Higher energy costs, euro's weakness could spur consumer-level inflation

FRANKFURT - Data from Germany and Italy point to a slight slowdown in euro-zone inflation in October, but given recent renewed increases in energy costs and the continued weakness of the euro, consumer prices are poised to rise again in November.

German consumer prices rose an annu­al 2.3% in October, down from a six-year high of 2.5% the previous month, according to a preliminary government report Tues­day. In Italy, the annual rate was 2.5%, down from 2.6% in September.

Along with the inflation news came a report from France showing that con­sumers cut their spending in September, adding to worries that rising oil prices will dent domestic demand and damp growth in the euro zone. French house­holds reduced spending by 1.2%, surpris­ing forecasters, who had expected a rise after a 1.8% decline in August.

On a more positive note, industrial pro­duction for the euro zone expanded at a ro­bust annual pace of 6.3% in August, com­pared with 5.4% in July. This continued the rising trend over the past year. But economists warn the outlook for produc­tionis less ros y - a number of surveys show businesses are less optimistic about the future.

The slowdown in consumer-price infla­tion in October was the result of a brief dip in energy prices, which had surged in Sep­tember. But oil prices have begun to rise again, and the euro continues to trade close to all-time lows. A weak euro makes imports more expensive for consumers in Europe.

The European Central Bank is worried that workers will demand wage increases to compensate for higher prices sparked by surging fuel costs and a weak currency. This would lead to even higher inflation - and more interest-rate increases, bitter medicine for an economy that already has shown signs of slowing. The ECB has raised interest rates seven times in the past year to counter inflation risks.

On Tuesday, Germany's six leading economic institutes forecast German growth would slow next year to 2.7% after 3% this year. European central bankers and politicians, who have also been trying to talk up the euro, still callEurope’sprospects the best in a decade.

VOCABULARY:

consumer prices are poised to rise again – потребительские цены вот-вот вновь возрастут

Синонимы: be ready to rise; be about to rise; be set to rise; be prepared to rise

 

rising oil prices will dent domestic demand – рост цен на нефть приведет к сокращению внутреннего спроса

 

outlook - перспективы

 

TRANSLATION NOTES:

given recent renewed increases… - принимая во внимание (учитывая) недавнее новое увеличение… (См. часть Ш, раздел 3, § 6, п.6.4)

 

bitter medicine for an economy – «горькая» пилюля для экономики – факторы, отрицательно сказывающиеся на экономике

 

 

35. Rise In Orders Fails to Lift Economy Gloom

US durable goods orders rebounded last month, but the recovery was not enough to eclipse December’s sharp plunge and failed to convince financial markets that any sustained economic recovery was under way.

The Department of Commerce said durable goods orders rose 1.5% in January to $119.6bn, following a 5.1 % drop in December.

New orders for industrial machinery and equipment gained strongly, climbing 6.3% to $21bn.

Orders for transportation equipment rose by 1.2% to $29.4bn – helped especially by the aircraft sector, while electrical and electronic goods orders fell 4.9% to $17.4bn, after four consecutive months on the rise.

The rebound in durable goods orders exceeded private sector economists’ forecasts. However, in conjunction with the previous month’s marked decline it provided no conclusive evidence of an economic upturn.

Meanwhile, markets remained dazed by Tuesday’s dramatic plunge in consumer confidence.

The Conference Board, a New York-based business consultancy, announced then that its consumer confidence index had fallen for the fifth month in succession – to its lowest level.

If the volatile defence sector is excluded, durable goods orders showed a stronger gain in January, rising 3.6%

However, economists noted that the backlog of unfilled orders fell by 0.3% in January to a level 3.7% lower than a year ago.

This has undermined hopes that a recovery could be spurred by industrial orders in the pipeline.

 

TRANSLATION NOTES:

it provided no conclusive evidence… - это не давало никаких оснований…; ничто не говорило о…; ничто не подтверждало…

Местоимение no, являясь определением к существительному evidence переводится как никаких, ни одного. Двойное отрицание, которое не соответствует нормам английской грамматики, вполне допустимо в русском языке.

 

 

VOCABULARY CHECK

1) Все рынки подвержены циклическим колебаниям и проходят идентичные стадии развития.

2) Ситуация, когда падение курса акций принимает неуправляемый характер, называется «свободным падением».

3) Резкое падение цен на акции приводит к значительным убыткам биржевых торговцев и огромному числу банкротств.

4) «Мыльный пузырь» - это ситуация на бирже, когда цены на акции необоснованно завышены.

5) Коррекция – обратное движение цены финансового инструмента, товара, индекса (обычно в сторону понижения).

 

 

SECTION 4 MONEY MANAGEMENT

LEAD-IN

Money management provides for fiscalandmonetary policy. Fiscal policy is government policy with regard to public spending, taxation and borrowing. Monetary policy is government policy with regard to the level of interest rates and the growth of money supply. Central Banks can either loosen or tighten both policies.

The control over money supply is an important task of any central bank: the Federal Reserve System (FED) in the United States, the Bank of England in the United Kingdom, the Bank of Japan in Japan etc. This task means targeting rates of money growth within which the central bank feels the nation’s best interests are served.

In the United States, interest rates are decided by the Federal Reserve. The Fed meets eight times a year to set short-term interest rate targets. During these meetings, the CPI and PPIs are significant factors in the Fed's decision.

Interest rates directly affect the credit market (loans) because higher interest rates make borrowing more costly. By changing interest rates, the Fed tries to achieve maximum employment, stable prices, and a good level growth. As interest rates drop, consumer spending increases, and this in turn stimulates economic growth.

The Fed is not a single bank. It is a system made up of twelve Federal Reserve banks, which are governed by a board of directors. The Board is appointed by the president of the USA with the approval of the Senate. The FED has three main tools with which it can influence the money supply: (1) open market operations; (2) discount rate policy; (3) reserve requirements.

The biggest customer of the Federal Reserve is one of the largest spenders in the world - the U.S. government. Similar to how you have a checking account at your local bank, the U.S. Treasury has a checking account with the Federal Reserve. All revenue generated by taxes and all outgoing government payments are handled through this account. Included in this service, the Fed sells and redeems government securities such as savings bonds and Treasury bills, notes and bonds.

The United States government issues several different kinds of bonds through the Bureau of the Public Debt, an agency U.S. Department of the Treasury. Treasury debt securities are classified according to their maturities: Treasury Bills have maturities of one year or less; Treasury Notes have maturities of two to ten years; Treasury Bonds have maturities greater than ten years.

Treasury Bonds, Bills, and Notes are all issued in face values of $1,000, though there are different purchase minimums for each type of security.

Investors often shorten the word Treasury to just the letter "T" when referring to these bonds. Thus, Treasury Bonds are known as T-Bonds, Treasury Notes are called T-Notes, and Treasury Bills are T-Bills.

Treasury Bills (T-bills) are the most marketable money market security. Their popularity is mainly due to their simplicity. T-bills are basically a way for the U.S. government to raise money from the public. T-bills are issued with 3 month, 6 month, and 1 year maturities. The biggest reason that T-Bills are so popular is because they are one of the few money market instruments that are affordable to the individual investors. T-bills are usually issued in denominations of $1,000, $5,000, $10,000, $25,000, $50,000, $100,000, and $1 million. Other positives are that T-bills (and all treasuries) are considered to be the safest investments because the U.S. government backs them. In fact, they are considered risk-free.

 

VOCABULARY

fiscal policy	- налогово-бюджетная политика: политика правительства в области налогообложения и государственных расходов; является инструментом регулирования экономики
monetary policy	- денежно-кредитная политика: воздействие ЦБ на стоимость и предложение кредита для содействия экономическому росту, занятости, стабильности цен, и платежного баланса; контроль за денежным обращением и ликвидностью банковской системы
public spending government spending	- государственные расходы
interest rate	- процентная ставка, ставка процента: плата за кредит в процентном выражении к сумме кредита, как правило, в расчете на один год
money supply	- денежная масса [количество денег] в обращении; предложение денег: количество денег на определенную дату, которое имеется в наличии для сделок и инвестиций в экономике
loosen (ease)	- смягчать (зд. денежно-кредитную или бюджетно-налоговую политику)
tighten	- ужесточать (зд. денежно-кредитную или бюджетно-налоговую политику)
Federal Reserve System (FED)	Федеральная Резервная Система (ФРС): Центральный банк США
Bank of England	- Банк Англии: Центральный банк Великобритании
Bank of Japan	Банк Японии: Центральный банк Японии
targeting rates	- установление ориентиров, пределов (зд. показателей роста денежной массы)
open market operations	- операции на открытом рынке: деятельность центрального банка по приобретению и продаже государственных ценных бумаг с целью увеличения или сокращения денежной массы в обращении
discount rate	- учетная ставка, учетный процент: ставка, по которой центральный банк дает кредиты коммерческим банкам; инструмент денежно-кредитной политики, в значительной мере определяющий общий уровень процентных ставок
reserve requirements	- резервные требования: доля пассивов, которую коммерческие банки согласно правилам центрального банка, должны держать на беспроцентном счете в центральном банке
checking account	- текущий (чековый) счет: предполагает определенный минимум вклада при открытии счета, оплату услуг банка по определенному тарифу; по такому счету обычно не выплачиваются проценты; его удобство - в возможности получать на счет регулярные суммы и расплачиваться за товары и услуги личными чеками
U.S. Treasury Department of the Treasury (U. S. Department of the Treasury)	- Министерство финансов США. Возглавляется министром финансов (Secretary of the Treasury). В состав Министерства входят Таможенная служба США (Customs Service), Налоговая служба США (Internal Revenue Service) и другие подразделения.
treasuries	- казначейские ценные бумаги
Treasury bill (T-bill)	- казначейский вексель: дисконтный финансовые векселя правительства, используемые для краткосрочных (до года) заимствований и регулирования ликвидности денежного рынка; широко используются ФРС для операций на открытом рынке
Treasury bonds (T-bonds)	-казначейские облигации (США): долгосрочные облигации со сроками более 10 лет и минимальным номиналом в 1 тыс. долл.
Treasury notes (T-note)	- cреднесрочные свободно обращающиеся казначейские облигации со сроками погашения 2 - 10 лет и номиналами от 1 тыс. до 1 млн долларов и выше
maturity	- срок платежа (по векселю), срок погашения (облигации)
denomination	- номинальная стоимость ценной бумаги, банкноты, монеты

COMPREHENSION QUESTIONS:

1) Why are fiscal policy and monetary policy so important?

2) Who exercises control over money supply in the US and the UK?

3) What do interest rates directly affect?

4) What kinds of bonds does the US government issue?

5) What bills are the most marketable money market securities?

 

VOCABULARY PRACTICE

Monetary policy is typically implemented by a central bank, while fiscal policy decisions are set by the national government. However, both monetary and fiscal policy may be used to influence the performance of the economy in the short run.

In general, a stimulative monetary policy is expected to improve the economy's rate of growth of output (measured by Gross Domestic Product or GDP) in the quarters ahead; tight or restrictive monetary policy is designed to slow the economy in the future to offset inflationary pressures.

Likewise, stimulative fiscal policies, tax cuts, and spending increases are normally expected to stimulate economic growth in the short run, while tax increases and spending cuts tend to slow the rate of future economic expansion.

The extent and choice of any additional interest rate hike which could be necessary will depend on whether future economic data show more signs of increasing inflation risk.

Having raised the overnight lending rate from 1% to 5.25% the Fed decided to take a pause, while the world’s other largest central banks (ECB, the Bank of Japan and the Bank of England) quite recently embarked upon a rate increase campaign.

 

TEXTS TO TRANSLATE:

36. Tightening Has Begun To Take Hold

After experiencing a lift to their economy from the Summer Olympics, Australians should prepare for less than a gold-medal performance in coming months.

The economy is slowing around the edges, although not to any worrisome degree. Consumers are cooling off, and housing remains weak compared with a year ago. The economy's biggest engine is exports, and that should continue into the next year. But after real gross do­mestic product soared at a 4.7% average annual rate for the past three years, growth is likely to slow to 4% for the year ending June.

That at least was the word from Reserve Bank of Aus­tralia Governor Ian Macfarlane when he testified before Parliament on Nov. 30. He said domestic demand would have a "substantial slow­down," growing by about 3% instead of the current 6% pace. Capital spending alone is expected to grow about 4%, after some weakness in mid-2000. But a weak Aussie dollar would bolster exports.

A softer economy worries Australia's executives. Business confidence plunged in the fourth quarter. And the profit outlook is the lowest in 10 years.

With signs of a slowdown increasing, RBA policy-makers kept rates unchanged at its Dec. 5 meeting. The RBA had raised its overnight cash rate by a total of 1.5 percentage points, but now policy bias is in neutral.

The RBA's tightening moves were aimed at keeping inflation in check. Although a 25% jump in oil prices has boosted total consumer prices, inflation was rising even before fuel costs spiked. In the third quarter, consumer prices were up 6.1% from a year ago, but the rate was skewed by the introduction of a 10% sales tax.

Macfarlane said the RBA expects inflation to settle down to 3%. That rate would be at the up­per limit of the RBA's inflation target. The high inflation rate is partly the result of the weak Aussie dollar, which will lift import prices. Indeed, the RBA could face a tough challenge next year. It may have to strike a balance between the weak Aussie's benefits to ex­porters and its cost in the form of higher inflation.

 

VOCABULARY:

keep inflation in check – сдерживать, держать под контролем инфляцию

Синонимы: tame inflation; restrict inflation; check inflation; contain inflation; control inflation; curb inflation.

 

strike a balance – найти «золотую середину», уметь правильно расставить силы

 

 

37. From T-shirts to T-bonds