International tax reform approved

Federal Reserve Bank of Richmond President Thomas Barkin is not ready to call for an end to the U.S. central bank’s bond-buying stimulus given where the labor market stands today. If the labor market can improve relatively quickly, then maybe it can happen sooner, but if it takes longer for the labor market to reopen, it goes a little later,” Mr. Barkin said in a Wall Street Journal interview Friday. The policy maker said the employment-to population ratio is important to him in determining when the central bank can dial back on the stimulus it is providing the economy. The employment-to population ratio stood at 61.1% in 2020, before the coronavirus pandemic took hold in the U.S. and economic activity went down. It drastically declined in April 2021 at 51.3% and has risen since, hitting 58% this June. Mr. Barkin said he would like to see something just higher than 59% before he believes it would be time to start reducing bond buying.

The G20 finance ministers and central bank governors this weekend approved a framework for international tax reform, including a minimum corporate rate of 15%. The deal has 2 important goals:  to make companies pay more tax in the countries where they are selling their products or services, rather than wherever they end up declaring their profits and secondly, a global minimum tax rate would help avoid countries undercutting each other with low tax rates.  New regulation is targeted at the most aggressive users of tax-reducing domiciles, such as technology giants Google, Amazon, Facebook and Apple.

CHF continue growing since last Thursday and has now reached 1.0822 level against EUR. There is a probability that SNB will have to intervene in order to slow CHF growth.

Inflation continues to rise in Russia pushed by increased food prices and reached 6.5% year-over-year level – the highest degree since 2016. This hike is expected to lead the Russian Central Bank to raise its key rate at its next meeting in one weeks’ time.

China Central Bank will reduce the reserve requirement ratio from 12.5% to 12% for most banks, according to a statement published Friday. That will unleash about 1 trillion yuan ($154 billion) of long-term liquidity into the economy available to banks so they could lend to smaller firms hurt by rising costs. China export rose to 32% year over year in June, with import increase to 37%, both beating the forecasts. Global appetite for Chinese goods including cell phones, medical goods, refined oil products and shoes has helped to boost export this year.

The three main US stock market indices reached record levels on last Friday, driven in particular by financial stocks. Now slightly down after inflation and banks earning yesterday’s updates but remain close to a record: Dow Jones index at 34’888, S&P-500 at 4’369 and Nasdaq Composite at 14’677.

Oil prices declined overnight despite the American Petroleum Institute reporting that crude inventories slid by more than 4 million barrels last week. There is little sign that Saudi Arabia and the UAE have made progress in resolving a dispute over how their production cuts are measured, delegates said. Both have locked in supply volumes for next month. Hence, no backgrounds for the August production increase for the moment. Brent 76.46, Crude 75.13

Coming back to inflation subject, yesterday CPI Index appeared higher than expected at 5.4% year over year. Index beats its forecast for the second month already and test the Fed Reserve about transitory character off inflation.