Telegram CEO Durov arrested in France — media

August 25, 2024 | 5:45 pm

PARIS — Pavel Durov, the Russian-French billionaire founder and Chief Executive Officer (CEO) of the Telegram messaging app, was arrested at Bourget airport outside Paris on Saturday evening, TF1 TV and BFM TV said, citing unnamed sources.

Mr. Durov was traveling aboard his private jet, TF1 said on its website, adding he had been targeted by an arrest warrant in France as part of a preliminary police investigation.

TF1 and BFM both said the investigation was focused on a lack of moderators on Telegram, and that police considered that this situation allowed criminal activity to go on undeterred on the messaging app.

The encrypted Telegram, with close to one billion users, is particularly influential in Russia, Ukraine and the republics of the former Soviet Union. It is ranked as one of the major social media platforms after Facebook, YouTube, WhatsApp, Instagram, TikTok and Wechat.

Telegram did not immediately respond to a Reuters request for comment. The French Interior Ministry and police had no comment.

Russian-born Mr. Durov founded Telegram with his brother in 2013. He left Russia in 2014 after refusing to comply with government demands to shut down opposition communities on his VKontakte social media platform, which he sold.

“I would rather be free than to take orders from anyone,” Mr. Durov told US journalist Tucker Carlson in April about his exit from Russia and search for a home for his company which included stints in Berlin, London, Singapore and San Francisco.

After Russia launched its invasion of Ukraine in 2022, Telegram has become the main source of unfiltered — and sometimes graphic and misleading — content from both sides about the war and the politics surrounding the conflict.

The platform has become what some analysts call ‘a virtual battlefield’ for the war, used heavily by Ukraine’s President Volodymyr Zelensky and his officials, as well as the Russian government.

Telegram — which allows users to evade official scrutiny — has also become one of the few places where Russians can access independent news about the war after the Kremlin increased curbs on independent media following its invasion of Ukraine.

The Russian foreign ministry said its embassy in Paris was clarifying the situation around Mr. Durov and called on Western non-governmental organizations to demand his release.

Russia began blocking Telegram in 2018 after the app refused to comply with a court order to grant state security services access to its users’ encrypted messages.

The action interrupted many third-party services, but had little effect on the availability of Telegram there. The ban order, however, sparked mass protests in Moscow and criticism from non-government officials.

‘NEUTRAL PLATFORM’
TF1 said Dubai-based Mr. Durov had been traveling from Azerbaijan and was arrested at around 8.00p.m. (1800 GMT).

Mr. Durov, whose fortune was estimated by Forbes at $15.5 billion, said some governments had sought to pressure him but the app should remain a “neutral platform” and not a “player in geopolitics.”

Telegram’s increasing popularity, however, has prompted scrutiny from several countries in Europe, including France, on security and data breach concerns.

Russia’s representative to international organizations in Vienna, Mikhail Ulyanov, and several other Russian politicians were quick on Sunday to accuse France of acting as a dictatorship — the same criticism that Moscow faced when putting demands on Mr. Durov in 2014 and trying to ban Telegram in 2018.

“Some naive persons still don’t understand that if they play more or less visible role in international information space it is not safe for them to visit countries which move towards much more totalitarian societies,” Mr. Ulyanov wrote on X.

Elon Musk, billionaire owner of X, the social media platform formerly known as Twitter, said after reports of Mr. Durov’s detention: “It’s 2030 in Europe and you’re being executed for liking a meme.”

Several Russian bloggers called for protests at French embassies throughout the world at noon on Sunday. — Reuters

SpaceX to return Boeing’s Starliner astronauts from space next year — NASA

August 25, 2024 | 5:43 pm

WASHINGTON — Two NASA astronauts who flew to the International Space Station in June aboard Boeing’s faulty Starliner capsule will need to return to Earth on a SpaceX vehicle early next year, NASA officials said on Saturday, deeming issues with Starliner’s propulsion system too risky to carry its first crew home as planned.

Veteran NASA astronauts Butch Wilmore and Suni Williams, both former military test pilots, became the first crew to ride Starliner on June 5 when they were launched to the ISS for what was expected to be an eight-day test mission.

But Starliner’s propulsion system suffered a series of glitches in the first 24 hours of its flight to the ISS that has so far kept the astronauts on the station for 79 days as Boeing scrambled to investigate the issues.

NASA officials told reporters during a news conference in Houston that Wilmore and Williams, both former military test pilots, are safe and prepared to stay even longer. They will use their extra time to conduct science experiments alongside the station’s other seven astronauts, NASA said.

In a rare reshuffling of NASA’s astronaut operations, the two astronauts are now expected to return in February 2025 on a SpaceX Crew Dragon spacecraft due to launch next month as part of a routine astronaut rotation mission. Two of the Crew Dragon’s four astronaut seats will be kept empty for Wilmore and Williams.

The agency’s decision, tapping Boeing’s top space rival to return the astronauts, is one of NASA’s most consequential in years. Boeing had hoped its Starliner test mission would redeem the troubled program after years of development problems and over $1.6 billion in budget overruns since 2016.

Five of Starliner’s 28 thrusters failed during flight and it sprang several leaks of helium, which is used to pressurize the thrusters. It was still able to dock with the station, a football field-sized laboratory that has housed rotating crews of astronauts for over two decades.

NASA said in a statement Starliner will undock from the ISS without a crew in “early September.” The spacecraft will attempt to return to Earth autonomously, forgoing a core test objective of having a crew present and in control for the return trip.

“I know this is not the decision we had hoped for, but we stand ready to carry out the action’s necessary to support NASA’s decision,” Boeing’s Starliner chief Mark Nappi told employees in an email.

“The focus remains first and foremost on ensuring the safety of the crew and spacecraft,” Mr. Nappi said.

Several senior NASA officials and Boeing representatives made the decision during a Saturday morning meeting in Houston.

NASA’s space operations chief Ken Bowersox said agency officials unanimously voted for Crew Dragon to bring the astronauts home. Boeing voted for Starliner, which it said was safe.

Mr. Nelson told reporters at a news conference in Houston that he discussed the agency’s decision with Boeing’s new Chief Executive Officer Kelly Ortberg and was confident Boeing would continue its Starliner program. Mr. Nelson said he was “100 percent” certain the spacecraft would fly another crew in the future.

“He expressed to me an intention that they will continue to work the problems once Starliner is back safely,” Mr. Nelson said of Mr. Ortberg.

Boeing struggled for years to develop Starliner, a gumdrop-shaped capsule designed to compete with Crew Dragon as a second US option for sending astronaut crews to and from Earth’s orbit. The company is also struggling with quality issues on production of commercial planes, its most important products.

Starliner failed a 2019 test to launch to the ISS uncrewed, but mostly succeeded in a 2022 do-over attempt where it also encountered thruster problems. Its June mission with its first crew was required before NASA can certify the capsule for routine flights, but now Starliner’s crew certification path is uncertain.

The drawn-out mission has cost Boeing $125 million, securities filings show. The company arranged tests and simulations on Earth to gather data that it has used to try and convince NASA officials that Starliner is safe to fly the crew back home.

But results from that testing raised more difficult engineering questions and ultimately failed to quell NASA officials’ concerns about Starliner’s thrusters and its ability to make a crewed return trip, the most daunting and complex part of the test mission.

“There was just too much uncertainty in the prediction of the thrusters,” NASA’s commercial crew program chief Steve Stich told reporters.

Starliner’s now-uncertain path to receiving a long-sought NASA certification will add to the crises faced by Ortberg, who started this month with the goal to rebuild the planemaker’s reputation after a door panel dramatically blew off a 737 MAX passenger jet in midair in January. — Reuters

Anthony Fauci, former top US disease expert, recovering from West Nile virus — news report

August 25, 2024 | 5:02 pm

FORMER top US infectious disease expert Dr. Anthony Fauci is recovering from West Nile virus after being hospitalized with the mosquito-borne illness for nearly a week, he told Stat News on Saturday.

Mr. Fauci, 83, became the face of the US government’s efforts to contain the COVID-19 pandemic in 2020. He retired in December 2022 after 54 years at the US National Institutes of Health (NIH) including 38 serving as director of the National Institute of Allergy and Infectious Diseases (NIAID).

In an interview with Stat News on Saturday, Mr. Fauci said he had spent six days in a hospital starting Aug. 16 while doctors tried to discern the source of his weakness, fever and chills. He then tested positive for West Nile virus, and he told the digital news outlet: “I’ve never been as sick in my life.”

Reuters could not immediately reach him for comment.

The virus is spread by infected mosquitoes. There were about 2,500 cases reported in the US last year and 182 deaths from the disease, according to the US Centers for Disease Control and Prevention (CDC). There are no specific treatments or vaccine for the disease.

Mr. Fauci said he expects to make a full recovery although it may take several weeks for him to return to normal, Stat reported. — Reuters

Unilab announces passing of its first president Amb. Howard Q. Dee

August 24, 2024 | 1:00 am

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Philippines could provoke China at ‘another Chinese island’, says Global Times

August 23, 2024 | 1:01 pm

PHL-Flag-south-china-sea — PHILIPPINE COAST GUARD/HANDOUT VIA REUTERS

BEIJING – The Philippines could “stir up trouble” at yet another “Chinese” island in the South China Sea, China’s state-backed Global Times reported, after what it said were Manila’s “provocative intrusions” into waters at two other reefs in the region.

The Philippines is expanding military infrastructure on Thitu Island, which Beijing calls Zhongye Dao, to potentially invite warships and warplanes from countries outside of the region such as the United States and Japan, sabotaging peace and stability in the South China Sea, the nationalist tabloid reported, citing Chinese experts.

Zhongye Dao is a part of Nansha Qundao, as the Spratly Islands are known in China, but “illegally occupied” by the Philippines, Global Times reported late on Thursday.

The Philippines national security council and defense ministry did not immediately respond to Reuters requests for comment.

China claims sovereignty over nearly the whole South China Sea, deploying an armada of coast guard vessels to protect what it considers its territory. An international arbitral tribunal has said Beijing’s claim has no basis under international law.

The Philippines, Taiwan, Malaysia, Indonesia, Vietnam and Brunei contest the claims.

The Philippines occupies nearly 10 locations in the South China Sea, including Thitu Island. Manila will develop islands in the South China Sea that it considers part of its territory to make them more habitable for troops, Philippine military chief Romeo Brawner said in January.

In the latest clash between China and the Philippines in the South China Sea, Manila and Beijing accused each other on Monday of ramming vessels and performing dangerous maritime maneuvers.

The Philippines said two of its coast guard vessels “encountered unlawful and aggressive maneuvers” from Chinese vessels near Sabina Shoal while on their way to supply Filipino personnel stationed in two occupied islands.

Sabina Shoal is part of the Spratly Islands, which are claimed by China, the Philippines, Taiwan and Vietnam.

The United States condemned China’s actions. Its ambassador to Manila, MaryKay Carlson, said the US “stands with the Philippines in condemning the China Coast Guard’s dangerous maneuvers”.

The encounter came less than two weeks after an air incident between the Chinese and Philippines militaries in Scarborough Shoal, also in the South China Sea. – Reuters

Kamala Harris says she will aim to pass middle class tax cut as president

August 23, 2024 | 12:47 pm

CHICAGO – Democratic presidential candidate Kamala Harris said in her Democratic National Convention speech on Thursday that as president she will aim to pass a middle class tax cut.

Ms. Harris said her opponent, Republican presidential candidate Donald Trump, was not concerned about the middle class.

“Instead of the Trump tax hike we will pass a middle class tax cut that will benefit more than 100 million Americans,” Harris said in her speech, without giving further details.

Ms. Harris argued that the Republican former president’s plan for tariffs will serve as a price hike. Mr. Trump has threatened to use tariffs to achieve what he terms as fair trade relations and deals with other countries.

Ms. Harris called building the middle class “a defining goal of her presidency” and vowed, if elected, to create an “opportunity economy” where “everyone has the chance to compete and a chance to succeed.”

Last week, Ms. Harris outlined proposals to cut taxes for most Americans, ban “price gouging” by grocers and build more affordable housing.

Her agenda may run into resistance from both corporations and the US Congress, which rejected similar proposals when they came from Democratic US President Joe Biden.

Ms. Harris is aiming to draw a contrast with her opponent on broad economic policies, specifically on tariffs and taxes. – Reuters

Mexico’s planned judicial reform is ‘major risk’ to democracy, says US ambassador

August 23, 2024 | 12:45 pm

mexico-flag-815077_1920 — STOCK PHOTO | Image by Jorge Carlos from Pixabay

MEXICO CITY – The proposed reform of Mexico’s judiciary threatens the country’s democracy and its vital trade relationship with the United States, the top US diplomat in Mexico said on Thursday, while his Canadian counterpart warned of investor worries.

The controversial reform, set for a congressional vote in September, proposes that judges, including all Supreme Court justices, be elected by popular vote.

“Based on my lifelong experience supporting the rule of law, I believe popular direct election of judges is a major risk to the functioning of Mexico’s democracy,” US Ambassador to Mexico Ken Salazar said in a statement.

Mr. Salazar said the reform could make Mexico’s judiciary more vulnerable to influence from organized crime and undermine confidence in the country’s judicial system.

“Direct elections would also make it easier for cartels and other bad actors to take advantage of politically motivated and inexperienced judges,” he said.

The comments are the strongest to date by Mexico’s largest trading partner and represent a significant ratcheting up of tensions between the two countries over the issue.

Canadian Ambassador Graeme Clark also criticized the reform at an event on Thursday.

“My investors are concerned, they want stability, they want a judicial system that works if there are problems,” he said.

Mr. Clark stipulated that the two nations’ governments have “excellent relations” and he was only transmitting investors’ concerns.

Mexico’s presidency and foreign ministry did not immediately respond to a request for comment.

Mexican ruling party Senator Ricardo Monreal told journalists on Thursday evening, though, that he thought Mr. Salazar had “not read the reform all the way through” and argued that judges were elected in several US states.

Incoming President Claudia Sheinbaum, who takes office in October, has defended outgoing President Andres Manuel Lopez Obrador’s judicial proposal, saying she agrees judges should be elected.

Mr. Salazar said the debate around the reform, and the politics of the process, were it to be approved, would threaten the US-Mexico trade relationship, “which relies on investors’ confidence in Mexico’s legal framework.”

“Any judicial reform should have the right kinds of safeguards that will ensure the judicial branch will be strengthened and not subject to the corruption of politics,” Mr. Salazar said.

Mr. Lopez Obrador argues the reform, which proposes that judges be elected via votes in 2025 and 2027, will help combat impunity and corruption.

But markets have been on edge since Mr. Lopez Obrador’s Morena party won more congressional seats than forecast in a June national election, effectively guaranteeing it the ability to pass constitutional reforms when the new Congress takes office in September.

Mexico’s stock market fell about 0.6% and the peso about 1 % on Thursday. – Reuters

Beyonce’s representative denies she will perform at Democratic convention, report says

August 23, 2024 | 12:42 pm

839px-Beyoncé_-_Tottenham_Hotspur_Stadium_-_1st_June_2023_(47_of_118)_(52946286530)_(cropped) — By Raph_PH - BeyonceSpurs010623 (47 of 118), CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=133462482

By Raph_PH – BeyonceSpurs010623 (47 of 118), CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=133462482

A representative for Beyoncé has denied reports she will perform on the final night of the Democratic National Convention in Chicago on Thursday, the Hollywood Reporter reported.

There was no official confirmation or denial after the entertainment website TMZ and The Hill reported the singer would perform to cap off the night, when Vice President Kamala Harris formally accepts the Democratic Party nomination.

“Beyoncé was never scheduled to be there,” a representative for the singer told The Hollywood Reporter. “The report of a performance is untrue.”

Ms. Harris’ campaign has declined to comment on any special guests.

Ms. Harris has adopted Ms. Beyoncé’s “Freedom” as her campaign rally song, and took the stage in Chicago on Monday to the tune, increasing speculation that Beyoncé would perform.

Ms. Beyoncé has reportedly given Ms. Harris permission to use the song. She has previously backed Democrats, including US President Joe Biden in the last election.

In a post ahead of the 2020 presidential election, Ms. Beyoncé posted a photo of herself on Instagram wearing a Biden-Harris face mask and encouraged her millions of followers to vote. “Come thru, Texas! #VOTE,” she wrote.

Country band The Chicks performed the national anthem at the convention. The Chicks performed with Ms. Beyonce at the 2016 Country Music Awards.

Earlier this year, Ms. Beyoncé released Cowboy Carter, an album with a heavy country influence, that critics said had political undertones, speaking to the broader struggles of Black Americans and the fight for recognizing Black history.

Ms. Harris attended one of the megastar’s Washington, D.C., stops last year for her popular Renaissance tour.

Ms. Harris praised Ms. Beyoncé earlier this year on X, writing: “Thank you for reminding us to never feel confined to other people’s perspective of what our lane is. You have redefined a genre and reclaimed country music’s Black roots. Your music continues to inspire us all.” – Reuters

Chinese entities turn to Amazon cloud and its rivals to access high-end US chips, AI

August 23, 2024 | 12:39 pm

BEIJING/SINGAPORE/NEW YORK – State-linked Chinese entities are using cloud services provided by Amazon or its rivals to access advanced US chips and artificial intelligence capabilities that they cannot acquire otherwise, recent public tender documents showed.

The US government has restricted the export of high-end AI chips to China over the past two years, citing the need to limit the Chinese military’s capabilities.

Providing access to such chips or advanced AI models through the cloud, however, is not a violation of US regulations since only exports or transfers of a commodity, software or technology are regulated.

A Reuters review of more than 50 tender documents posted over the past year on publicly available Chinese databases showed that at least 11 Chinese entities have sought access to restricted US technologies or cloud services.

Among those, four explicitly named Amazon Web Services (AWS) as a cloud service provider, though they accessed the services through Chinese intermediary companies rather than from AWS directly.

The tender documents, which Reuters is the first to report on, show the breadth of strategies Chinese entities are employing to secure advanced computing power and access generative AI models. They also underscore how US companies are capitalizing on China’s growing demand for computing power.

“AWS complies with all applicable US laws, including trade laws, regarding the provision of AWS services inside and outside of China,” a spokesperson for Amazon’s cloud business said.

AWS controls nearly a third of the global cloud infrastructure market, according to research firm Canalys. In China, AWS is the sixth-largest cloud service provider, according to research firm IDC.

Shenzhen University spent 200,000 yuan ($27,996) on an AWS account to gain access to cloud servers powered by Nvidia A100 and H100 chips for an unspecified project, according to a March tender document. It got this service via an intermediary, Yunda Technology Ltd Co, the document showed.

Exports to China of the two Nvidia chips, which are used to power large-language models (LLM) such as OpenAI’s ChatGPT, are banned by the US.

Shenzhen University and Yunda Technology did not respond to requests for comment. Nvidia declined to comment on Shenzhen University’s spending or on any of the other Chinese entities’ deals.

Zhejiang Lab, a research institute developing its own LLM, GeoGPT, said in a tender document in April that it intended to spend 184,000 yuan to purchase AWS cloud computing services as its AI model could not get enough computing power from homegrown Alibaba.

A spokesperson for Zhejiang Lab said that it did not follow through with the purchase but did not respond to questions about the reasoning behind this decision or how it met its LLM’s computing power requirements. Alibaba’s cloud unit, Alicloud, did not respond to a request for comment.

Reuters could not establish whether or not the purchase went ahead.

The US government is now trying to tighten regulations to restrict access through the cloud.

“This loophole has been a concern of mine for years, and we are long overdue to address it,” Michael McCaul, chair of the US House of Representatives Foreign Affairs Committee, told Reuters in a statement, referring to the remote access of advanced US computing through the cloud by foreign entities.

Legislation was introduced in Congress in April to empower the commerce department to regulate remote access of US technology, but it is not clear if and when it will be passed.

A department spokesperson said it was working closely with Congress and “seeking additional resources to strengthen our existing controls that restrict PRC companies from accessing advanced AI chips through remote access to cloud computing capability.”

The commerce department also proposed a rule in January that would require US cloud computing services to verify large AI model users and report to regulators when they use US cloud computing services to train large AI models capable of “malicious cyber-enabled activity”.

The rule, which has not been finalized, would also enable the commerce secretary to impose prohibitions on customers.

“We are aware the commerce department is considering new regulations, and we comply with all applicable laws in the countries in which we operate,” the AWS spokesperson said.

CLOUD DEMAND IN CHINA

The Chinese entities are also seeking access to Microsoft’s cloud services.

In April, Sichuan University said in a tender document it was building a generative AI platform and purchasing 40 million Microsoft Azure OpenAI tokens to support the delivery of this project. The university’s procurement document in May showed that Sichuan Province Xuedong Technology Co Ltd supplied the tokens.

Microsoft did not respond to requests for comment. Sichuan University and Sichuan Province Xuedong Technology did not respond to requests for comment on the purchase.

OpenAI said in a statement its own services are not supported in China and that Azure OpenAI operates under Microsoft’s policies. It did not comment on the tenders.

The University of Science and Technology of China’s (USTC) Suzhou Institute of Advanced Research said in a tender document in March that it wanted to rent 500 cloud servers, each powered by eight Nvidia A100 chips, for an unspecified purpose.

The tender was fulfilled by Hefei Advanced Computing Center Operation Management Co Ltd, a procurement document showed in April, but the document did not name the cloud service provider and Reuters could not determine its identity.

USTC was added to a US export control list known as the ‘Entity List’ in May for acquiring US technology for quantum computing that could help China’s military, and involvement in its nuclear program development.

USTC and Hefei Advanced Computing Center did not respond to requests for comment.

BEYOND RESTRICTED AI CHIPS

Amazon has offered Chinese organizations access not only to advanced AI chips but also to advanced AI models such as Anthropic’s Claude which they cannot otherwise access, according to public posts, tenders and marketing materials reviewed by Reuters.

“Bedrock provides a selection of leading LLMs including prominent closed-source models such as Anthropic’s Claude 3,” Chu Ruisong, President of AWS Greater China, told a generative AI-themed conference in Shanghai in May, referring to its cloud platform.

In various Chinese-language posts for AWS developers and clients, Amazon highlighted the opportunity to try out “world-class AI models” and mentioned Chinese gaming firm Source Technology as one of its clients using Claude.

Amazon has dedicated sales teams serving Chinese clients domestically and overseas, according to two former company executives.

After Reuters contacted Amazon for comment, it updated dozens of posts on its Chinese-language channels with a note to say some of its services were not available in its China cloud regions. It also removed several promotional posts, including the one about Source Technology. Amazon did not give a reason for removing the posts and did not answer a Reuters query on that.

“Amazon Bedrock customers are subject to Anthropic’s end user license agreement, which prohibits access to Claude in China both via Amazon’s Bedrock API (application programming interface) and via Anthropic’s own API,” the AWS spokesperson said.

Anthropic said it does not support or allow customers or end-users within China to access Claude.

“However, subsidiaries or product divisions of Chinese-headquartered companies may use Claude if the subsidiary itself is located in a supported region outside of China,” an Anthropic spokesperson said.

Source Technology did not respond to a request for comment. – Reuters

China trials cargo drone with biggest payload capacity yet

August 23, 2024 | 12:33 pm

BEIJING – Chinese aviation logged a new milestone with a test flight of an unmanned civilian drone capable of carrying up to 3.2 metric tons of cargo, as drone makers trial larger and larger drones in anticipation of future domestic demand.

The unmanned SA750U developed by a drone maker based in southern Hunan province completed a 40-minute test flight on Thursday morning, the official Hunan Daily reported on Friday, adding the aircraft can operate as high as 7,300 meters (24,000 feet) and fly as far as 2,200 kms (1,367 miles).

Manufacturers in the world’s top drone-making nation are ramping up test flights as China loosens airspace curbs and rolls out incentives to build up a low-altitude economy which authorities say could become a 2-trillion-yuan ($280 billion) industry by 2030, a four-fold gain from 2023.

The test flight of SA750U came quickly on the heels of the trial of a drone earlier this month by a Sichuan-based manufacturer that boasted a payload capacity of 2 tons. Two months ago, state-owned Aviation Industry Corp of China tested a drone with a capacity of just 700 kg.

Cargo drones promise shorter delivery times and lower transport costs, Chinese industry insiders say. They can also take off or land at sites that lack conventional aviation infrastructure, such as rooftop spaces in heavily built-up cities.

China has already begun commercial deliveries by drone. In May, a firm under delivery giant SF Express started delivering fresh fruit from the island of Hainan to Guangdong.

In a report this year, the government identified the low-altitude economy as a new growth engine for the first time, with vertical mobility seen as a “new productive force” in areas such as passenger and cargo transport. – Reuters

Inflation could further ease in Q4

August 23, 2024 | 12:34 am

Food stall-vendor — Various dishes are on display at a food stall along Kalaw Extension in Manila. — PHILIPPINE STAR/RYAN BALDEMOR

By Luisa Maria Jacinta C. Jocson, Reporter

PHILIPPINE headline inflation could ease to less than 2% in the fourth quarter of this year, Nomura Global Markets Research said in a report.

Nomura said it is “penciling in a trajectory in which headline inflation drops to less than 2% by fourth quarter 2024, a substantial decline from 4.4% in July, and thereafter hovering within a similar range for most of the first half of 2025.”

Nomura said it sees inflation settling at 2.8% this year and further easing to 2.3% in 2025.

These forecasts are lower than the Bangko Sentral ng Pilipinas’ (BSP) own projections. The central bank expects inflation to average 3.4% in 2024 and 3.1% next year.

Nomura said its inflation outlook is mainly driven by the recent cut in tariffs on rice imports.

In June, President Ferdinand R. Marcos, Jr. issued an executive order reducing the tariff on rice imports to 15% from 35%, until 2028 to tame rice prices.

Rice inflation, which accounts for nearly half of overall inflation, eased to 20.9% in July from 22.5% a month ago. This marked the fourth straight month of slower rice inflation.

Nomura said it sees the BSP further cutting rates for the rest of this year.

“Overall, we reiterate our forecasts that BSP will cut by 25 basis points (bps) each in the last two meetings of the year, i.e. in October and December,” it said.

The Monetary Board last week reduced the target reverse repurchase (RRP) rate by 25 bps to 6.25% from the over 17-year high of 6.5%.

BSP Governor Eli M. Remolona, Jr. said that the central bank could deliver one more 25-bp cut in the fourth quarter.

“Beyond that, we also expect BSP to cut in the first three meetings in 2025 before pausing from there. This would bring the RRP rate to 5% by May 2025, i.e. a total of 150-bp cuts in this cycle,” it added.

Nomura said the BSP’s next policy decisions will largely be driven by the inflation path in the coming months.

“If inflation continues on a downward path, BSP can look to further remove the restrictiveness in the monetary stance to support a recovery in domestic demand and overall growth.”

“Moreover, we continue to think the Fed turning dovish will play a role, and its easing cycle underway from September, as our US team expects, should support further BSP’s consecutive rate cuts in the coming months,” it added.

The US Federal Reserve appears to be very much on track for an interest rate cut in September after a “vast majority” of officials said such an action was likely, according to the minutes of the US central bank’s July 30-31 meeting, Reuters reported.

The minutes, which were released on Wednesday, even showed some policy makers would have been willing to reduce borrowing costs at last month’s gathering.

The policy-setting Federal Open Market Committee left its benchmark interest rate unchanged in the 5.25%-5.5% range on July 31 but opened the door to a cut at the Sept. 17-18 meeting.

Financial markets have been expecting the September meeting to kick off the Fed’s policy easing, with as much as a full percentage point worth of rate cuts expected by the end of this year.

PESO IMPACT
Meanwhile, Bank of America (BofA) Global Research in a separate report noted the recent impact of the BSP’s policy easing on the peso.

“The Philippine peso has strengthened versus the US dollar, but less so compared to peers in the region, taking cues from the BSP’s rate cut in the last meeting and dovish guidance for another possible cut this year,” it said.

BofA now expects the peso to average P56 against the greenback by yearend from its earlier forecast of P57 per dollar.

“With the Fed cutting cycle likely commencing soon, Philippine peso could still appreciate versus the US dollar over time, which would keep BSP relatively comfortable on FX (foreign exchange) moves,” it said.

However, BofA also noted that the peso may be sensitive to the Fed’s moves.

“Lower rates in the Philippines have raised the likelihood of even a narrower interest rate buffer against US dollar rates. That may gain importance as a factor for corporate hedging behavior once the US dollar stabilizes,” it said.

“This pressure could increase if the US dollar strength picks up or US yields move higher again, increasing Philippine peso sensitivity to the US policy outlook.”

The peso closed at P56.333 against the dollar on Thursday, strengthening by 16.7 centavos from its P56.50 finish on Wednesday. This was its strongest finish in more than four months or since its P56.315 close on April 2.

The local currency has been trading at the P57- or P58-a-dollar level in the past months.

“The Philippine peso has weakened against most Asian peers this year, partly as a result of BSP’s dovish bias. With the next policy meeting some time away, US dollar direction could be the key factor driving the peso in the near term,” it added.

InstaPay, PESONet transactions jump by 34.6%

August 23, 2024 | 12:33 am

Phone-hand — STOCK PHOTO | Image by David Dvořáček from Unsplash

THE VALUE of transactions done through InstaPay and PESONet climbed by 34.6% in the first seven months, according to data from the Bangko Sentral ng Pilipinas (BSP).

Central bank data showed that transactions coursed through the automated clearing houses jumped to P9.45 trillion as of end-July from P7.02 trillion in the same period a year ago.

The combined volume of transactions done via InstaPay and PESONet surged by 64.6% to 786.2 million from 477.5 million year on year.

Broken down, the value of PESONet transactions rose by 28.4% to P5.56 trillion as of July from P4.33 trillion a year ago.

The volume of transactions that went through the payment gateway likewise went up by 8.4% to 56.84 million as of end-July from 52.43 million a year ago.

Meanwhile, the value of transactions done through InstaPay stood at P3.9 trillion at end-July, higher by 45% from P2.69 trillion in the same period in 2023.

The volume of transactions coursed through the clearing house soared by 71.6% to 729.3 million from 425.08 million a year ago.

PESONet and InstaPay are automated clearing houses launched in December 2015 under the central bank’s National Retail Payment System framework.

PESONet caters to high-value transactions and may be considered as an electronic alternative to paper-based checks, while InstaPay is a real-time, low-value electronic fund transfer facility for transactions up to P50,000 and is mostly used for remittances and e-commerce.

The share of online payments in the total volume of monthly retail transactions rose to 52.8% in 2023 from 42.1% a year earlier, latest data from the BSP showed.

This surpassed the central bank’s target of digitalizing 50% of the volume of retail payments by end-2023.

The volume of digital payments stood at 2.62 billion in 2023, higher than the 2.35 billion non-digital transactions. Meanwhile, the value of online payments amounted to $110.5 billion in 2023, also higher than the $89.3-billion non-digital transactions.

The BSP said that the top contributor to the rise in digital payments was merchant payments, which accounted for the bulk or 64.9% of monthly digital payments volume.

The central bank is targeting to achieve a 60-70% share of digital payments over total retail payments volume by 2028, in line with the Philippine Development Plan. — Luisa Maria Jacinta C. Jocson