Wednesday, December 14, 2016

US Fed raises interest rate by 0.25%; Moody's sees vulnerability in Asia-Pacific; Security of 1bn Yahoo accounts breached

1 US Fed raises interest rate by 0.25% (BBC) The US Federal Reserve has raised its benchmark interest rate by 0.25%, only the second increase in a decade. The central bank voted unanimously to raise the key rate to a range of 0.5% to 0.75%, citing a stronger economic growth and rising employment.

But the central bank said it expected the economy to need only "gradual" increases in the short term. Fed chairwoman Janet Yellen said the economic outlook was "highly uncertain" and the rise was only a "modest shift". However, the new Donald Trump administration could mean rates having to rise at a faster pace next year, she signalled.

The president-elect has promised policies to boost growth through tax cuts, spending and deregulation. Ms Yellen said it was wrong to speculate on Mr Trump's economic strategy without more details. But she added that some members of the Federal Open Markets Committee, the body which sets rates, have factored in to their forecasts an increase in spending.

Rates have been near zero since the global financial crisis. But the US economy is recovering, underlined by recent data on consumer confidence, jobs, house prices and growth in manufacturing and services.

The Fed also published its economic forecasts for the next three years. These suggest that the Federal Funds rate may rise to 1.4% next year; 2.1% in 2018; and 2.9% in 2019. GDP growth will rise to 2.1% next year and stay there, more or less, during those years. The unemployment rate will fall to 4.5% over the 2017-2019 period, the Fed forecast. And inflation will rise to 1.9% next year and hover at that level for the next two years.


2 Moody’s sees vulnerability in Asia-Pacific (Jacqueline Woo in Straits Times) High debt levels and global financial linkages spell vulnerability for a number of Asia-Pacific nations, including Singapore, according to Moody's Investors Service. This comes amid a marked fall in financial asset prices in the Asia-Pacific since the US presidential election last month.

In a report on "sovereign risk" - a reference to the credit standing of sovereign countries, Moody's noted that regional currencies have since depreciated against the US dollar, while equity prices have fallen and portfolio flows have reversed. "If they last more than a few weeks, capital outflows or lower inflows will correspond to a tightening in domestic financing conditions for many Asian countries," the credit ratings agency said.

"For some, (it) could exacerbate difficulties in meeting their current account and external debt payment obligations." Moody's pointed out that direct vulnerability to capital outflows is limited in the Asia-Pacific, though with a few exceptions.

The countries in the region that face external liquidity challenges include Mongolia, Pakistan and, to a lesser extent, the Maldives, Papua New Guinea and Sri Lanka.

Moody's added that for mainland China, the scope to offset a tightening in financing conditions related to capital outflows is still ample, although sustained outflows would erode it. "Increased scrutiny by the Chinese authorities over fixed asset and financial investment abroad indicates their concerns about sustained outflows," it said.


3 Security of 1bn Yahoo accounts breached (Sam Thielman in The Guardian) Yahoo has said it had discovered another major cyber attack, saying data from more than 1bn user accounts was compromised in August 2013, making it the largest such breach in history.

The number of affected accounts was double the number implicated in a 2014 breach that the internet company disclosed in September and blamed on hackers working on behalf of a government. “An unauthorised party” broke into the accounts, Yahoo said. The company believes the hacks are connected and that the breaches are “state-sponsored”.

The hackers used “forged ‘cookies’” – bits of code that stay in the user’s browser cache so that a website doesn’t require a login with every visit, wrote Yahoo’s chief information security officer, Bob Lord. The cookies “could allow an intruder to access users’ accounts without a password” by misidentifying anyone using them as the owner of an email account.

The company is being acquired by Verizon for $4.8bn but the sale has not been an easy one. In October, a report revealed that the company had cooperated with the NSA to scan users’ emails for keywords on behalf of the agency. A Verizon lawyer, Craig Silliman, said that the September breach had clearly damaged Yahoo’s value and hinted that the damage ought to be reflected in the buying price.


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