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Philippines’ central bank chief on interest rate cut, economy

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The Philippine central bank still has plenty of room to maneuver as the economy faces a downturn in the face of the coronavirus pandemic, according to the institution’s chief.

Central bank governor Benjamin Diokno told CNBC’s “Street Signs” on Monday: “We still have a lot of policy space, unlike other countries where they are now in the negative territory.”

Diokno’s comments followed the Bangko Sentral ng Pilipinas’s (BSP) decision last week to cut its benchmark interest rate by 50 basis points to 2.25%, an unexpected move as most economists in a Reuters survey had expected the central bank to stay on hold. It came after the Philippines’ Development Budget Coordination Committee in May projected an economic contraction by 2% to 3.4% in 2020.

We still have a lot of ammunition … should things get worse.

Benjamin Diokno

Governor, Bangko Sentral ng Pilipinas

Diokno said the rate cut came after the IMF downgraded its forecasts for the global economy. Coupled with calculations from the central bank that showed inflation would be “benign, not only for this year but for the next three years,” the BSP chief said the bank was “prompted” to make a preemptive move as a result.

“Monetary policy works with a lag, so we don’t have to wait for … next month or next quarter to make the policy decision,” Diokno said. He also said its reserve requirement ratio for banks still sits at the “double digit level.”

“We still have a lot of ammunition … should things get worse,” Diokno said.

Peso going ‘quite strong’

Asked if he was concerned over a potential flight to safety strengthening the dollar and bringing more volatility to the Philippine peso, Diokno said his country’s currency is going “quite strong” at the moment.

The peso is supported by a “hefty” amount of gross international reserves, Diokno said, adding there is “strong confidence in the currency.”

The Philippine peso was trading at 49.789 per dollar as of Tuesday afternoon Singapore time. The currency has appreciated more than 1.5% against the greenback so far this year.

Diokno cited an “unprecedented” move by the Japan Credit Rating Agency to upgrade the Philippines to A- from BBB+ at a time recently.

In light of a “wave of credit rating downgrades” elsewhere, he said the move represented a “strong vote of confidence” in the Philippine economy’s ability to bounce back, as well as for the strength of the peso.

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UK extends visa rights to Hong Kongers, offers path to citizenship

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In this photo taken in Hong Kong on June 3, 2020, Reese Tan, a 25-year old tutor, poses with his British National (Overseas), or BN(O), in his favorite part of the city and the place he would miss the most if he leaves, the bustling shopping and eating district of Mongkok.

Anthony Wallace | AFP | Getty Images

The U.K. is offering around 3 million Hong Kong residents a path to British citizenship after a new national security law was imposed in the city, Foreign Secretary Dominic Raab said on Wednesday.

That announcement came after Beijing passed and implemented a new national security law in Hong Kong. Raab called the move “grave and deeply disturbing.”

“The enactment and imposition of this national security law constitute a clear and serious breach of the Sino-British Joint Declaration,” U.K. Prime Minister Boris Johnson told Parliament on Wednesday.

The Sino-British Joint Declaration signed by then Chinese Premier Zhao Ziyang and British Prime Minister Margaret Thatcher guarantees Hong Kong’s autonomy under the “one country, two systems” framework. The city was a British colony for over 150 years before being transferred back to China in 1997.

The new national security law is spurring concerns about excessive oversight from Beijing and eroding rights and freedoms in Hong Kong.

About 3 million Hong Kongers are eligible for British National (Overseas) passports. There were 357,156 BN(O) passport holders as of April 17.

The new measures extend the visa rights of BN(O) passport holders, allowing them to stay in the U.K. for five years with the ability to work or study. That’s far greater than the six months previously allowed.

After five years, the passport holders will be able to apply for settled status and citizenship, according to information on the U.K. government website.

“This is a special, bespoke, set of arrangements developed for the unique circumstances we face and in light of our historic commitment to the people of Hong Kong,” said Raab in Parliament.

“We want a positive relationship with China. But, we will not look the other way on Hong Kong, and we will not duck our historic responsibilities to its people,” he added.

The U.S. and Taiwan are also looking into helping those who want to leave Hong Kong.

In the U.S., a bipartisan bill known as the “Hong Kong Safe Harbor Act” would grant Hong Kongers priority refugee status. Introduced in both chambers of Congress this week, the bill would enable those who fear political persecution from China to more quickly leave the city.

Taiwan on Wednesday set up an office to help resettle fleeing Hong Kongers.

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Pakistan central bank governor on economic challenges during coronavirus pandemic

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The coronavirus pandemic is a public health crisis and until it’s addressed, there will most likely be economic hardships ahead, Pakistan’s central bank governor told CNBC. 

Pakistan has reported more than 213,000 cases of infection and nearly 4,400 people have died.

“We are very concerned. First and foremost, this is a public health crisis — we have to remind ourselves of that,” Reza Baqir said on CNBC’s “Street Signs Asia” on Wednesday.

“And, only on a secondary basis, then it becomes an economic crisis. Until the public health crisis is addressed, we should continue to expect challenges on the economic front,” he added. 

For countries like Pakistan, the trade-off between lives and livelihood is a very real trade-off.

Reza Baqir

Pakistan’s central bank governor

Prime Minister Imran Khan’s government lifted a two-month-long lockdown in early May, a few weeks before an important festival. 

As millions were struggling with starvation during that time of drastically reduced economic activity, the country’s Covid-19 cases surged once the lockdown was eased, Reuters reported

Lockdowns are a ‘luxury’

At the moment, the government is targeting coronavirus hotspots in the country and locking those areas down. 

Baqir explained that prolonged national lockdowns are a “luxury of the rich.” 

“For countries like Pakistan, the trade-off between lives and livelihood is a very real trade-off,” he said. The country has many day laborers who earn daily wages and lockdown would abruptly cut off their source of income. Without having a savings pool to dip into, many of those people would be looking at starvation, according to Baqir. 

Policemen put barbed wire as an market area is sealed by the authorities in Rawalpindi on July 1, 2020, as COVID-19 coronavirus cases continue to rise.

Farooq Naeem | AFP | Getty Images

Pakistan has limited fiscal policy options to help the economy weather the coronavirus crisis. Considering the country’s relatively large public debt, excessive government spending to boost the economy will be difficult.

On the monetary policy side, Baqir said the central bank injected so far about $7 billion, or 2.5% of GDP, in terms of liquidity support to households and businesses.

The central bank last week slashed its monetary policy rate by 100 basis points to 7% — State Bank of Pakistan has cut interest rates by 625 basis points since March when the coronavirus infection began spreading through the country. Baqir told CNBC the move was in tandem with the fall in inflation, from above 14% in January to around 8% currently. 

“There is no doubt that we face grave challenges,” Baqir said.

He outlined the three considerations in Pakistan’s response to the crisis. 

First, he highlighted that before the virus struck, the country’s economic fundamentals was improving – such as bringing down its current account deficit, which was a core part of its economic problems. Second, its fiscal and monetary policies are “prudent,” and finally, Pakistan is working with international financial organizations like the IMF and World Bank to keep its economy afloat. 

“I think the smart lockdown strategy of locking down hot spots in cities so far is working reasonably well, and we are confident that with the combination of measures – for us on the economic side, we should come out of this crisis largely unscathed,” Baqir said. 

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Wall Street is under pressure over its lack of diversity

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Protestors and police officers clash for the second morning in a row on July 1, 2020 in New York City following a budget vote. (Photo by David Dee Delgado/Getty Images)

David Dee Delgado | Getty Images

A global corporate reckoning that began in the United States after the killing of George Floyd has prompted industries long dominated by White males, such as the financial sector, to rethink diversity.

George Floyd was killed by a Minneapolis police officer on May 25, who knelt on Floyd’s neck for 8 minutes and 46 seconds. Floyd was arrested on suspicion of using a counterfeit $20 bill. His death ignited worldwide protests aimed at addressing racial injustice and inequality.  

Wall Street has long been an industry dominated by White males. At Goldman Sachs, just 2.7 percent of executives, senior officials and managers are Black. At Citi, 2 percent of executives and senior managers are Black.

Closing the racial wealth gap

While companies and banks cannot single-handedly solve the systemic and historic racism that has existed in the United States since its founding, an effort is being made to try and give Black Americans a better chance at economic equality.

In addition to the obvious benefit closing the racial wealth gap would mean for affected communities, a 2019 McKinsey report projected doing so could net the U.S. economy between $1.1 trillion and $1.5 trillion by 2028.

“Public companies and private companies have to focus on ‘how can you show your corporate purpose,’ not just to your employees and your clients, but in every society you work,” BlackRock CEO Larry Fink told CNBC’s Hadley Gamble in a World Government Summit panel last week. He added that “purposeful” companies are going to have better long term profitability.

BlackRock has promised 30 percent more Black employees at the firm by 2024. As CEO of the world’s largest asset manager, Fink oversees more than $6 trillion and hires 16,000 people across the globe, only 5 percent of which are Black. Global Infrastructure Partners Chairman Adebayo Ogunlesi told CNBC’s Hadley Gamble that thanks to “prodding” from CEOs like Fink, business is recognizing that it has a leadership role to play in society in areas like economic and racial injustice.

Wall Street wakes up

Under pressure, banks have taken steps to do more to fight racism. Many CEOs released statements and spoke out about the killing of George Floyd, recognizing the deep divisions America faces when it comes to race.

JPMorgan CEO Jamie Dimon released a statement recognizing the “reality” of police brutality, and “coupled with the COVID crisis, highlights the inequities black and other diverse communities have and continue to face every day,” vowing to do more as a firm.

Wells Fargo pledged to double Black leadership over the next 5 years at the bank. According to a memo, only 6 percent of the San Francisco-based bank’s senior leaders are Black.

Bank of America announced a $1 billion, four-year commitment of additional support to help local communities address economic and racial inequality accelerated by Covid-19.

The gender gap

Wall Street doesn’t struggle only with racial diversity. Women are significantly underrepresented in the financial services industry.

Francesca McDonagh, the CEO of the Bank of Ireland, told CNBC the banking sector is “notoriously non-representative” of women.

“There are very few female CEOs of systemically important banks,” she said. “When I look around at opportunities to promote women, I always look hard and fast, but there is a shortage at the senior level.”

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