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ECB Economists See Interest Rate Jump Below Market Expectations – Monetary Policy

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ECB Economists See Interest Rate Jump Below Market Expectations - Monetary Policy

Technical experts at the European Central Bank (ECB) are pointing to the need to raise the rate applied to deposits to 2.25% or even below this level if at the same time the monetary authorities reduce the balance sheet, according to sources close to the process, cited by Reuters.

The value is well below the market rate, which was aimed at the possibility of reaching the key interest rate of 3%.

The model was presented by economists during a meeting of the monetary authorities, which took place last week in Cyprus, according to information provided by the British agency.

In less than two months, the Eurozone deposit rate has moved from negative territory (-0.5%) to 0.75% at a pace never seen before. In early September, the Monetary Authority, led by Christine Lagarde, announced a historic 75 basis point hike in three key interest rates, in line with market expectations.

At present, the interest rate on major refinancing operations is set at 1.25%, on margin loans – 1.5%, on deposits – 0.75%.

At the last meeting, the Governing Board also guaranteed that “it will continue to fully reinvest amounts that reach maturity under the normal asset purchase program “over an extended period of time” and “for as long as is necessary to maintain conditions with sufficient liquidity”. Monetary authorities will meet again on 27 October.

The study, cited by Reuters, indicates that interest rates only need to rise once to the restrictive level to push inflation towards the 2% target.

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After reading the study and listening to its presentation, sources contacted by the British agency said that the members of the Governing Council responsible for voting on the central bank’s monetary policy decided not to disclose the document to the media, nor to take it in the form of a political focus.

Among the main reasons for this decision is the fact that this type of model has “performed poorly in recent years”, as well as the fact that, in their opinion, ECB economists “underestimate the risk of inflation”, writes Reuters.

In addition, some members of the Board of Governors also argued that their decisions should not be limited to one model, but should take into account a complex set of indicators and factors.

“The tax on deposits could be 3%,” admitted the Belgian governor.

Pierre Wunsch, Governor of the National Bank of Belgium, goes even further and believes that the interest rate on deposits may even need to reach 3% to have an impact on fighting inflation.

Despite the fact that the ECB has set this key rate at 0.75%, the governor recalled that in real terms, that is, adjusted for inflation, it still remains negative. “Given the current scenario, which is more or less a technical recession, we will have to enter positive territory,” said Pierre Wunsch. So, according to the governor, the rate on deposits “may have” more than 2% by the end of the year.

Still, “I wouldn’t be surprised if we have to go above 3% at some point,” Wunsch added during the annual meeting of the IMF and the World Bank in Washington, DC.

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Economy

Apple is preparing a strategy to transfer production from China

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Ilustração Apple na china

Apple is one of the largest companies using factories in China to manufacture its products. However, the American giant is looking to diversify its supply chain even more, given the global situation in China, both in terms of public health and government policy.

The production of the top models of the iPhone 14 Pro and Pro Max has been hit hard by problems at the factories in connection with the measures of the Chinese authorities to combat Covid-19.

Protests are raging in China the likes of which have not been seen in more than 30 years. The zero tolerance policy in the context of the pandemic has caused serious discontent and upheaval in society.

These demonstrations, protests and clashes with the authorities spilled over into factories and the market in general. Beijing, after tightening measures, has already shown that it may have to change its policy regarding the fight against the pandemic.

Apple begins to look to the future outside of China

In recent weeks, Apple has accelerated plans to move some of its production out of China, the dominant country in the supply chain that has created the most valuable company in the world, according to information from people involved in these processes.

The Cupertino-based company has begun asking its suppliers to more actively plan to assemble Apple products in other Asian countries, especially India and Vietnam.

according to InformationApple wants to reduce dependence on Taiwanese factories led by the Foxconn Technology group.

Riots in a place called iPhone City spurred Apple's move. In the giant city of Zhengzhou, China, about 300,000 workers work at Foxconn's iPhone and other Apple products factory.

At one point, the device accounted for 85% of the iPhone Pro lineup, according to analytics firm Counterpoint Research.

The Zhengzhou plant was the scene of violent protests last November. As we can see in the video above, the workers complained about harassment by the authorities to implement a zero tolerance measure to combat the pandemic.

After a year of events that have undermined China's status as a stable manufacturing hub, the unrest means Apple is no longer comfortable with so much of its business tied up in one place, analysts say.

iPhone 14 Pro sales may suffer due to low production

Apple released the iPhone 14 and its sales continued to have a big impact, even breaking records during a volatile time in the smartphone market.

According to Ming-Chi KuoApple's market analyst said fourth-quarter iPhone shipments were about 10 million units below market forecasts made before the Zhengzhou protests.

The high-end iPhone 14 Pro and Pro Max models were particularly hard hit, according to the analyst.

There were protests in Beijing last week against the strict measures against Covid.

Apple and China have enjoyed a relationship for decades that has so far been mostly mutually beneficial. Change won't happen overnight. Apple continues to release new iPhone models every year and also constantly upgrades its iPads, laptops, and other products.

Basically, Tim Cook will have to keep flying the plane by changing the engine.

So if current events warrant thought, Kuo says the Cupertino-based company's goal would be to move 40% to 45% of its iPhone production from China to India. In addition, Vietnam will be able to increase production of other Apple products such as AirPods, Apple Watch and Macbook.

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Economy

BMW suspension recharges battery in bad ground

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Suspensão da BMW recarrega bateria quando há mau piso

BMW creates something new! It is true that the electric vehicle segment has been innovative, but there is certainly much more to be discovered and improved. In the field of vehicle autonomy, research is still focused on batteries, but there may be mechanisms to recharge the battery while vehicles are in motion.

BMW is developing a suspension that can generate energy in the face of uneven road conditions and thereby recharge the battery.

The BMW suspension is actuated and generates energy that is used to recharge the battery.

Electricity is critical to driving electric vehicles. In addition to the energy stored in batteries, which provide a certain amount of autonomy, it would be interesting if the vehicles themselves generate energy while driving. It is in this sense that BMW is working on a solution in which the suspension is used as energy generating equipment.

In practice, when the suspension works to smooth out uneven floors, energy is generated and stored in the battery.

BMW suspension recharges battery in bad ground

This BMW suspension, as far as we know, will be used exclusively in electric vehicles. There is no word yet on when it will become part of the German brand's electric model.

It should be noted that traditionally, the energy of the vehicle's wheels moving over irregularities is absorbed by the spring suspension elements, and then this energy is dissipated in the form of heat by shock absorbers. The job of shock absorbers, as the name suggests, is to dampen the shock, resulting in a smoother ride.

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Economy

Fuel prices won’t drop next week! I know why…

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Fuel prices won't drop next week!  I know why...

Every week, the Portuguese live in anticipation of whether fuel prices will rise or fall.

Last Friday there was the first information that the cost of fuel will continue to fall … and will! However, there is a variable that will rise and possibly offset lower gasoline and diesel prices. Find out what has changed since then.

Fuel: ISP discount will be reduced...

The price of fuel will not fall at the beginning of the week because the government has decided to cut the discount that applies to the tax on petroleum products (ISP), according to Porto Canal.

Tax on petroleum products (NPT) is one of the excise taxes provided by law. It applies to gasoline and diesel as well as other products, oil and energy, hydrocarbons and electricity.

The tax will be reduced by 3.9 cents per liter of diesel fuel and 2.4 cents per liter of gasoline. The decision should cancel forecasts for falling fuel prices next week, which indicated minus 3 cents for diesel and minus 1 cent for gasoline.

The price of diesel fuel may remain unchanged, but gasoline should rise in price by 1.5 cents from Monday. Diesel falls seven weeks in a row, and gasoline a month.

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