Abating job growth and hiring in US on track for Fed goals – Industry roundup: 10 April
by Kylene Casanova
India’s central bank surprisingly holds rates steady for now
To the surprise of analysts, the Reserve Bank of India held rates steady at 6.5% last Thursday. The bank (which is India’s central bank) had been expected to raise its policy repurchase rate, the country’s benchmark interest rate, by 25 basis points.
However, the bank clarified that it is not closing the door on potentially hiking rates further if necessary. RBI Governor Shaktikanta Das reaffirmed the bank’s commitment to bringing inflation into the 2%-6% range. “Our job is not yet finished and the war against inflation has to continue”, stated Das.
Abating job growth and hiring in US on track for Fed goals
The US Bureau of Labor Statistics published its March report on Friday, showing numbers that suggest the labour market may be beginning to cool. Unemployment dropped to 3.5%, while job creation came in at 236,000, both close to but slightly below predictions.
Participation in the labour force reached its highest level since before the pandemic, while average hourly wages grew just 0.3%, which brings the average 12-month average down to the lowest level in nearly two years. ZipRecruiter’s chief economist, Julia Pollak, stated that it was the first time in two years the actual data had followed expectations so closely. “Everything is moving in the right direction.”
While concerns persist that the Fed’s ongoing rate increases may trigger a mild recession, Pollak at least believes the March numbers demonstrate that they are accomplishing what they intended. “This is great news for the Federal Reserve. They don’t have any concerns for the labor market when they make the next decision”, she said. “Today’s report is just a checkmark for them.”
JPMorgan CEO urges circumspect regulatory response to banking crisis
An interview last week on CNN with Jamie Dimon, CEO of JPMorgan Chase, covered his thoughts on the impacts of the banking crisis and on what he believes the response ought to be. Dimon stated that the crisis adds to the odds of a recession and that regulatory responses should be cautious.
“Just like another weight on the scale”, he says, the banking crisis does add to the mix of pressures that already included inflation, the war in Ukraine and quantitative tightening. “We are seeing people reduce lending a little bit, cut back a little bit, pull back a little bit,” he says. “It won’t necessarily force a recession, but it is recessionary.”
On the other hand, Dimon was hopeful about the path forward. Comparing this year’s crisis to that of 2008, he notes that this one is far different and more isolated, involving few banks and a specific issue. “This is nothing like that,” he said, referring to the 2008 crisis. “This will resolve and then we should go look at what went wrong and fix it in the light of day.”
In discussing the response from regulators, Dimon stated that he agrees things need to change, but he urged a circumspect approach, saying that there are already hundreds of regulations surrounding banking, and regulators should “take a deep breath” before adding to them. “If there are problems with held-to-maturity portfolios or uninsured deposits, let’s fix them, let’s fix them thoughtfully”. In a shareholder report dated two days earlier, Dimon stated. “We should not aim for a regulatory regime that eliminates all failure but one that reduces the chance of failure and the odds of contagion.”
AI expanding in finance: BloombergGPT and an AI challenge from Santander, Microsoft
Last week, Bloomberg announced the development of a large language model (LLM) AI tool, “BloombergGPT”, trained on forty years’ worth of financial data. According to Bloomberg’s announcement, “BloombergGPT represents the first step in the development and application of this new technology for the financial industry. This model will assist Bloomberg in improving existing financial NLP [natural language processing] tasks, such as sentiment analysis, named entity recognition, news classification, and question answering, among others.” BloombergGPT is expected to allow Bloomberg Terminal users to harness the masses of data available today more effectively.
Meanwhile, Banco Santander and Microsoft, along with the Oxentia Foundation, are launching an AI challenge to encourage innovative AI use. The challenge, with an application window through April 27, is open to startups and scaleups from several countries across the globe (Poland, Germany, Spain, Portugal, the UK, the US, Mexico, Argentina, Brazil, Chile and Uruguay) whose AI use creates a “positive impact on society”.
BNP Paribas working with Worldline to address IBAN fraud in SEPA Direct Debits
Reports show that more than 60% of fraudulent SEPA Direct Debits are related to the use of someone else’s IBAN for the mandate signing. BNP Paribas announced that it will be addressing this issue through Worldline’s Account Validation product.
This reportedly makes BNP Paribas the first in the industry to take this step for reducing IBAN fraud. Worldline’s Account Validation solution will use open banking methods to validate accounts, which, combined with the SEPA mandate e-signatures, is expected to provide a significantly more secure process.
Juniper Research expects 170% growth in digital payment cards within the next four years
A recent study released by Juniper Research stated that the number of digital payment cards stands at 500mm in 2023, but they are forecasting that number to reach 1.3bn by 2027. According to the researchers, “This growth of 170% reflects strong interest in improving the way users access and replace cards from issuers. This is in the context of strong competition between issuers from digital-only banks and new fintechs offering card services”.
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