An initiative has been taken to withdraw the upper ceiling on investment in wage earners development bonds for expatriate Bangladeshis. With this, the authorities aim to lure expatriate professionals and businesses to invest at home, clear ways for foreign investments, and increase inflow of remittances.
The expatriate welfare and overseas employment ministry issued a letter to Abdur Rahman, Khan, secretary of the internal resources division (IRD), on Wednesday, asking him to take action in this regard.
The wage earners development bond was introduced in 1981, with a maturity period of five years.
Asked about the issue, the IRD secretary declined to make any comment and claimed that he has not yet received any letter over the issue
According to the Wage Earners Development Bond Rules, 1981 (amended on 23 May, 2015), there was scope to invest any amount in the bond. However, during the Covid-19 outbreak, the IRD issued a notification on 3 December, 2020, imposing an investment limit of Tk 10 million (or its equivalent in foreign currency) on wage earners development bonds, US dollar premium bonds, and US dollar investment bonds.
The cap on US dollar premium bonds and US dollar investment bonds was lifted later on 4 April, 2022, allowing unlimited investments.
However, the investment limit for wage earners development bonds remains unchanged, with no provision for auto reinvestment. Hence, expatriates are being forced to withdraw their investments.
In its letter, the expatriate welfare ministry told the IRD secretary that the upper ceiling on investment should be abolished or relaxed to boost remittance inflows and attract more investment from expatriates.
On Tuesday, expatriate welfare and overseas employment adviser Asif Nazrul told the media that he proposed to cancel the ceiling of Tk 10 million on the purchase of wage earners development bonds.
“It needs the assistance of Bangladesh Bank, and I hope Bangladesh Bank will facilitate this,” he said, expressing optimism for more remittance in the coming days.
These bonds can be purchased from offshore and authorised dealer (AD) branches of Bangladesh Bank, exchange houses, exchange companies, and scheduled banks. Its profits are free from the tax net. Also, there are scopes to take loans against the bonds, and there is no requirement to have a foreign currency (FC) account to buy these bonds.
Foreign exchange earners themselves can invest in these bonds, or invest in the name of their nominee. Government employees who serve in Bangladesh missions abroad are also eligible to invest in Wage Earners Development Bonds.
It was learned that the IRD will present a summary of the proposal to finance and commerce adviser Salehuddin Ahmed for approval next week. Once it gets approval, the IRD will issue a notification, while the central bank and the national savings directorate will implement.
When asked about the matter at the secretariat on Thursday, adviser Salehuddin Ahmed told that the proposal should be submitted first before any further comments can be made.
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Bangladesh has registered a minimal decline in inflation as it recorded an overall inflation of 9.72 per cent in June, slightly down from 9.89 per cent in May.
Food inflation also maintained a similar trend as it declined to 10.42 per cent in June, from 10.76 per cent in May, according to the latest inflation updates of the Bangladesh Bureau of Statistics (BBS).
A 9.72 per cent inflation means consumers had to spend Tk 109.72 to purchase a product this June, which used to cost them Tk 100 in June last year.
It indicates the cost of living has increased proportionately, and subsequent hardships of the people, particularly the low and limited income groups.
Non-food inflation also eased slightly to 9.15 per cent in June, from 9.19 per cent in May.
Bangladesh has been experiencing high inflation rates over the threshold of 9 per cent for the past two years. Efforts to keep it in check remained unsuccessful, except for slight fluctuations.
Economists believe that high inflation is now one of the major challenges for the economy.
According to experts, inflation is a form of tax that impacts people from all walks of life. When inflation outpaces income growth, the purchasing power of poor and middle-income families diminishes to a significant extent, making it tough for them to sustain their livelihoods.
Some experts even believe the actual inflation to be higher than the BBS estimation.
Meanwhile, the government has planned to bring down inflation to 6.5 per cent within the fiscal year 2024-25.
In his budget speech at the parliament last month, finance minister Abul Hassan Mahmood Ali said, “We are expecting that the inflation rate will come down to 6.5 per cent in the next fiscal year as an outcome of the policy strategies that we have adopted.”
He noted that the government adopted a series of contractionary monetary policies, aligning with global trends. The central bank has significantly increased interest rates, with the policy interest rate now at 8.5 per cent, the Standing Lending Facility (SLF) rate at 10 per cent, and the Standing Deposit Facility (SDF) rate at 7 per cent.
Besides, the Six Months Treasury Bill based Interest Rate Determination System (SMART) has been abolished and made a market-based system. Under the new system, loan demand and interest rates will be determined by credit supply and the relationships between bankers and customers.
These monetary measures are part of a broader strategy to curb inflation, which has been affecting the economy and the common people.
The government has also implemented supportive policies. Programmes like the Family Card and Open Market Sales (OMS) are being bolstered to mitigate the adverse effects of inflation on vulnerable populations.The government is optimistic that these combined policy strategies will reduce the inflation rate to 6.5 per cent in the current fiscal year.
]]>The prices of several essentials including onions, potatoes, eggs, garlic and ginger increased after the Eid-ul-Fitr while edible oil prices have been revised, meat and fish prices remain unchanged, and rice, lentils, flour and sugar continue to be sold at high prices.
The commerce ministry revised edible oil prices after a meeting with traders on Thursday afternoon. As per the meeting decision, the price of bottled soybean oil increased by Tk 4 litre to Tk 167 per 1-litre bottle and Tk 818 per 5-littre bottle while loose soybean oil by Tk 2 a litre to Tk 149 a litre. The price of palm oil was also fixed at Tk 135 a litre.
State minister for commerce Ahasanul Islam told journalists that prices of edible oil have been revised as the value added tax (VAT) reduction expired.
Meanwhile, visiting the kitchen markets in the capital’s Malibagh, Rampura and Karwan Bazar, it has been learned that prices of onion increased by Tk 5-10 a kg and garlic by Tk 10-20 a kg. Hali variety of onions was sold for Tk 60-70 a kg and local variety of garlic at Tk 130-170 a kg.
Trader Shafiqul Islam from Karwan Bazar told all kitchen markets are yet to open after Eid, and supply is low too, thus, prices rose slightly.
Prices of potatoes were on the rise before Eid and increased by Tk 5 a kg to Tk 50-55 a kg after Eid. Imported gingers were sold for a maximum of Tk 240 a kg – a Tk 10 rise per kg compared to the price before Eid.
Al Amin, a potato trader from Ramupra market, told “The wholesale price of potato increased by Tk 5 a kg after Eid, so, they raised retail price at a similar rate.”
Egg prices also rose by Tk 10 a dozen as brown eggs were sold for Tk 125-130 a dozen and white eggs by Tk 115-120 a dozen.Prices of meat and fish were largely unchanged. However, chicken prices increased by Tk 10 a kg at some places as broiler chicken was sold for Tk 230-240 a kg and Sonali chickens at Tk 340-350 a kg. Beef was still sold for Tk 800 kg.
]]>Interestingly, the top five garment-exporting countries experienced similar declines. China’s apparel exports to the United States fell by $5.44 billion, Vietnam’s by $4.06 billion, India’s by $1.52 billion, and Indonesia’s by $1.42 billion.
According to updated statistics from the Office of Textiles and Apparel (OTEXA) under the US Department of Commerce, US businesses imported $77.84 billion worth of clothing last year, down from $99.86 billion in the same period in 2022.
This marks a 22.05 per cent decrease in US apparel imports compared to the previous year.
The entrepreneurs of Bangladesh’s garment industry attribute the rapid increase in US inflation to the onset of the Russia-Ukraine war in 2022. Consequently, inflation in the United States surged to 9.1 per cent in June of that year. This spike in inflation prompted US shoppers to scale back on non-essential purchases, leading to a decline in exports for garment-exporting countries.
However, garment industry entrepreneurs note that inflation in the United States has since come under control, with the rate dropping to 3.1 per cent in January. Additionally, they report positive Christmas sales in December. As a result, they anticipate an uptick in the rate of purchase orders for the upcoming summer season.
In the outgoing year, China, the top apparel exporter to the US market, experienced a 24.98 per cent decrease in exports of Chinese-made garments to the US, amounting to $16.31 billion. Vietnam, the second top exporter, saw a 22.29 per cent decrease in exports, totaling $14.18 billion.
Bangladesh, the third top exporting country in this market, exported $7.29 billion worth of ready-made garments, marking a decrease of 24.98 per cent compared to the previous year. In the previous year, 17.5 per cent of Bangladesh’s total garment exports were destined for the United States.
Additionally, Bangladesh exported 2.26 billion square meters of cloth-made garments last year, representing a 27.94 per cent decrease compared to the previous year’s export of 3.13 billion square meters of textile equivalents.
Over a period of 10 years, Bangladesh’s garment exports to the US market have increased by 2.33 per cent. In 2012, the export amount was $4.18 billion, while in 2022, apparel exports to the US market rose to $9.72 billion. However, within a year, exports fell by one-fourth.
Sheikh HM Mostafiz, the managing director of Cute Dress Industries, informed that purchase orders from the United States are on the rise, along with an increase in orders from Canada and South America. Last year, the demand for ready-made garments decreased, leading to low purchase orders due to high stocks of goods in various US warehouses.
However, as stocks have diminished, purchase orders have begun to increase. Additionally, the demand for clothing is also rising.
Exports of ready-made garments to the European Union (EU) experienced modest growth of only one and a half per cent last year. According to EPB data, readymade garments worth $23.38 billion were exported to the EU last year.
Ashikur Rahman, former director of BGMEA, shared with, “There were good sales in the United States during Christmas. As a result, we expect purchase orders to increase from next April to May. At that time, next year’s summer purchase orders will come. The winter purchase order that came before that is not too bad.”
Despite the decrease in exports from various countries to the US market, there has been no significant change in market share. Last year, China, Vietnam, and Bangladesh accounted for 21, 18, and 9 per cent, respectively, of the US market in ready-made garment exports.
Fazlul Haque, former president of BKMEA, the association of knitwear industry owners, shared with, “Purchase orders are gradually coming in from the United States. It will take some time to gauge the pattern of purchase orders. We anticipate that the summer purchase orders will be satisfactory, even if the next winter purchase orders are not substantial.”
]]>The central bank set an interest cap equal to the policy interest rate or 8 per cent on the loans to the banks from ‘special bonds’. People concerned said Bangladesh Bank has deviated from the objective of its monetary policy.
The government is issuing bonds to address the debts incurred by the fertiliser and power sectors, with five banks already receiving bonds worth about Tk 50 billion. Now, the central bank has printed money and started lending to the banks.
Private IFIC Bank received Tk 4.59 billion and City Bank 19.85 billion with a 180-day deadline.
Bangladesh Bank, however, argues this move does not contradict the objectives of the monetary policy.
Mezbaul Haque, executive director and spokesperson of Bangladesh Bank, told that banks can get the money by depositing these special bonds.
He termed the process a part of regular treasury management.
The central bank spokesperson also said it takes a long time to provide money in an alternative way, and that affects more on inflation. But, this liquidity facility will not affect the inflation that much, he claimed.
The government opted to issue special bonds amid the currency crisis triggered by a fall in revenue collection, and private banks are the recipients of these bonds. The government reports outstanding dues of approximately Tk 260 billion from both the private sector and government agencies in the fertiliser and power sectors. Among these, the electricity subsidy constitutes Tk 140 billion, while outstanding amounts to Tk 120 billion in fertiliser.Ads by
In response to the financial crisis, Bangladesh Bank initially provided government funding by printing currencies. However, the central bank has since shifted away from this approach due to the escalating inflation. Consequently, the government has chosen to address its financial needs by issuing bonds.
Already, Islami Bank Bangladesh Ltd. received Tk 24 billion in bonds, Sonali Bank Tk 2.44 billion, IFIC Bank received Tk 4.59 billion in bonds to settle dues in the fertiliser sector while City Bank got Tk 19.85 billion and Pubali Bank 770 million in bonds to clear up debt in the power sector.
Bangladesh Bank moved to provide liquidity facilities to banks against the bonds after the government started providing the banks with special bonds.
The central bank’s Motijheel office supervises liquidity management. In a letter on 21 January, Bangladesh Bank’s Debt Management Department told the Motijheel office that, to settle the debts incurred by the fertiliser and power sectors, banks will receive a definite repo of 1, 3, 14, 28 or 180-day terms from Bangladesh Bank at the existing policy rate, taking the Bangladesh Government Special Purpose Treasury Bond, issued by the government, as collaterals.
In this case, money equal to the Bangladesh Government Special Purpose Treasury Bond will be used for repurchase agreements known as repo, which will continue until the government withdraws this bond.
For this reason, the Debt Management Department made several recommendations. These include making necessary arrangements in the electronic system of Bangladesh Bank to keep bonds as collaterals; adjusting money from banks’ current accounts by exempting the lien of the collateral bonds when its maturity is over, and depositing that money to the respective accounts of Bangladesh Bank.
It has also been advised to provide repo once again following the appeal from the banks after depositing the money coming from bond maturity to the respective accounts of the central bank. As a result, banks have borrowed money from the central bank over the past two days.
Bangladesh Bank issued guidelines to inject money into Islami Bank against bonds. However, banks can borrow at an interest rate of 8 per cent and lend to their clients at an interest rate of 11-12 per cent.
Both banks and the government benefit from this move as the banks’ liquidity crisis and the government’s debt eases. However, people concerned expressed doubt whether introducing loans against bonds by printing money would ease inflation.
Bangladesh Bank moved to further reduce the currency supply to the markets in the monetary policy of the second half of the current fiscal in a bid to rein in the rising inflation.
The central bank also increased the policy interest rate. As a result, the government and private banks are borrowing currency from the central bank at a higher interest rate than before. Besides, private sector credits are reined in too.
Zahid Hussain, former lead economist of the World Bank’s Dhaka office, told, “This way or that the government has been taking money from the Bangladesh Bank. Maybe it would not have been a decent way for now to print the money directly, so this is being done in a slightly different way. These liabilities will increase slowly, and maybe they will print money directly to settle the debts in the coming days. As a result, there will be no initiative to reduce subsidies on power and fertiliser, which would result in creating inflation pressure. And all these contradict the objective of the monetary policy.”
]]>However, they had to pay an additional Tk 13 per dollar through pay order. In total, they paid Tk 5.2 million Tk through pay order. As such, the business firm had to pay Tk 123 per dollar. Although the official price of USD is Tk 110 in all banks, the actual price is much higher than that.
Most of the import agencies are experiencing the same predicament. While some influential business persons are buying dollars at a comparatively low price from the bank, the common people have to purchase dollars at a price higher than the declared rate to clear the import debt
In the same way, when the common traders are struggling to open letter of credit (LC), big and influential persons are getting benefits from banks.
The importers are purchasing dollars at a rate of Tk 12 to Tk 13 higher than the official rate at the same time when the two organisations of bankers have lowered the price of dollars in phases. Although the rate of dollars fell in pen and paper as a result of their declaration, dollars are not available at such a price in reality.
spoke to several business persons in the last few days to understand the actual situation regarding the supply and demand of dollars.
Speaking on condition of anonymity, they said they are facing more hurdles for opening LCs than any time before. Besides, dollars are not available at the declared price. So they have no other way than buying dollars at a higher price. The additional price is being paid in different ways.
Meanwhile, additional dollars have to be added to the reserve within this month as per the condition of the International Monetary Fund (IMF). According to that condition imposed by the IMF, the neat reserve should stand at USD 17.78 billion at least by the end of this month. The current neat reserve is a little higher than 16 billion.
In this situation, the Bangladesh Bank (BB) has curtailed the supply of dollars in the market. In addition, the central bank has reduced the size of the export development fund to USD 3.1 billion from USD 7 billion. According to reliable sources in the central bank, the BB is planning to reach the desired reserve by purchasing dollars from commercial banks on the last day of December.
Asked about how much of the dollar crisis in the market has been sorted out, Mutual Trust Bank managing director Syed Mahbubur Rahman told that the crisis is not over yet. However, he refused to speak any further regarding this.
However, the chief executive of a leading bank in the country told on condition of anonymity that those who have power are purchasing dollars at a higher price ignoring the instructions of the central bank. These people are also paying higher to clear the import bills. The influential banks are doing more business now.
There are cases where the importers had to pay as much as Tk 128 per dollar. Sources in the banking sector say some shariah-based banks are directly taking this additional money while others are collecting it through pay order.has seen the documents of banks taking additional prices for dollars.
Speaking to, Sadid Jamil, managing director of Metal, a leading importer and distributor of agricultural equipment in the country, said, “It’s the harvesting season and the demand for tractors and harvesters is high at the moment. However, we cannot open LCs as per the demands due to the dollar crisis. Even if we succeed in opening a LC, we have to pay an additional Tk 12 to Tk 13 per dollar. However, the banks are not opening any LC at all this month.”
Apart from the importers, the exporters are also under pressure as the banks are selling the dollars from their export income to others. Later, the exporters had to purchase dollars at a higher price to import the raw materials.
Speaking regarding this to Bangladesh Knitwear Manufacturers and Exporters Association executive president Mohammad Hatem said, “The more power you have, the lower the price dollars for you. The banks are taking from Tk 115 to Tk 128 per dollar in case of import. The banks are selling the dollars from our export income to others. And later, it is us who has to pay an extra price for the dollars that we brought. The banks have created syndicates in the dollar market. We will not bear any responsibility for the damage done to the exporting agencies as a result of these syndicates.
The banks are not following the dollar rate fixed by the two organisations of the bankers. Economists have long been saying to leave the dollar exchange rate on the market. The IMF delegation has also stressed on adopting a flexible dollar exchange rate. However, the central banks are interested in leaving the dollar exchange rate on the market.
Policy Research Institute’s executive director Ahsan H Mansur told, “The difference between the official and market price of dollars is further intensifying the crisis. If that difference was between one or two taka, then it wouldn’t matter. The problem is the gap between the official and market price of dollars is too much now. It has an adverse impact at consumer level. The official price should be close to the market price. Dollars should be sold from the reserve at the market price.”
Forex reserves rose a little upon getting the installments of the loans from the IMF and Asian Development Bank (ADB). Bangladesh received the second loan installment of USD 689.8 from the IMF and USD 400 million of the ADB loan. After that the gross reserve rose to USD 26.05 billion. However, Bangladesh’s reserve now stands at USD 20.68 billion as per BPM-6 calculating method of the IMF. The net reserve at the moment is little above USD 16 billion.
The central bank officials say more money from foreign loans will be added to the reserves in the last few days of the month. In addition, the BB will purchase dollars from the commercial banks to increase the reserve. The central bank will try utmost to meet the goal set by the IMF. The BB earlier failed to fulfill the IMF condition of maintaining the reserve.
The country received a total of Tk 1.57 billion in remittance in the first 22 days this month. Besides, LCs of a total of USD 3.20 billion have opened in the first 18 days of the month.
Speaking to, treasury heads of three banks said some banks have stopped buying remittance after the government became strict about purchasing expatriate income at higher prices. Although a little portion of the total remittance received by the country was purchased at the official rate, some of the shariah-based and conventional banks are purchasing remittance at a higher price.
Bangladesh has gained the confidence of the foreign banks’ after receiving the second installment of the IMF loan. It will help get a high ceiling of loans from these banks.
Speaking regarding fulfilling the IMF condition of maintaining the reserve, Policy Research Institute executive director Ahsan H Mansur told, “We must meet the condition at any cost. We have several options to meet the condition, including foreign loans or purchasing dollars from commercial banks. The international agency will take it positively if the IMF stands with Bangladesh, which would help us end the crisis.”
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Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), made the disclosure on Thursday and clarified that the clause erroneously led to speculations regarding sanctions against Bangladesh.
The particular LC, initially issued by Standard Chartered Bank Dubai, contained a clause saying, “We will not process transactions involving any country, region, or party sanctioned by the UN, US, EU, UK. We are not liable for any delay, non-performance or/ disclosure of information for Sanctions Reasons.”
According to Faruque Hassan, the LC was transferred by the ZXY International against a master LC issued by the French buyer named ‘KARIBAN’.
As the clause and subsequent media reports triggered confusions among the business community as well as the commoners, the BGMEA sought clarification from ZXY in this regard.
“We received a formal clarification from ZXY, as well as a clarification statement by the original buyer KARIBAN,” he said.
It is clear from their response that KARIBAN did not insert the clause in its master LC in favor of ZXY International. Instead, Standard Chartered Bank Dubai had been incorporating this clause in all LCs since 30 November, 2022 and it does not indicate any sanction against Bangladesh.
The BGMEA president said, “ZXY International confirmed that they will remove the clause in the LC, and if required they will issue a fresh LC without that clause.”
The sanction-clause drew the attention of exporters during a meeting in Chattogram on Tuesday.
Asked about the issue, the BGMEA chief told on Wednesday that a buyer issued an LC with a new condition that it will not receive products or complete payment in the case of a sanction against Bangladesh.
He also clarified that it will surely make the businesses worried. “However, we don’t anticipate any negative impact on the businesses.”In a separate message on Thursday evening, he confirmed that the bank dropped the clause from the concerned LC.
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Prices of staples and spices like onions, garlic and ginger did not change significantly over the past week. However, prices of winter vegetables remain affordable to customers.
According to Thursday’s price list of state-owned Trading Corporation of Bangladesh (TCB), retail price of coarse variety of rice was sold at Tk 50-52 a kg, semi-fine rice at Tk 55-58 a kg and fine rice at Tk 62-75 a kg.
However, fine rice was sold at up to Tk 95 a kg in the local market.
Rice prices saw no significant change over the past week. According to TCB, the price of coarse variety of rice rose by 2 per cent per kg, semi-fine rice by 6 per cent a kg and price of fine rice by 4 per cent a kg over the past month.
Bangladesh Auto Major Husking and Mill Owners’ Association general secretary HR Khan told that rice production is good, and new rice have started arriving in the market. So, rice price is unlikely to rise further, he added.
Like rice, the price of lentils is still higher. According to TCB, prices of large, medium and finer lentils were at Tk 105-130. Lentil price remained unchanged at local markets for a week, while, according to TCB, price saw no change over the past month.
Prices of flour and coarse flour, according to TCB, are on the rise. Prices of packaged coarse flour increased by 4 per cent to Tk 55-65 a kg over the past week while prices of packaged flour rose by 4 per cent to Tk 70-75 a kg. Price of bottle soybean oil also saw a 1 per cent rise in the past week.
Commodity marketing company TK Group director Shafiul Aathar told that price of commodities is unlikely to increase further, but rising dollar price causes a rise in import costs. As a result, there is no sign of dropping prices now, he added.
Sugar market also turned volatile, with loose and packet sugar being sold at Tk 140-150 a kg. There is apparently no supply of sugar in the market. The government fixed retail price of loose sugar at Tk 130 a kg and packet sugar at Tk 135 a kg, but traders did not follow it.
Commerce minister Tipu MUnshi said on Wednesday there is no option to decrease sugar price due to rise in dollar price.
Visiting the kitchen markets in the capital’s New Market, Shantinagar, Shajahanpur and Malibagh on Thursday, it was seen that price of mutton, fishes, eggs decreased slightly following fall in price of beef to Tk 600 a kg. White and brown eggs were being sold at Tk 120 or less per dozen, broiler chicken at Tk 120 a kg and sonali chicken at Tk 280-290 a kg.
Prices of farm-produced fish decrease due to good supply. Medium-sized farm-produced pangas was sold at Tk 180-200 a kg, farm-produced tilapia at Tk 200-220 a kg while rui fish was sold at Tk 300-400 a kg.
Prices of onion, garlic and ginger remained more or less unchanged. Local varieties and imported onions were being sold at Tk 100-120 a kg. Meanwhile, locally produced onions started arriving in the market.
A customer, Selim Uddin told at Shajahanpur kitchen market that prices of everything is high now, but it feels better when prices of some products drop slightly. However, prices of red meat and fishes did not fall that much, he observed.
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One mover was gold, which climbed to $2,009 an ounce XAU= and briefly hit a six-month top of $2,017.82. GOL/
The approach of month end could also cause some caution given the hefty gains investors are sitting on. Japan’s Nikkei .N225 eased 0.3 per cent, but it still up 8.6 per cent so far in November.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS also dipped 0.3 per cent, giving it a monthly gain of 6.4 per cent.
Chinese blue chips .CSI300 lost another 1.1 per cent, and have missed out on all the global cheer with the market down 2 per cent in November so far.
China’s central banks announced it would encourage financial institutions to support private companies, but was short on detail.EUROSTOXX 50 futures STXEc1 eased 0.2 per cent, while FTSE futures FFIc1 fell 0.1 per cent.
S&P 500 futures ESc1 eased 0.2 per cent, and Nasdaq futures NQc1 lost 0.4 per cent. The S&P 500 cash index has rallied for four weeks straight and up 8.7 per cent on the month so far, which would be its best performance since mid-2022.
The Federal Reserve’s favoured measure of inflation is due on Thursday and is expected to slow to its lowest since mid-2021, reinforcing market wagers that the next move in rates will be down.
Fed Chair Jerome Powell will have a chance to push back against the doves at a Fireside Chat on Friday, and there are at least seven other Fed speakers on the docket this week.
“A view we hold strongly is that central banks are unlikely to deliver easing in the first half of 2024 absent a threat to the expansion or financial stability,” agues Bruce Kasman, head of global economics at JPMorgan.
“Indeed, this message of patience is likely to be notable in upcoming DM policy communications in response to recent financial market developments.”
European Central Bank President Christine Lagarde has also sounded in no hurry to ease and will have another opportunity to ram home the message at the EU parliament later on Monday.
Data on EU consumer prices for November is due Thursday and expected to show a cooling in both the headline and core rates, which would support market pricing for cuts.
Markets priced in 80 basis points of US easing next year, and around 82 basis points for the ECB. FEDWATCH, 0#ECBWATCH
The chance of an easing in borrowing costs has generated a big rally in bonds, with yields on 10-year Treasuries US10YT=RR down 36 basis points so far this month at 4.50 per cent.
That in turn has been a drag on the dollar which has lost 3 per cent on a basket of major counterparts this month =USD.
The euro was up at $1.0940 EUR=EBS on Monday, not far from its recent four-month high of $1.0965, while the dollar softened to 149.23 yen JPY=EBS.
A run of firmer official fixes for the Chinese yuan has also weighed on the dollar against Asian currencies and the Australian dollar AUD=D3.
The oil market faces a tense few days ahead of a meeting of OPEC+ on Nov. 30, a meting that had originally been slated for Sunday but was postponed as producers struggled to find a unanimous position. O/R
Reports suggest African oil producers are seeking higher caps for 2024, while Saudi Arabia may extend its additional 1 million bpd voluntary production cut, which is due to expire at the end of December.
“Saudi Arabia and OPEC+ faces a challenge in convincing markets that it can help keep oil markets tight in 2024,” wrote commodity analysts at CBA in a note.
“OPEC+ will have to show significant supply discipline, or at least jawbone such ability, to alleviate market worries of a deep surplus in oil markets next year.”
The uncertainty erased early gains and Brent LCOc1 edged down 31 cents to $80.27 a barrel, while U.S. crude CLc1 lost 31 cents to $75.23 per barrel.
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Bangladesh is the world’s biggest garments exporter after China. This week, after deadly protests between police and factory workers, the government mandated an almost 60 per cent raise to the minimum monthly wage to 12,500 taka ($113) from December, the first increase in five years.
Factory owners had said the wage hike, which comes ahead of a January general election, would eat into their profit margins by increasing costs 5-6 per cent. Labour accounts for 10-13 per cent of total manufacturing costs, industry estimates show.
Asked if they would raise purchase prices by the 5-6 per cent that costs will rise, Stephen Lamar, chief executive of the American Apparel & Footwear Association (AAFA), told Reuters: “Absolutely”.
“As we and our members have reiterated several times now, we are committed to responsible purchasing practices to support the wage increases,” Lamar said in an email.
“We also renew our pleas for the adoption of an annual minimum wage review mechanism so that Bangladeshi workers are not disadvantaged by changing macroeconomic conditions.”
Low wages have helped Bangladesh build its garment industry, which employs about 4 million people. Readymade garments are a mainstay of the economy, accounting for almost 16 per cent of GDP.
Even after the increase in minimum wage, which some workers said was too little, Bangladesh lags other regional garment manufacturing hubs such as Vietnam, where the average monthly wage is $275, and Cambodia, where it is $250, data from the International Labour Organization shows.
Last month, several members of the AAFA including Abercrombie & Fitch and Lululemon, told Bangladesh Prime Minister Sheikh Hasina they wanted workers wages to rise, and to take into account inflation, which is currently at 9 per cent. Lamar also wrote to Hasina in July.
Retailers in the United States and Europe are the main buyers of Bangladesh-made clothes. Like most consumer goods retailers, fashion companies are grappling with high inventories and a slowing global economy, where shoppers in key markets are buying less as they feel the pinch.
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