Aurelia Butler

Here’s what to look out for in the week ahead from Marcela Ayres in Brasilia, Kevin Buckland in Tokyo, Ira Iosebashvili in New York, and Dhara Ranasinghe and Amanda Cooper in London.1/ FOUR, AND COUNTING For ECB policymakers, their last meeting in October must seem a lifetime ago. Since then, Donald Trump’s U.S. election win means the euro area faces renewed economic pain with likely tariffs, and governments in heavyweight Germany and France have collapsed, with the latter engulfed in its second political crisis in six months. All that has dealt a blow to sentiment in a bloc where business activity is deteriorating – and the euro has slid.The ECB, also no stranger to hard times, is expected to deliver its fourth quarter-point rate cut on Thursday, with more cuts anticipated.A pick-up in inflation means a bigger rate cut is unlikely. And yes, you guessed it, ECB chief Christine Lagarde will likely stress caution and data-dependency. 2/ A CUT AND A HARD PLACE    Australia’s central bank, which meets on Tuesday, is in a tight spot. The economy is sputtering, the currency is at four-month lows and yet inflation is sufficiently persistent to make repeated rate cuts unlikely. The chances of a quarter-point reduction are below 15% and rates are expected to take until July to fall even 50 bps. The Bank of Canada, by contrast, looks set to answer investors’ wishes for more cuts. It has said inflation is a thing of the past and more cuts could be in the offing, leaving the market split on whether its Dec. 11 meeting will yield a 25- or even a 50-bps cut. Enter the most dovish of the G10 central banks – the Swiss National Bank. With inflation at 0.7%, it is expected to cut rates by 50 bps on Dec. 12.3/ NO HURRY Markets gaming out the trajectory for Federal Reserve policy in the months ahead get a U.S. inflation reading on Wednesday. The Fed has shaved 75 basis points (bps) off interest rates since September, following months of cooling inflation – expectations are towards another 25 bps cut later in December. But the path ahead is less clear. The economy has proved stronger than expected, and Fed Chair Jerome Powell has said there is little reason to hurry the pace of cuts.A strong number could bolster that view, potentially reigniting a bond selloff and strengthening the dollar if investors decide to further unwind bets on how much the Fed will cut next year. Economists polled by Reuters expect consumer prices to have risen 0.2% in November – matching the October rise. 4/ BITCOIN BREAKOUTThere was something inevitable in Bitcoin’s record surge past $100,000 after Trump’s election promises to make America “the crypto capital of the planet”.    But it did so in resounding fashion, vaulting from below $99,000 to as high as $103,619 in the space of two hours before catching its breath. The catalyst may have been confirmation of Trump’s choice of crypto veteran Paul Atkins to run the SEC. Of course, $100,000 is just a number – but one the faithful and the sceptical regard as a major milestone in Bitcoin’s 16-year journey towards legitimacy.    Recall though that its history is written in breathless rallies and white-knuckle reversals. While numbers like $150,000 are already being mentioned for 2025, the token is flashing overbought on daily, weekly, monthly and quarterly charts.5/ FINAL ACTBrazil’s central bank holds its final meeting under Governor Roberto Campos Neto on Wednesday, with bets on a sharper 75 bps hike after two raises that brought rates to 11.25%. Campos Neto, set to hold a news conference on Dec. 19, said a positive fiscal shock could relieve pressure on the exchange rate and long-term yields in Latin America’s largest economy. But the government’s widely anticipated fiscal package disappointed markets, driving up risk premiums on major assets. Brazil’s real has weakened some 20% against the dollar year-to-date, and strong economic resilience – on display in the third quarter – is fuelling inflation worries. As policymakers grapple with mounting challenges, Congress debates measures to curb spending and contain debt growth. (Graphics by Sumanta Sen, Kripa Jayaram and Prinz Magtulis, Compiled by Karin Strohecker, Editing by Barbara Lewis (JO:LEWJ)) More

(Reuters) – The Bank of Canada will slash interest rates by a half percentage point at a second consecutive meeting on Dec. 11, according to a majority of economists polled by Reuters, many of whom changed their view on news of a sharp rise in unemployment.The BoC is already well in front of its peers for both size of rate cuts and speed. It has reduced rates by 125 bps, nearly double that of its southern neighbour, the U.S. Federal Reserve, which has hammered the Canadian dollar.News on Friday Canada’s jobless rate spiked to an 8-year high – outside the pandemic period – of 6.8% made several forecasters change their call to 50 bps from 25 bps. That rise came despite news over twice the number of jobs expected were added to Canadian payrolls in November.Nearly 80% of respondents, 21 of 27, predicted the Bank to cut the overnight rate by 50 bps on Dec. 11 to 3.25%. The rest forecast a quarter-point reduction. While interest rate futures traders had been pricing in the larger move, economists argue the decision is still nuanced. Some who switched to 50 said this did not mean they thought this was the correct policy choice. Derek Holt at Scotiabank (TSX:BNS) was one of several who changed to 50 bps on Friday. “I hate the call because I think it’s the wrong thing to do, but they are likely to take the easy way out relative to market pricing while arguing that the risk of doing too much is less than the risk of doing too little that could see inflation undershoot,” said Holt.  “I hope that (BoC Governor Tiff) Macklem will sound more circumspect and cautious if he does go big as multiple arguments lean toward being very cautious on inflation into 2025.”Inflation rose to the 2.0% central bank target in October, the first rise in the annual rate since May, but that was in line with the BoC’s recent predictions. Signs of improvement in parts of the economy suggest there is a risk it rises further.Among the big five Canadian banks, only TD expects 25 bps. James Orlando, senior economist at TD, noted that when the BoC stepped up its rate-cutting pace to 50 bps in October, there were concerns at the time that it was behind the curve with both growth and inflation undercutting expectations. “But since then, economic data have shown more resilience, with consumer spending, the real estate market, and price pressures rebounding,” Orlando wrote. “Even with the messiness of (the) employment report, the economy continues to add jobs, reinforcing our view that the labour market is on solid foundations. We think this should be enough to convince the central bank to revert to a 25 bp cut next week, but it will remain a close call,” he noted.The BoC will reduce rates by at least another 75 bps to 2.50% or lower by end-2025, according to over 80% of respondents. That was a stronger majority than just over half in an October poll.One potential serious threat to the economy in the coming months is much more difficult to forecast. Since the October policy meeting, U.S. President-elect Donald Trump has threatened to impose a 25% tariff on imports from Canada.All 11 economists who responded to an additional question said a recession was likely if Trump follows through on his tariff threat. Eight said the downturn would be shallow while three said severe. (Other stories from the Reuters global economic poll) (Reporting and polling by Mumal Rathore and Pranoy Krishna; Editing by Ross Finley and Diane Craft) More

(Reuters) -Donor countries have pledged a record $100 billion three-year replenishment of the World Bank’s fund for the poorest nations, providing a vital lifeline for their struggles against crushing debts, climate disasters, inflation and conflict.The World Bank made the announcement on Friday in Seoul at a pledging conference for the International Development Association, which provides grants and very low interest loans to 78 low-income countries. The total exceeds the previous $93 billion IDA replenishment announced in December 2021. Countries will contribute $23.7 billion directly to IDA, only marginally increased in dollar terms from the $23.5 billion pledged in 2021, but the fund will issue bonds and employ other financial leverage to stretch that to the targeted $100 billion in grants and loans through mid-2028.The two-day pledging conference fell short of the $120 billion goal African heads of state had called for, partly because the U.S. dollar’s strength – pushed up by Donald Trump’s U.S. presidential election victory – diminished the dollar value of significant increases in foreign currency contributions by several countries.At a G20 leaders’ summit in Brazil last month, Norway increased its pledge by 50% from 2021 to 5.024 billion krone. That’s $455 million at current exchange rates, but at the start of 2024, it would have been worth $496 million.South Korea boosted its pledge by 45% to 846 billion won, ($597 million), Britain by 40% to 1.8 billion pounds and Spain by 37% to 400 million euros. Spain’s pledge was worth $423 million on Friday, $10 million less than the day it was announced in October.U.S. President Joe Biden pledged a $4 billion U.S. contribution, up from $3.5 billion in the previous round.DOMESTIC RESISTANCEThe World Bank did not immediately reveal the amounts of other pledges, but said that 17 donor countries had committed to raising their contributions by more than 25%, with 10 offering increases of 40% or more.”While some donors made some very important increases, a lot of historically big IDA donors did not,” said Clemence Landers, senior policy fellow at the Center for Global Development, a Washington think tank. “This is a sign of the times: for a lot of governments, global poverty issues are often a tough sell domestically.”Still the pledges won some plaudits from non-profit groups, with ONE Campaign CEO Okonkwo Nwuneli calling it a “bold breakthrough” in leadership to aid some 40 African IDA recipients.”ONE will be holding all donors to account, ensuring that these pledges are delivered in full, and we will be working closely with African governments and our civil society partners to ensure that the resources are maximized for impact,” Nwuneli said.World Bank President Ajay Banga said in a statement that the IDA will be able to stretch the new pledges further because of work done to optimize the development lender’s balance sheet over the past two years, increasing its lending capacity by some $150 billion over 10 years.The bank’s ability to leverage contributions will transform “modest contributions into life-changing investments,” Banga said in an open letter to shareholders and client countries.About 35 countries have graduated from IDA to become donors, including China, South Korea, Chile, Jordan and Turkey.Banga said the resources will allow the bank to put job creation at the center of its work, even as it addresses climate change and other global crises.”In this context, IDA is not just a financial instrument; it is a catalyst for job creation,” Banga said. “It provides countries with the resources to build infrastructure, improve education and health systems and foster private sector growth.”($1 = 0.9455 euros) More