Fed will remain flexible, rates not on ‘preset course’; minutes

Fed will remain flexible, rates not on ‘preset course’; minutes

The US Federal Reserve will remain flexible and interest rates will not be on a “preset course” despite persistent risks from trade uncertainty and weak global growth, the Federal reserve has said.

Although the minutes of the Fed’s policy meeting late last month showed officials were primarily focused on the risks to the US economy, amid fears about the blowback from President Donald Trump’s trade war with Beijing, they stressed that they would keep their options open on their next steps.

After the Fed cut the benchmark interest rate for the first time in more than a decade, the fact that officials highlighted the importance of maintaining “optionality” may unsettle financial markets that have been counting on another rate cut in September.

After four rate increases last year, the last one in December, the Fed has been under relentless pressure from Trump to reverse course and slash rates to juice the economy.

While they made no mention of Trump’s constant attacks on Fed Chairman Jerome Powell, officials said they would be “guided by incoming information and its implications for the economic outlook” and avoid “any appearance of following a preset course,” according to the minutes of the Fed’s July 30-31 policy meeting.

The July rate cut was viewed as “part of a recalibration… or mid-cycle adjustment” and, given the uncertainty surrounding the outlook, the officials “highlighted the need for policymakers to remain flexible and focused on the implications of incoming data for the outlook.”

However, the minutes showed the central bankers are not unified, with several opposed to cutting rates while a couple favored a bigger cut.

“The July minutes underscore why Fed Chairman Jay Powell had such a hard time explaining the Fed’s decision to cut rates; the vote cleared by an even smaller majority than depicted in the statement; they had two extremes fighting against each other,” economist Diane Swonk of Grant Thornton said in an analysis.

Continuing trade frictions have increased uncertainty and caused businesses to hold off on investments, at a time when China’s economy is slowing and Europe is facing the uncertainty of Brexit, and those risks are expected to persist, the Fed said.

The “continued weakness in global economic growth and ongoing trade tensions had the potential to slow US economic activity,” the Fed cautioned.

Powell acknowledged at his news conference on July 31 that the rate cut was meant as insurance “against downside risks from weak global growth and trade policy uncertainty, to help offset the effects these factors are having on the economy.”

And the minutes said officials were “mindful” that trade tensions were far from settled and that trade uncertainties could intensify again, while continued weakness in the global economy “remained a significant downside risk.”

And with inflation stubbornly weak, a slowing US economy would further delay a sustained return of inflation to the two percent objective, the report said.

Despite the risks to the outlook, and the fact that Fed officials expect US growth to slow in the second half of the year, they “continued to view a sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric two percent objective as the most likely outcomes.”

In fact a rate cut when the economy is showing solid, albeit slower, growth and unemployment is near historic lows, runs counter to conventional thinking.

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European shares steady on upbeat PMI data, Italy jumps

European shares steady on upbeat PMI data, Italy jumps
European shares traded close to flat on Thursday as upbeat surveys on Germany and the euro zone offset signs that US policymakers had not intended to start a cycle of interest rate cuts with last month’s move.

Germany’s DAX shrugged off a weak open, to trade 0.1pc higher, after Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors, rose to 51.4 in August, above expectations of 50.5.

The leading indicator also showed French business activity expanded in August, pointing to resilience in the euro zone’s two biggest economies after Germany contracted in the second quarter.

A similar survey showed Euro zone business growth picked up a touch in August, helped by brisk services activity and as manufacturing contracted at a slower pace.

The data helped the pan-European STOXX 600 index to recover from solid initial losses to trade just 0.1pc lower by 0815 GMT, with Italian stocks outperforming with a 0.39pc rise.

“What we are seeing is the service sector holding up comfortably well while the industrial slump has got more room to run and even possibly deepen,” said Holger Schmieding chief economist at Berenberg.

“This data is not going make recessionary concerns worse, but it also won’t make them vanish anytime soon. We are still far away from any stabilization and it could possibly drag on till we see at least a partial trade deal between the US and China.”

Flash surveys from the United States are due later in the day.

Italy reversed earlier losses after Reuters reported President Sergio Mattarella wanted clear signs of a possible deal to form a new government by the end of the day.

“That is actually good news because the immediate challenge for Italy is to come up with a 2020 budget by mid-October, now the 5-Star and Democratic Party (PD) could possibly broker a compromise with the EU which would reduce uncertainty,” Schmieding said.

Hopes of stimulus moves by governments and central banks have steadied major stock markets in the past week but most are still on course to end August lower after a two-week sell-off driven by concerns that major economies were heading for recession.

The Federal Reserve minutes on Wednesday showed policymakers were deeply divided over whether to cut rates in July, but united in wanting to signal they were not on a preset path to more cuts that would support economic growth.

Minutes from the European Central Bank’s last policy meeting are also due at 11:30 GMT.

Ahead is the Fed’s annual Jackson Hole meeting of central bankers, which should provide more clues to the Fed’s mood after US President Donald Trump’s announcement of additional tariffs on Chinese goods at the start of August.

The biggest gainer on the STOXX was NMC Health Plc, up 26pc, after Reuters reported that two groups, including one backed by China’s Fosun, have made competing offers to buy a 40pc stake.

Shares of Ambu A/S plunged 15.2pc, to the bottom of the STOXX 600, after the company issued its second profit warning in three months.

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EPA publishes industrial pollutant emissions data

EPA publishes industrial pollutant emissions data

There was a dramatic decrease in the HCFC refrigerant gas emissions from large industrial activities, according to the most recent data from the Environmental Protection Agency.

The findings from 2017 show the positive response to the phase out and switch to a more environmentally-friendly bulk refrigerant by Irish industry.

The EPA has published environmental data today on Ireland’s national pollutant and transfer register. It covers 91 pollutants from 417 large industrial facilities around the country.

It found a 17% increase in 2017 in the recovery of hazardous waste within Ireland, and a 47% increase (165,000) in the quantity of hazardous waste sent abroad for recovery.

Patrick Geoghegan, EPA Senior Manager said, the data on hazardous waste transfers indicates that the positive trend to send hazardous waste for recovery treatment, rather than disposal, continued in 2017.

“However, it also highlights that Ireland has not moved significantly towards self-sufficiency. A lack of domestic infrastructure and the often more favourable cost option of treatment and disposal abroad have meant that export continues to be a significant treatment route for Ireland’s hazardous waste.”

The pollutant release and transfer register provides greater transparency among stakeholders and incentivises industry to establish clean production techniques and pollution abatement equipment to reduce emissions.

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Card spending continued to rise in second quarter

Card spending continued to rise in second quarter

Almost €19 billion was spent on Irish credit and debit cards between April and June, according to the Central Bank.

That represents an 8% rise year-on-year, as consumers increasingly opted for cards instead of cash.

The vast majority of card transactions in the second quarter – more than €16 billion worth – were done with debit cards. That is up 8.9% on the same period of 2018.

Most of that increase came at the point of sale, with transactions there rising by 13.4% to €10.96 billion year-on-year.

At the same time ATM withdrawals stayed broadly flat at €5.4 billion.

Meanwhile credit cards accounted for almost €2.9 billion of transactions in the period – an increase of 3.7% on the second quarter of 2018.

According to the Central Bank almost €5.2 billion worth of card transactions between April and June went towards online purchases, an increase of 15.8% on last year.

It came as the number of cards in issue rose by 4.4% to 7.2 million at the end of June. Almost 5.3 million of those were debit cards, while the number of credit cards rose to 1.91 million.

However the number of active cards in Ireland rose by a slightly more modest 3.9% to 6.1 million.

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Committee recommends broadband network remain in public ownership

Committee recommends broadband network remain in public ownership

A report carried out by the Oireachtas Committee on Communications has recommended that the broadband network infrastructure remain in public ownership.

The committee carried out an investigation into the Government’s decision to award preferred bidder status on the multi-billion euro national broadband contract to Granahan McCourt.

The aim of the project is to deliver high speed broadband to 540,000 households, farms and other businesses.

The Government has said the contract for the National Broadband Plan will be signed later this year.

In the report, the committee has recommended that the Government commission an external, independent review on whether its proposals and the costs are the only viable option.

It also says a new cost-benefit analysis should be carried out before the final national broadband contract is signed.

The committee also says the Government should re-engage with the ESB to examine the best model for delivery of a new plan through the ESB.

The report concluded that the original terms of the tender were too narrow.

It found that the lack of research into the actual cost of the final project proved to be a structural flaw and it said this lad to bidders withdrawing.

The report says Granahan McCourt will recoup its money within seven to eight years and retain full ownership, while at the same time the State will have invested almost €3 billion with no ownership rights.

The report also raises concerns over just one State representative being appointed to the board of the new National Broadband Ireland group overseeing the plan.

It said the committee accepts that changing the final bid so that ownership of the network is retained by the State may require a slight delay to the signing of contracts.

However, the report says there should be no reason why this could not be achieved in a much shorter period than has been suggested.

The Department of Communications says it will consider the committee’s report when it is published.

A Government source said the recommendations in the report would mean abandoning the current process and starting again, which it said could take years.

Earlier, Fine Gael TD and committee chairperson Hildegarde Naughton had called members to support her recommendation for the Government to press ahead and sign the contracts as soon as possible.

She said there was no evidence that indicated any reliable, cheaper alternative to the NBP.

Green Party leader Eamon Ryan was seeking cross-party support to ensure State ownership of the network.

Fianna Fáil’s Timmy Dooley said he was concerned that the operator would recoup its money after seven to eight years carrying very little risk and will retain full ownership.

TDs and senators also echoed concerns contained in the report over just one State representative being appointed to the board.

Sinn Féin’s David Cullinane said Eir’s claim that it could provide the NBP for less than €1bn was unproven.

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Average monthly rents hit record level for 13th quarter in a row – report

Average monthly rents hit record level for 13th quarter in a row – report

Average monthly rents across the country rose to a new record level during the second quarter of the year.

According to the latest quarterly Rental Report by Daft.ie, on average the cost of renting is now €1,391 per month.

The increase marks the 13th consecutive quarter of record rents.

However, the 6.7% rise over the same quarter last year is the lowest rate of rental inflation recorded since the last three months of 2013.

Nonetheless, the average listed rent per month is €361 higher than the last peak 11 years ago.

Ronan Lyons, economist at Trinity College Dublin and author of the report, said the moderation in increases was more likely due to limits on affordability, rather than improvements in the supply of rental properties.

“Availability on the rental market remains at levels that were unprecedented prior to 2015,” he said in a statement.

“For example, in the Dublin market, there were just 1,541 properties available to rent on August 1st. While that’s up from 1,121 two years ago, it’s well below the average of 4,700 for the preceding decade.”

According to Daft, the slowdown has been principally driven by the capital, although other main cities have also seen inflation rates moderate too.

In Dublin, rent growth in the last quarter was 4.5% compared to a year earlier, bringing average rents to €2,023 a month.

That compares to an annual inflation high of 13.4% in mid-2018.

While in Cork they were up 7.9% year on year to a monthly average of €1,366.

Limerick rents climbed 10.5% over the past 12 months to €1,225 a month, just ahead of the average increase in Waterford of 10%, bringing average rents each month there to €1,013.

The highest rent inflation was recorded in Galway, where rents during the last quarter were 15.5% higher compared to the same period a year earlier.

Mr Lyons said the construction of up to 25,000 new rental units in the next few years would certainly help moderate the situation further.

However, he said that not only do policymakers need to target the inflation, but they also need to bring rents down to an affordable level.

Commenting on the report, the Irish Property Owners’ Association said the report shows the availability of rental property is disturbingly low.

“The private rental market is shrinking rather than expanding, Rent Pressure Zones are a blunt instrument and do not take into account the level of rent being charged or the indebtedness of a landlord, making it uneconomical for some landlords to continue renting property,” said Stephen Faughnan IPOA Chairman.

“The State needs to protect the existing supply of accommodation as well as incentivise further investment in the sector.”

Minister for Housing, Planning and Local Government, Eoghan Murphy, said rent pressures and the insecurity this is causing for people is very much a priority for the government because rents are still too high.

“It’s worth pointing out that the period covered in this report was before the significant changes introduced in the Rent Reform Bill earlier this year and passed in June,” he said.

“These reforms strengthen rent pressure zones considerably, remove a number of opt-outs, and give new legal powers and resources to the RTB to enforce rent controls.”

“Separately to this we are seeing a continued increase in purpose built student accommodation, which is positive for students, but also in terms of freeing up houses and apartments in other parts of the rental sector.”

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Stock markets higher on hopes for stimulus, trade progress

Stock markets higher on hopes for stimulus, trade progress

European shares are up for the third straight session, building on a recovery since late last week. Shares in Asia also rose in overnight trade.

Global stocks rallied at the start of the trading week on rising optimism about stimulus measures in China and Germany as investors welcomed more conciliatory signs in the long-running US-China trade war.

Germany’s central bank, the Bundesbank, warned that Europe’s biggest economy could enter a recession in the third quarter, a statement that further fueled expectations that a stimulus program would be coming.

Market watchers also expect further stimulus measures by China to boost growth.

They’re confident too that Federal Reserve Chair Jerome Powell will communicate dovish direction at a big central bank gathering at the end of the week in Jackson Hole, Wyoming.

Analysts also cited the Trump administration’s decision to delay by 90 days a ban on US companies doing business with Huawei.

The move is seen as a conciliatory step in the running US-China trade fight and coming on the heels of statements from US President Donald Trump and other top administration officials emphasizing efforts to revive talks with Beijing.

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Threshold, USI call on Govt for scheme to protect rental deposits

Threshold, USI call on Govt for scheme to protect rental deposits

The Union of Students in Ireland and national housing charity Threshold have called on the Government to immediately implement a Deposit Protection Scheme (DPS) in order to safeguard rental deposits.

Both organisations say that such a scheme is needed to protect tenants in the private rented sector from scams.

According to Aideen Hayden, Chairperson of Threshold, the scheme was initially promised in the 2011 Programme for Government and successive Ministers for Housing have agreed to its introduction.

She called on the Government to establish a legal definition of rental deposits; to limit rental deposits to the value of one month’s rent and to implement the DPS which, she says, would see deposits lodged with an independent third party such as the Residential Tenancies Board.

The RTB’s annual report last year showed that in four out of five disputes the deposit was either fully or partially awarded to the tenant.

“A Deposit Protection Scheme, in which deposits would be guarded by an independent third party, would inevitably lead to less of these kinds of disputes,” Ms Hayden said.

Similar schemes are in place in Northern Ireland, England, Wales, Scotland, New Zealand and Australia.

Tenants’ rental deposits are lodged with an independent third party and returned to the tenant directly by this third party.

It is guaranteed that the deposit will be returned to the tenant as long as they have met the terms of their tenancy agreement which means the deposit will be safe even in exceptional circumstances like when a landlord or letting agent goes out of business.

Average monthly rents hit record level for 13th quarter in a row – report

Ms Hayden said: “We ask the Government to honour its commitment to re-examining the laws around rental deposits, which urgently need to be strengthened in order to increase protection for tenants in the private rented sector.

“There are vulnerable people in tenancies all over the country who are on the margins of homelessness and simply cannot afford to lose their deposits.”

Despite passing legislation to introduce a deposit initiative in 2015, the Government has yet to initiate the scheme.

Meanwhile, USI President Lorna Fitzpatrick has said that many third-level students are relying on the private rental sector for a place to live while attending college, due to a shortage of student accommodation.

“These students are already struggling to afford their college fees and rent, particularly those reliant on SUSI maintenance grants, and they are a group that is especially vulnerable to fraud and scams,” she said.

“A Deposit Protection Scheme would minimise their exposure to rental fraud and would also be of benefit to international students who may have to return to their home country without securing a return of their deposit.”

A spokesperson for Minister for Housing Eoghan Murphy said he does not oppose setting up such a scheme but it cannot impose an extra charge on tenants or landlords, and so must be self-financing.

The spokesperson said there had been significant changes to the rental market since the 2015 scheme was first envisaged.

“The draft scheme was originally intended to be financed by the interest payable on deposits lodged; this is no longer viable, given current financial market conditions.

“Furthermore, it is noteworthy that disputes relating to deposits are no longer the most common dispute type referred to the RTB,” he said.

Threshold said the introduction of a deposit initiative would further reduce the number of disputes referred to the RTB and have a knock-on saving to the State.

The Property Services Regulatory Authority also warned students and parents against bogus letting agents and fraudulent scams.

CEO Maeve Hogan said: “Our advice to potential students – and their mothers and fathers and guardians to help their offspring off to college on a positive note – is to make sure that they use a licensed letting agent and that’s critical.

She said each letting agent is required to carry an identity licence card and urged students or their parents to see that card.

In relation to scams, Ms Hogan said they get very little complaints but are aware anecdotally of people who are embarrassed after getting caught out.

“If rent is too good to be true, it possibly is too good to be true.”

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New guidelines on mobile and broadband advertising

New guidelines on mobile and broadband advertising

Telecoms operators should not mislead customers by exaggerating the availability, coverage and speed of mobile and broadband services, according to new guidelines.

The new measures around the advertising of mobile phone and broadband services are being introduced by the Advertising Standards Authority for Ireland and come into effect from 1 September.

Included in the rules are a requirement to give greater detail on the availability of a product, particularly in relation to geographical location.

Companies will also have to clearly state when their broadband connection is only partially fibre-based, as opposed to full-fibre networks which are now available in some places.

Meanwhile, the authority is reviewing the use of the word “unlimited” where data limits do exist, and consumers end up paying so called ‘fair usage charges’.

The ASAI says the guidelines will complement its existing code in ensuring that certain marketing terms used by telecommunications operators convey clear meanings that are not misleading to consumers.

“Marketing terms, by their design, are there to attract consumers to buy certain products and are an essential part of business development in the telecoms industry. However, there is the potential to mislead when marketing terms are used incorrectly,” Orla Twomey, Chief Executive of the ASAI said.

“To ensure that the Code will remain, at all times, credible and relevant, the ASAI regularly reviews and appraises the Code, taking account of evolving commercial and societal trends.”

Fibre network operator Siro has welcomed the changes and said it will help remove consumer confusion around products that are advertised as being fibre-based.

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Banks claim that tracker scandal cases fall outside of time limit

Banks claim that tracker scandal cases fall outside of time limit

Hundreds of homeowners who believe they were caught up in the tracker mortgage scandal may have left it too late to get compensation, if the banks involved get their way.

According to RTÉ, Financial Services Ombudsman Ger Deering has raised concerns that some of the banks involved in the tracker mortgage scandal are now claiming that complaints fall outside the six-year legal window.

Mr Deering revealed that 103 of 1,141 complaints he received from mortgage holders are currently being assessed as to whether they fall outside the statutory time limit. He revealed there may be even more cases.

“Based on our current experience, I believe that as we progress additional complaints to investigation, there will be more complaints where the statutory time limits will be an issue,” he told RTÉ.

“My best estimate at this stage is that a time limit assessment will most likely be required on over 400 of those complaints.

“Legislation setting out the time limits is so complicated,” he said, adding that “this office in some instances spends at least as much time dealing with assessments relating to time limits as it would in conducting a full formal investigation of the merits of that same complaint”.

Mr Deering said some banks were “rigorously challenging the jurisdiction of this office to deal with complaints where there is a question in relation to whether the complaint was made outside the time limits”.

This is despite an agreement not to raise the issue of statutes of limitations as a defence as part of an agreement between institutions and the Central Bank.

Fianna Fáil TD Michael McGrath said: “Whatever banks are adopting this approach of invoking the time limit and trying to prevent those cases being dealt with, they really need to change.”

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