BoE raised interest rates again on June 22 as the economy fights high inflation.
It is expected to continue hiking the rates or risk embedding inflation through slow business activity, and possibly recession looms.
Eurozone businesses are caught in a tight zone once more as high-interest rates haunt the economy. It is only expected to worsen from here, at least on a short to mid-term basis, as more hikes must be done to tame rising inflation. This means more pain will be felt in the markets even after the eurozone’s flash composite PMI dropped to 50.3 in June.
June had a slowdown in business activity in the Eurozone after the area was seen to have had a recession, as Q4 of 2022 and Q1 of 2023 had reversed growth rates. To add to the pain, the inflation in the region is one of the highest recorded in the world, which necessitates further rates hike.
These rates hike to make borrowing more expensive; thus, most businesses start shrinking, which is exactly what has happened in the area. The Stoxx 600 index fell by 1.9% in Thursday’s open in anticipation of the BoE interest hike rate decision. BoE went ahead to hike the rates by 50 basis points, higher than the expected 25 basis points.
Preliminary data shows that the region will also have a difficult ending in the Q2 of 2022, with its flash composite Purchasing Managers’ Index dropping to 50.3 in June from 52.8 recorded in May. This is a huge dive from the expected 52.5, which concerns as the 50 mark indicates an expansion in activity while a dip below 50 marks contraction.
“Eurozone business output growth came close to stalling in June, according to the latest HCOB flash PMI survey data produced by S&P Global, pointing to renewed weakness in the economy after the brief growth revival recorded in the spring,” S&P Global said in a release.
“Although energy and supply chain worries have eased since late last year, June has seen a further escalation of concerns over demand growth, and in particular the impact of higher interest rates, and the resulting possibilities of recessions both in domestic markets and further afield.”
The European Central Bank has consistently raised rates for the past 12 months to bring down inflation. The consequence of this action is higher costs of business operations in the bloc, which is a drag on productivity.
Keep watching Fintech Express for updates on finance and other fintech-related developments.
A June 20 post by cyber Security firm, Group-IB reveals that over 100K ChatGPT logins might have been exposed to the Darkweb.
The exposes happened over the past year and have been traded on the darkweb.
Concerns surrounding ChatGPT user credentials being leaked online and traded on the Darkweb are surfacing after a blog post by Singaporean cybersecurity firm Group-IB. The firm alleges that over 101K ChatGPT logins appear to have been stolen over the past year and traded over the dark web between June 2022 and May 2023.
Calls for caution when using AI as ChatGPT appears to be compromised
Concerns surrounding the usage of Artificial intelligence are increasing as the risks associated with the innovation get uncovered. Regulators worldwide have been working on the issue to prevent their citizens from being harmed.
The EU has already passed the world’s first comprehensive artificial intelligence regulatory framework, with the US proposing a bipartisan bill to introduce a national commission to figure out the best approach to regulate Artificial Intelligence there.
The key similarity in these two regulatory approaches is to protect users from data breaches and mishandling by Artificial Intelligence systems. These dreaded events are exactly what Group-IB has brought to light about ChatGPT. According to the firm, May 2023 alone saw around 27,000 ChatGPT-related credentials on online black markets.
According to our findings, the Asia-Pacific region has experienced the highest concentration of ChatGPT credentials being offered for sale. pic.twitter.com/s3TbsntCgX
— Group-IB Threat Intelligence (@GroupIB_TI) June 20, 2023
It added that the Asia Pacific region had the highest number of leaked credentials, making up around 40% of the whole figure, while Indian based credentials accounted for around 12,500.
These developments come at a time when regulating emerging markets and industries is a main issue in the world. As such, it is expected to attract legal consequences and more oversight as such data breaches are often taken seriously. Keep watching Fintech Express for more updates on this and other Finance and technology-related stories
Ex-Coinbase executive Balaji Srinivasan has called out the US Federal Reserve for lying that the US banking system still stands strong.
Balaji is motivated by the fact that the US Federal Reserve claimed it would only use around $25B for Exchange Stabilization Fund, only to have spent over $102.7 billion by this week.
The US Federal Reserve is under fire again for lying about the general outlook of the US banking system to ‘assure’ investors and citizens that there are no risks. However, the data that is coming forward isn’t all merry. Observers have noticed that the authority is spending more money than previously projected to bail out financial institutions.
EX Coinbase Exec. Balaji calls out US Federal Reserve for lying publicly
The US banking system has been shaken after a recent series of collapses started by the Silicon Valley Bank. Since then, the authorities in charge, like the US Federal Reserve and President Biden, have come out to defend, saying that the banking system stands strong and will weather the misfortunes it has been facing.
They assured investors that all is good and minimal risks are associated with the banking system. However, the word from these agencies and authorities does not match market data and the efforts they put behind the curtains. For instance, the U.S. has been facing high inflation rates; though the US Federal Reserve has managed to gain a bit of control in the battle, more still needs to be done.
It has raised interest rates to 5 to 5.25%, the highest hike since the 2008 financial sector meltdown. Though US Federal Reserve Chair Jerome Powell paused June 2023’s rates hike, he says it is still necessary to raise it at least twice this year. As such, we can see that more needs to be done to harmonize the US financial sector.
In other news, the US is only weeks away from passing the Fiscal Responsibility Act, a bill passed to ‘save’ the US from unfathomable financial consequences as it could have defaulted on its debt. It had breached its debt ceiling as its spending continually eclipses its earning. If it defaulted, over 8 million people would go jobless, with thousands of stocks trading in the red and making huge losses.
This was evaded by only lifting the debt ceiling, which shows that the financial problem still lies underneath. Financial Analyst Joe Consorti has noticed that the risk-taking across US markets is rising as more liquidity is drawn from the US Federal Reserve emergency loan program.
“As liquidity is drawn from the Fed’s emergency loan program, risk-taking rises across markets. There’s a near 1:1 correlation between the usage of BTFP (seen in the BTFP interest rate rising) and the S&P 500:.”
As liquidity is drawn from the Fed's emergency loan program, risk-taking rises across markets.
There's a near 1:1 correlation between the usage of BTFP (seen in the BTFP interest rate rising) and the S&P 500: pic.twitter.com/kHFwJwDoDq
The bank Term Funding Program (BTFP) is a new lending facility launched in March in response to the Silicon Valley Bank. It has risen above the $100B mark while the US Federal Reserve sat back and ‘assured’ citizens that it would only range around $25B. Its immense growth shows that the US banking system is contracting. Wildly, it is projected to continue growing.
Rolls-Royce Holdings PLC is opening its first office in East Africa as engine demand grows.
The company has seen increased demand for hydroelectric power generation and other engines like ships and locomotives in the region.
Rolls-Royce is working on setting up its first office in East Africa as demand for locomotive, ship, and hydropower generation engines grows. In a conference in Nairobi, Kenya, the UK engineering firm CEO John Kelly said that the region is growing at an adorable 6.5% rate, and with a population of 174 million, it’s becoming more promising by the day.
Rolls-Royce to seek collaboration with Kenya and other East African countries
Business in East Africa is taking shape in an encouraging way as international investors are seeking to set up camp. As a result, Rolls-Royce is seeking similar success in the East African market as it has had in Nigeria. In his speech, CEO John Kelly said:
“It’s important for us to be in Africa, to understand Africa and to make sure that we optimize our solutions and our offerings for the market and its requirements.”
The company is also in talks with Kenya Railways Corporation on a deal to power its locomotives. John Kelly revealed this without giving further details. He added that the company also seeks to focus on naval solutions and electricity requirements for data centers, a market growing immensely in Kenya and possibly valued at around $100M in the next three years.
Kenya already produces 80% of its electricity from renewable sources like Geothermal and wind. It also considers nuclear generation, which Rolls-Royce considers a key component of powering the world.
“We want to be front and center in terms of providing those power solutions, both on the land, in terms of energy requirements, in the air, in terms of aviation,” Kelly said.
Keep watching Fintech Express for more updates on fintech-related developments.
Tayyip Erdogan’s Finance Minister has introduced another 6.5% rates hike taking the total to 15%
The move marks a turnaround for the residents of Turkey as their money faces great devaluation owing to a high inflation rate.
As the Ministry of Finance fights an economy-crippling inflation menace, more pain is expected in the Turkish markets for the next short to mid-term basis.
On Thursday, the Central Bank of Turkey delivered another large interest rate hike to battle the overshadowing inflation rise. The move signals a shift towards more conventional economic policies to counter the sky-high inflation rates following the criticism that Tayyip Erdogan had led to higher living costs.
Turkey to brace for more pain in the markets
Residents and Citizens of Turkey will have to brace for tougher economic terms, at least in the short to mid-term, as the Central Bank and Finance Ministry work hand in hand to shave off the sky-high inflation rates that have crippled their economy.
On June 22, the Central Bank announced that it had raised key rates by 6.5%, now boosting it to 15%. This boost is a significant jump from the existing 8.5% that was in effect since March 2021 and follows Erdogan’s new term as the President.
Erdogan has been under fire for watching the cost of living overwhelm the citizens of Turkey. The recent rate hike indicates that the country is moving away from Erdogan’s unorthodox belief that lowering interest rates fight inflation.
This traditional economic theory has proved ineffective, and central bankers worldwide have been going at it differently. The US and UK have both raised interest rates to deal with inflation. Only time will tell how high Turkey will need to set its inflation rates hike before completely taming it. Keep watching Fintech Express for updates on finance and other fintech-related developments.
