10/03/2016 World Business Report


10/03/2016

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Those are the latest headlines from BBC World News.

:00:00.:00:00.

More stimulus expected from the European Central Bank,

:00:00.:00:24.

Why Ireland's the latest European economy to face post-election

:00:25.:00:29.

Also in the programme: Food prices surge in China but inflation is

:00:30.:00:50.

Our team in Singapore will tell you all you need to know.

:00:51.:00:58.

We start in Frankfurt, where in a few hours time the European

:00:59.:01:01.

Central Bank and this man, its boss Mario Draghi, are widely expected to

:01:02.:01:04.

beef up their already massive stimulus programme in a desperate

:01:05.:01:07.

The big question - will it do any good?

:01:08.:01:14.

Let's take a look at the situation as it stands.

:01:15.:01:16.

In December, the ECB cut its main interest rate deeper into

:01:17.:01:19.

Effectively banks have to pay to deposit their money with

:01:20.:01:23.

the central bank, the idea is it will push them to

:01:24.:01:26.

We are expecting that rate to be cut further today.

:01:27.:01:33.

Over the past year the ECB has also spent more than 700 billion euros,

:01:34.:01:37.

that's ?60 billion a month, buying government bonds and assets, to push

:01:38.:01:40.

Last month, prices actually fell, bringing deflation to the eurozone.

:01:41.:02:00.

And in the last three months of 2015, the region's economy

:02:01.:02:02.

Many experts doubt whether further stimulus will work.

:02:03.:02:12.

That includes the man who's known as the father of the euro, former

:02:13.:02:15.

I stain from criticising my former institution, but I think the limits

:02:16.:02:36.

of this policy are clearly seen. Take the extreme case of Japan,

:02:37.:02:40.

another 100 billion didn't make any difference. It is hard to expect

:02:41.:02:44.

that. So I think whatever the benefit of quantitive easing at the

:02:45.:02:49.

beginning might have been, additional benefits are, if any,

:02:50.:02:55.

minimal and the negative side-effects for this financial

:02:56.:02:57.

system are increasing. So how would action by the ECB

:02:58.:03:00.

position it compared with the other major central banks

:03:01.:03:03.

around the world? It's a question that could have a

:03:04.:03:07.

big impact on the currency markets. It is not done long ago we were

:03:08.:03:26.

wondering which month in 2016 with the bank of -- Bank of England here

:03:27.:03:33.

raise interest rates. It was put monetary policy was moving in the

:03:34.:03:38.

other direction the ECB. No longer. Now it is thought the bank will cut

:03:39.:03:41.

rates from a level which was already very low. So why the turnaround?

:03:42.:03:46.

After all, Britain has stronger economic growth and much lower

:03:47.:03:51.

unemployment than the eurozone. But it does share one problem with its

:03:52.:03:54.

neighbours, persistently very low inflation. That's got the ECB

:03:55.:03:59.

scratching its head and taking us into the weird world of negative

:04:00.:04:03.

interest rates. The Bank of England hasn't got there yet, but maybe it

:04:04.:04:14.

is getting closer. Here in Asia the bank of Japan's controversial move

:04:15.:04:18.

to push interest rates below zero caught everyone offguard. The

:04:19.:04:22.

Japanese yen was getting too strong for the bank's liking and hurting

:04:23.:04:26.

exports and Japanese companies were holding onto massive piles of cash.

:04:27.:04:31.

So to force the yen low and get company spending again, the bank

:04:32.:04:33.

pushed rates into negative territory. At that in turn had a

:04:34.:04:39.

negative impact on people in Japan. Savers now have to pay the bank to

:04:40.:04:44.

hold onto their cash. That raises the question, what does the central

:04:45.:04:48.

bank do next? Japan is still is -- still struggling and it looks like

:04:49.:04:51.

the bank of Japan has limited options to get the economy off the

:04:52.:04:52.

ground. Last year and America's central bank

:04:53.:05:08.

went back into positive interest rates. A quarter of a percentage

:05:09.:05:12.

point rise after seven years near zero isn't much. But the assumption

:05:13.:05:18.

is that American rates are now on course to rise, albeit slowly. But

:05:19.:05:23.

this depends on the continued growth of the world's largest economy. One

:05:24.:05:30.

of the headwinds it faces is the strength of the US dollar, which

:05:31.:05:34.

makes American exports more expensive abroad. If the decision to

:05:35.:05:39.

buy other central banks, like the ECB, strengthen the dollar further,

:05:40.:05:44.

who knows what the knock-on effects will be. -- decision by other.

:05:45.:05:48.

That was our team based all around the world. As soon as we get any

:05:49.:05:56.

news later this morning we will update you hear on BBC World News.

:05:57.:06:00.

Also there will be more allowances on that in about 3-4 minutes when we

:06:01.:06:04.

review the papers. It is all over the financial papers today. People

:06:05.:06:08.

trying to guess what's coming and of course analysis of what it will do

:06:09.:06:11.

or not do to help the eurozone economy. Now, moving on to the

:06:12.:06:16.

second-biggest economy. We've had new south of China again today, this

:06:17.:06:20.

time about consumer prices or inflation jumping more than most

:06:21.:06:23.

people expected in the last month. Is it evidence the economy is

:06:24.:06:27.

in better shape than we thought, or Let's get the latest from Rico Hizon

:06:28.:06:30.

in Singapore. The -- lovely to see you. This is

:06:31.:06:43.

the month of February, which is unusual because of the lunar New

:06:44.:06:46.

Year holiday. Talk us about this news and what it means for China.

:06:47.:06:51.

That's right. The Chinese New Year, when a lot of mainlanders go back

:06:52.:06:55.

home and buy gifts, they buy food, clothes for their loved ones. This

:06:56.:07:02.

is basically what spurred China's consumer spending in the month of

:07:03.:07:05.

February. At the big question is, can this be sustained? That's a big

:07:06.:07:12.

question mark. For now, inflation is accelerating at its fastest rate in

:07:13.:07:16.

almost two years to 2.3% in February and that is from 1.8% in January.

:07:17.:07:24.

This recent rebound in oil prices is one of the fastest. Recovering food

:07:25.:07:31.

prices, these types of things are contributing to the higher inflation

:07:32.:07:35.

rate and the pickup in food prices is mainly due to cold weather and of

:07:36.:07:39.

course the Chinese New Year seasonality effect. Despite this

:07:40.:07:45.

encouraging headline number, economists say the rise in food is

:07:46.:07:48.

likely to be temporary and that consumer inflation will remain mild

:07:49.:07:54.

in the coming months and may not reach it target. On the flipside

:07:55.:07:57.

there was another number that came out today and that's the Consumer

:07:58.:08:02.

Prices Index. That was disappointing again. If you look at the positive

:08:03.:08:07.

side, it fell, but the decline slowed. This affects the sluggish

:08:08.:08:13.

demand, overcapacity in key sectors. Producers remained stubbornly weak

:08:14.:08:25.

with the index diving by 4%. It is a positive because of course the pace

:08:26.:08:28.

of decline was lower. But if you put all of this development together

:08:29.:08:32.

they say it will take some pressure off policymakers to roll out more

:08:33.:08:36.

monetary easing. Thanks a lot. Good to see you.

:08:37.:08:39.

We are also in Ireland, the latest country in Europe to

:08:40.:08:41.

find itself in political deadlock after inconclusive elections.

:08:42.:08:47.

Like their counterparts in Spain and Portugal, Ireland's government

:08:48.:08:50.

found themselves punished in recent elections

:08:51.:08:51.

But no party won a large enough majority to form

:08:52.:09:00.

a government and the result has been drawn-out coalition talks.

:09:01.:09:02.

Ireland's parliament re-convenes later to try and choose

:09:03.:09:04.

We will be keeping an eye on that story today, with further analysis

:09:05.:09:11.

later on the BBC. In other news: Volkswagen's top

:09:12.:09:15.

executive in the US is stepping down, nearly six months after

:09:16.:09:18.

the German carmaker became engulfed The company says Michael Horn is

:09:19.:09:21.

leaving "through mutual agreement". Another US executive,

:09:22.:09:24.

Hinrich Woebcken, Mr Horn's departure comes as VW

:09:25.:09:26.

continues to negotiate with US environmental regulators, the

:09:27.:09:33.

Department of Justice and lawyers representing consumers who are suing

:09:34.:09:35.

the company for compensation. Singapore has again been judged

:09:36.:09:38.

as the world's most expensive city. The Economist Intelligence Unit,

:09:39.:09:43.

ranked it as the priciest ahead of Zurich, Hong Kong,

:09:44.:09:47.

Geneva and Paris. London was sixth and New York

:09:48.:09:50.

seventh on the list that compares the cost of a

:09:51.:09:51.

basket of goods across 133 cities. The cheapest were Lusaka,

:09:52.:09:55.

the capital of Zambia, followed by Bangalore and then Mumbai in

:09:56.:09:59.

India. Marcus today are heat. Oil is at a

:10:00.:10:16.

three-month high, which is keeping energy stocks attractive at the

:10:17.:10:20.

moment. -- markets. We had a good close on Wall Street the night

:10:21.:10:24.

before. And New Zealand, a surprise cut in interest rates down to 2.25%.

:10:25.:10:27.

See you soon.

:10:28.:10:42.

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