsoons in a row. Some of the highest temperatures in March and April for a century have encouraged forecasts that heavy monsoon rains are on their way. Better agricultural performance would spur the economy to the government’s goal of reaching 9-10 per cent economic growth.
Montek Singh Ahluwalia, deputy chairman of the planning commission, said: “I don’t know what it is that causes a system or a private sector to be optimistic. It’s not the case that it depends on little instruments like whether you raise interest rates or lower the repo rate.
“The positive thing about India at the moment is that there is a tremendous amount on optimism. This will certainly keep the momentum going.”
It is the largest economy to tighten monetary policy with successive rate rises as its recovery from the global economic downturn gathers steam. India’s industrial production has picked up during the past six months to record double-digit growth, while the agricultural economy is expected to regain its strength this year with better seasonal rains.
EDITOR’S CHOICE
Video: India set for further tightening - Apr-20
Analysis: India: States of desire - Apr-20
Lex: Reserve Bank of India - Apr-20
Money Supply - Apr-20
Bank of Canada signals rate rise - Apr-20
Opinion: India faces new economic challenges - Apr-15
“With the recovery now firmly in place, we need to move in a calibrated manner in the direction of normalising our policy instruments,” said Duvvuri Subbarao, governor of the Reserve Bank of India, in a policy statement.
The wholesale price index, India’s most closely watched inflation measure, rose 9.9 per cent in March, similar to the previous month but the biggest rise since October 2008. Food inflation has been running at 15-20 per cent, a particular concern in a country where much of the 1.2bn population survives on meagre incomes.
Australia, which is slightly smaller in gross domestic product terms, is the only other Group of 20 nation that has tightened monetary policy with rate rises since the downturn. This month, its central bank raised interest rates to 4.25 per cent, its fifth rise since October. Within the region, Malaysia and Vietnam have also raised rates.
The Reserve Bank of India at its quarterly policy meeting on Tuesday raised the repo rate, a key lending rate, 25 basis points to 5.25 per cent and raised the cash reserve ratio, the amount of money banks are required to hold with the central bank, 25bp to 6 per cent.
In an unscheduled move last month, the bank increased the repo rate 25bp to 5 per cent. In January, it raised the reserve ratio 75bp to 5.75 per cent to soak up excess liquidity.
Economists predict steady tightening throughout the year as the government withdraws fiscal stimulus measures introduced to help the economy weather the effects of the global financial crisis. They have recommended that the central bank aggressively tackle domestically generated price pressures, which they say are not well captured by the wholesale index or consumer price index.
“While recovery in private demand needs to be stronger to reinforce the growth momentum, the already elevated headline inflation suggests that the weight of policy balance may have to shift to containing inflation, since high inflation itself will dampen recovery in growth,” the RBI said in a statement on Monday night.
In the weeks ahead of its next policy review in July, the RBI is likely to focus on the strength of the monsoon rains, on which much agricultural activity depends across south Asia.
“Provided there is a normal monsoon, agricultural production will rebound, sharply reducing food price inflation and boosting consumer confidence,” said Nikhilesh Bhattacharyya, associate economist at Moody’s Analytics. “This has been the pattern following prior food price spikes.”
Last year’s rains were the worst in 37 years. They badly hit agricultural output, which has a declining share of GDP. India rarely suffers two bad monsoons in a row. Some of the highest temperatures in March and April for a century have encouraged forecasts that heavy monsoon rains are on their way. Better agricultural performance would spur the economy to the government’s goal of reaching 9-10 per cent economic growth.
Montek Singh Ahluwalia, deputy chairman of the planning commission, said: “I don’t know what it is that causes a system or a private sector to be optimistic. It’s not the case that it depends on little instruments like whether you raise interest rates or lower the repo rate.
“The positive thing about India at the moment is that there is a tremendous amount on optimism. This will certainly keep the momentum going.”
Mumbai Hotel, a Killing Zone, Is Grand Again
MUMBAI, India — On Wednesday, the Oberoi Hotel, one of two five-star hotel complexes attacked by 10 Pakistan-based gunmen in November 2008, will welcome its first guests after a comprehensive $45 million reconstruction.
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Times Topic: Terrorism in India
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Prashanth Vishwanathan for The New York Times
The Oberoi’s lobby, once ravaged by guns and grenades, has been renewed.
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Lefteris Pitarakis/Associated Press
Terrorists struck the Oberoi and the Taj Mahal Palace & Tower.
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Prashanth Vishwanathan for The New York Times
A bedroom and bathroom at the Oberoi.
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Prashanth Vishwanathan for The New York Times
Housekeeping staff giving a final touch-up before the reopening on Wednesday.
The lobby, which had been ravaged by gunshots and grenade blasts during the three-day siege, has been rebuilt with milky-white marble from the Greek island of Thassos. The already luxurious guestroom baths have been upgraded to include flat-screen televisions. Dozens of security guards watch the premises. And the Tiffin restaurant, where many guests and employees were killed in the terrorist attack, is now called Fenix.
The rebirth of the Oberoi — along with the expected return to full service of the other hotel attacked, the Taj Mahal Palace and Tower — is an important milestone for Mumbai, formerly known as Bombay. The brazen strike, in which 163 people died, dealt India and Mumbai a significant psychic and economic blow, and recovery has come slowly.
As in the rest of the world, India’s economy slowed sharply at the end of 2008 because of the global financial crisis. But the attacks compounded the damage here by shaking the confidence of investors, corporate executives and consumers.
In the last nine months, however, government stimulus and strong domestic consumer demand have helped revive the economy. India is still some way from the heady 9 percent growth rate of 2007, but the government is projecting 8 percent growth for the 2010-11 fiscal year, up from 7.2 percent last year.
Tourism and travel are also rebounding. In the first quarter, India had 1.56 million foreign tourists, up 13 percent from the first three months of 2009 and just shy of the 1.6 million that showed up in the same period in 2008, according to the Tourism Ministry.
Domestic and foreign hotel companies are adding rooms at a breakneck pace. For instance, Hyatt Hotels, the chain based in Chicago, which currently has five hotels in India, plans to open 20 more properties in the country in the next four to five years.
The Oberoi, which formally reopens on Saturday, and the Taj are the last of the sites affected by the 2008 attacks to return to something resembling normal operations. The Taj, part of which is usable now, is expected to open guest rooms in its century-old palace wing soon, although the hotel has not provided an exact date.
Crushing as the attacks were for the rest of India, they were devastating for the two hotels — widely considered among the finest in the city — and the companies that own them.
The Mumbai Oberoi, for instance, accounted for about one-fifth of the revenue of the chain before the attacks. The earnings of East India Hotels, the publicly listed company that operates the hotels, fell nearly 70 percent in the nine months ended in December, compared with the same period a year earlier.
“We were affected severely,” said P. R. S. Oberoi, chairman of the parent company, the Oberoi Group, and the son of its founder. “Lehman Brothers was in September, and we had started feeling some of the effect maybe a little before that. Then the attacks happened and Bombay emptied out.”
In an interview last week at the hotel, Mr. Oberoi said occupancy rates at the Trident, the company’s business hotel next door, which did not suffer extensive damage, were back to levels that prevailed before the attack. But he noted that the supply of hotel rooms in Mumbai’s prime business district had shrunk significantly because the Oberoi and the palace wing of the Taj had been closed.
Mr. Oberoi, who himself narrowly missed being caught up in the attack on the hotel because he had left to attend an event elsewhere, said he had feared the hotel would be unsalvageable. But after four months of planning and 11 months of reconstruction, the innards of the hotel, which was built in 1986, have been transformed.
A big part of the focus has been to improve security. The hotel now has 150 security cameras, up from just 15 at the time of the attacks. It has 50 security personnel, five times the number it had in 2008. Visitors who drive up are greeted by a big steel gate where their cars are searched. The large windows in the lobby that overlook south Mumbai’s picturesque, crescent-shaped bay are now made from reinforced, shatterproof glass.
Still, Mr. Oberoi said that securing the hotel against every possible attack would be impossible. “What about suicide bombers? How do you stop them?” he said. “We check everybody, including me.”
At an age where many corporate executives spend much of their time on their golf game, Mr. Oberoi, 81, seems to have immersed himself in the details of rebuilding his flagship hotel. His staff said that he personally inspected hundreds of marble tiles to make sure no blemished pieces made it onto the floor, rejecting about 70 percent of the tiles the company received. Last week, during a tour with two visitors, he kept pointing out minor defects to his staff.
Many of the changes at the Oberoi are meant to make the hotel even more opulent and luxurious than it already was. Two big coffee tables in the lobby are topped with marble inlaid with precious stones. Those tables, and 600 others placed in guest rooms, were made by workers who, Oberoi executives said, are descendants of craftsmen who worked on the Taj Mahal.
Officials have made bathrooms bigger, added shower stalls and installed the TVs in front of free-standing bathtubs. Clear glass walls separate bathrooms from living rooms; a screen can be drawn for privacy. Rooms have “butler” buttons, which will summon a hotel employee within three minutes.
The Oberoi now has 81 suites, up from 26, because demand for suites has held up better than standard rooms, officials said. In total, the number of rooms has declined to 287, from 330. The price for a night’s stay ranges from 25,000 rupees ($560) for the smallest room to 300,000 rupees ($6,714) for the top suites.
The Taj has been making similar changes, increasing the number of suites. In an interview late last year, executives said one of the challenges of rebuilding their hotel was that no two rooms in the palace wing had the same layout. So, officials decided to redo every room using five templates.
“We are not going to just repair what is damaged and reopen the hotel,” said Ajoy K. Misra, a senior vice president for the Indian Hotels Company, which owns the Taj. “We are going to redesign the hotel.”
Related
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Times Topic: Terrorism in India
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Prashanth Vishwanathan for The New York Times
The Oberoi’s lobby, once ravaged by guns and grenades, has been renewed.
Enlarge This Image
Lefteris Pitarakis/Associated Press
Terrorists struck the Oberoi and the Taj Mahal Palace & Tower.
Enlarge This Image
Prashanth Vishwanathan for The New York Times
A bedroom and bathroom at the Oberoi.
Enlarge This Image
Prashanth Vishwanathan for The New York Times
Housekeeping staff giving a final touch-up before the reopening on Wednesday.
The lobby, which had been ravaged by gunshots and grenade blasts during the three-day siege, has been rebuilt with milky-white marble from the Greek island of Thassos. The already luxurious guestroom baths have been upgraded to include flat-screen televisions. Dozens of security guards watch the premises. And the Tiffin restaurant, where many guests and employees were killed in the terrorist attack, is now called Fenix.
The rebirth of the Oberoi — along with the expected return to full service of the other hotel attacked, the Taj Mahal Palace and Tower — is an important milestone for Mumbai, formerly known as Bombay. The brazen strike, in which 163 people died, dealt India and Mumbai a significant psychic and economic blow, and recovery has come slowly.
As in the rest of the world, India’s economy slowed sharply at the end of 2008 because of the global financial crisis. But the attacks compounded the damage here by shaking the confidence of investors, corporate executives and consumers.
In the last nine months, however, government stimulus and strong domestic consumer demand have helped revive the economy. India is still some way from the heady 9 percent growth rate of 2007, but the government is projecting 8 percent growth for the 2010-11 fiscal year, up from 7.2 percent last year.
Tourism and travel are also rebounding. In the first quarter, India had 1.56 million foreign tourists, up 13 percent from the first three months of 2009 and just shy of the 1.6 million that showed up in the same period in 2008, according to the Tourism Ministry.
Domestic and foreign hotel companies are adding rooms at a breakneck pace. For instance, Hyatt Hotels, the chain based in Chicago, which currently has five hotels in India, plans to open 20 more properties in the country in the next four to five years.
The Oberoi, which formally reopens on Saturday, and the Taj are the last of the sites affected by the 2008 attacks to return to something resembling normal operations. The Taj, part of which is usable now, is expected to open guest rooms in its century-old palace wing soon, although the hotel has not provided an exact date.
Crushing as the attacks were for the rest of India, they were devastating for the two hotels — widely considered among the finest in the city — and the companies that own them.
The Mumbai Oberoi, for instance, accounted for about one-fifth of the revenue of the chain before the attacks. The earnings of East India Hotels, the publicly listed company that operates the hotels, fell nearly 70 percent in the nine months ended in December, compared with the same period a year earlier.
“We were affected severely,” said P. R. S. Oberoi, chairman of the parent company, the Oberoi Group, and the son of its founder. “Lehman Brothers was in September, and we had started feeling some of the effect maybe a little before that. Then the attacks happened and Bombay emptied out.”
In an interview last week at the hotel, Mr. Oberoi said occupancy rates at the Trident, the company’s business hotel next door, which did not suffer extensive damage, were back to levels that prevailed before the attack. But he noted that the supply of hotel rooms in Mumbai’s prime business district had shrunk significantly because the Oberoi and the palace wing of the Taj had been closed.
Mr. Oberoi, who himself narrowly missed being caught up in the attack on the hotel because he had left to attend an event elsewhere, said he had feared the hotel would be unsalvageable. But after four months of planning and 11 months of reconstruction, the innards of the hotel, which was built in 1986, have been transformed.
A big part of the focus has been to improve security. The hotel now has 150 security cameras, up from just 15 at the time of the attacks. It has 50 security personnel, five times the number it had in 2008. Visitors who drive up are greeted by a big steel gate where their cars are searched. The large windows in the lobby that overlook south Mumbai’s picturesque, crescent-shaped bay are now made from reinforced, shatterproof glass.
Still, Mr. Oberoi said that securing the hotel against every possible attack would be impossible. “What about suicide bombers? How do you stop them?” he said. “We check everybody, including me.”
At an age where many corporate executives spend much of their time on their golf game, Mr. Oberoi, 81, seems to have immersed himself in the details of rebuilding his flagship hotel. His staff said that he personally inspected hundreds of marble tiles to make sure no blemished pieces made it onto the floor, rejecting about 70 percent of the tiles the company received. Last week, during a tour with two visitors, he kept pointing out minor defects to his staff.
Many of the changes at the Oberoi are meant to make the hotel even more opulent and luxurious than it already was. Two big coffee tables in the lobby are topped with marble inlaid with precious stones. Those tables, and 600 others placed in guest rooms, were made by workers who, Oberoi executives said, are descendants of craftsmen who worked on the Taj Mahal.
Officials have made bathrooms bigger, added shower stalls and installed the TVs in front of free-standing bathtubs. Clear glass walls separate bathrooms from living rooms; a screen can be drawn for privacy. Rooms have “butler” buttons, which will summon a hotel employee within three minutes.
The Oberoi now has 81 suites, up from 26, because demand for suites has held up better than standard rooms, officials said. In total, the number of rooms has declined to 287, from 330. The price for a night’s stay ranges from 25,000 rupees ($560) for the smallest room to 300,000 rupees ($6,714) for the top suites.
The Taj has been making similar changes, increasing the number of suites. In an interview late last year, executives said one of the challenges of rebuilding their hotel was that no two rooms in the palace wing had the same layout. So, officials decided to redo every room using five templates.
“We are not going to just repair what is damaged and reopen the hotel,” said Ajoy K. Misra, a senior vice president for the Indian Hotels Company, which owns the Taj. “We are going to redesign the hotel.”
India, Brazil Back U.S. Position on Yuan Before G-20
April 21 (Bloomberg) -- Central bank governors in India and Brazil backed a stronger Chinese yuan, siding with U.S. President Barack Obama before a meeting of the Group of 20 nations this week.
Exports from China to India have grown faster than Indian shipments to its northern neighbor “and that obviously is a reflection of differences in the exchange-rate management,” Reserve Bank of India’s Duvvuri Subbarao told reporters in Mumbai yesterday. Brazil’s Henrique Meirelles told a senate hearing yesterday in Brasilia it was “absolutely critical” that China should let its currency appreciate.
Obama, who considers the yuan “undervalued,” is seeking to gain broader support from finance officials of the G20, who will discuss outlook for the global economy in Washington for three days starting April 22. Speculation that China may scrap the yuan’s peg to the dollar intensified this month after Treasury Secretary Timothy F. Geithner delayed a report that could brand the nation a currency manipulator.
“This meeting will be the first test by the U.S. to use a multilateral forum to press China into action on its currency,” Philip Wee, a Singapore-based senior currency economist at DBS Group Holdings Ltd. wrote in a research note yesterday.
The discussions will include a range of topics including currencies and a communiqué will be released on April 23, a U.S. Treasury Department official, who declined to be identified, said yesterday. Bank Indonesia Deputy Governor Hartadi Sarwono declined to discuss his position before the meeting and the Bank of Korea also preferred not to comment when contacted yesterday.
Giving Opinions
India will give its opinion if the issue is raised in the G20 meeting, Subbarao said. “When it is discussed we will certainly give our opinion or view on the subject,” he said.
“If China revalues the yuan, it will have a positive impact on our external sector,” Subbarao said. “If some countries manage their exchange rate and keep them artificially low, the burden of adjustment falls on some countries that do not manage their exchange rate so actively.”
China has pegged its currency at about 6.83 against the dollar since July 2008, after allowing it to rise 21 percent in the previous three years. China won’t revalue until the middle of the year when it can see evidence of sustainable growth and inflation, Win Thin, a New York-based strategist at Brown Brothers Harriman & Co. said this week. Calls for revaluation will delay the process, he said.
Twelve-month non-deliverable yuan forwards traded at 6.622, reflecting bets the currency will strengthen 3.1 percent from the spot rate. The Brazilian real has gained 28 percent against the yuan in the past year, while the rupee climbed 13 percent.
India’s Imports
India imported $14.9 billion of goods in the six months to September 2009 from China, more than double the exports from the second-ranked U.S. India shipped $3.9 billion of goods to China in the same period.
U.S. lawmakers have urged Obama to step up pressure on China, accusing officials in Beijing of keeping the currency artificially weak to gain export advantage. Chinese President Hu Jintao told Obama on April 13 in Washington that the country wouldn’t yield to “external pressure” in deciding when to adjust the yuan.
The Chinese government will decide on the valuation of its currency and is seeking a stable yuan to control speculative capital inflows, Yao Jian, spokesman for the Ministry of Commerce, told reporters April 15.
Brazil Versus China
China boosted exports to Argentina, Uruguay and Paraguay, members of the Brazil-led Mercosur trade bloc, by 7.3 percent to $4.8 billion in the first eight months of 2009 from two years earlier, while Brazilian sales to its neighbors fell 18 percent to $9.6 billion during the same period.
Chinese-made products such as tires and stereo speakers are the target of 26 Brazilian anti-dumping measures, more than any other country and nearly half of all 68 in place, according to Brazil’s Trade Ministry. Soy and iron ore accounted for 66 percent of $20 billion in Brazilian sales to China last year.
“It’s absolutely critical that China appreciate its currency to ensure equilibrium in the global economy,” said Brazil’s Meirelles.
Exports from China to India have grown faster than Indian shipments to its northern neighbor “and that obviously is a reflection of differences in the exchange-rate management,” Reserve Bank of India’s Duvvuri Subbarao told reporters in Mumbai yesterday. Brazil’s Henrique Meirelles told a senate hearing yesterday in Brasilia it was “absolutely critical” that China should let its currency appreciate.
Obama, who considers the yuan “undervalued,” is seeking to gain broader support from finance officials of the G20, who will discuss outlook for the global economy in Washington for three days starting April 22. Speculation that China may scrap the yuan’s peg to the dollar intensified this month after Treasury Secretary Timothy F. Geithner delayed a report that could brand the nation a currency manipulator.
“This meeting will be the first test by the U.S. to use a multilateral forum to press China into action on its currency,” Philip Wee, a Singapore-based senior currency economist at DBS Group Holdings Ltd. wrote in a research note yesterday.
The discussions will include a range of topics including currencies and a communiqué will be released on April 23, a U.S. Treasury Department official, who declined to be identified, said yesterday. Bank Indonesia Deputy Governor Hartadi Sarwono declined to discuss his position before the meeting and the Bank of Korea also preferred not to comment when contacted yesterday.
Giving Opinions
India will give its opinion if the issue is raised in the G20 meeting, Subbarao said. “When it is discussed we will certainly give our opinion or view on the subject,” he said.
“If China revalues the yuan, it will have a positive impact on our external sector,” Subbarao said. “If some countries manage their exchange rate and keep them artificially low, the burden of adjustment falls on some countries that do not manage their exchange rate so actively.”
China has pegged its currency at about 6.83 against the dollar since July 2008, after allowing it to rise 21 percent in the previous three years. China won’t revalue until the middle of the year when it can see evidence of sustainable growth and inflation, Win Thin, a New York-based strategist at Brown Brothers Harriman & Co. said this week. Calls for revaluation will delay the process, he said.
Twelve-month non-deliverable yuan forwards traded at 6.622, reflecting bets the currency will strengthen 3.1 percent from the spot rate. The Brazilian real has gained 28 percent against the yuan in the past year, while the rupee climbed 13 percent.
India’s Imports
India imported $14.9 billion of goods in the six months to September 2009 from China, more than double the exports from the second-ranked U.S. India shipped $3.9 billion of goods to China in the same period.
U.S. lawmakers have urged Obama to step up pressure on China, accusing officials in Beijing of keeping the currency artificially weak to gain export advantage. Chinese President Hu Jintao told Obama on April 13 in Washington that the country wouldn’t yield to “external pressure” in deciding when to adjust the yuan.
The Chinese government will decide on the valuation of its currency and is seeking a stable yuan to control speculative capital inflows, Yao Jian, spokesman for the Ministry of Commerce, told reporters April 15.
Brazil Versus China
China boosted exports to Argentina, Uruguay and Paraguay, members of the Brazil-led Mercosur trade bloc, by 7.3 percent to $4.8 billion in the first eight months of 2009 from two years earlier, while Brazilian sales to its neighbors fell 18 percent to $9.6 billion during the same period.
Chinese-made products such as tires and stereo speakers are the target of 26 Brazilian anti-dumping measures, more than any other country and nearly half of all 68 in place, according to Brazil’s Trade Ministry. Soy and iron ore accounted for 66 percent of $20 billion in Brazilian sales to China last year.
“It’s absolutely critical that China appreciate its currency to ensure equilibrium in the global economy,” said Brazil’s Meirelles.
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