Europe:
ECB’s Draghi growing confident about inflation rebound
The European Central Bank is growing increasingly confident that inflation will rise back to its target but patience is still needed, ECB President Mario Draghi said on Monday. Draghi singled out currency volatility as a source of uncertainty which requires monitoring and argued that the economy still needed to absorb slack, requiring “ample” ECB accommodation. “Overall, we are becoming more confident that inflation will eventually head to levels in line with our inflation aim, but we also know that a very substantial degree of monetary accommodation is still needed for the upward inflation path to materialize,” Draghi told the European Parliament’s committee on economic affairs. With the euro zone economy now growing for the 17th straight quarter, the ECB is expected to reduce stimulus from next year, even if inflation will remain below the bank’s near 2 percent target for years to come. Indeed, policymakers speaking to Reuters said that the debate is now about the details of the policy shift, such as whether to keep quantitative easing open ended or whether to signal an intent to phase out bond purchases. ”We still see some uncertainties with respect to the medium-term inflation outlook,“ Draghi said. ”Most notably, the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring.
U.S.:
Trump Says He Wants 15% Corporate Tax Rate Despite Plan for 20%
Republican tax negotiators are targeting a corporate tax rate of 20 percent, according to two people familiar with the matter — but there’s at least one potential obstacle: President Donald Trump. “We’ll see what happens, but I hope it’s going to be 15 percent,” Trump told reporters Sunday as he prepared to return to Washington after a weekend in New Jersey. The current corporate tax rate is 35 percent. Meanwhile, the group of administration officials and congressional leaders that’s planning a framework for tax legislation is also expected to recommend cutting the top individual tax rate to 35 percent, down from 39.6 percent, according to two people familiar with the matter. Trump confirmed that his administration has hammered out a plan with congressional Republican leaders — though his administration has stopped short of confirming any details. The corporate and individual tax rates will be key portions of that plan — and Trump’s brief late-afternoon remarks raised questions about both. Trump plans a trip to Indiana Wednesday for a speech on tax issues, a person familiar with the planning said. The White House and congressional Republican leaders are preparing for a push for tax legislation that follows a series of defeats since Trump’s inauguration, including their failure so far to repeal Obamacare.
Asia:
China says growth of key debt ratio clearly slowing, stabilizing
The growth of China’s overall leverage ratio has been clearly slowing and is now stabilizing, the state planner said on Monday, days after S&P downgraded the country’s sovereign debt rating. China will focus on lowering leverage ratios among state-owned firms and winding down of “zombie firms” to reduce leverage ratios and control debt risks, the National Development and Reform Commission said in a statement on its website. S&P Global Ratings cut China’s credit rating last week, which followed a similar move by Moody’s Investors Service in May. Both firms cited the risks from China’s rapid build-up in debt and high overall debt levels as a major long-term concern. S&P said China’s attempts to reduce debt risks so far this year are not working as quickly as expected and credit growth is still too fast. The NDRC cited the latest data from the Bank of International Settlements (BIS) which showed China’s overall leverage ratio is still growing, but at a slightly slower pace. BIS data published last week showed China’s total non-financial debt was 257.8 percent of gross domestic product (GDP) at the end of the first quarter, up from 250.4 percent in the same period a year earlier, but only a slight increase from 257.0 percent at the end of 2016.