Aurelia Butler

The ECB left interest rates unchanged last month but made clear that its next move will be a cut, most likely on June 6, provided wage and inflation data stay on their current, relatively benign path. “It was seen as plausible that the Governing Council would be in a position to start easing monetary policy restriction at the June,” the ECB said in the account of the April 10-11 meeting.Policymakers appeared so confident about the outlook that some even made the case to start easing in April, a suggestion eventually overruled by a wide majority, who argued for patience until more wage and price data came in. The few dissenters argued, as ECB President Christine Lagarde described last month, that ECB rates will continue to restrict the economy even after an initial cut, so past policy tightening will continue to work through the economy. Speaking in the weeks since the April meeting, policymakers have confirmed that the June 6 cut is all but a done deal but the rate path beyond that is uncertain, given inflation volatility and a possible delay by the U.S. Federal Reserve to its own rate cuts. Most, however, argue that June will not be a singular, one-off cut, even if the timing for further moves should not be predetermined in advance, to give policymakers flexibility in the case of abrupt changes in economic conditions.In another small shift in the bank’s message, policymakers now see the cost of undershooting the inflation target on a par with overshooting, a reversal for many who argued that too rapid price growth was the bigger risk. “The risk of undershooting the inflation target and eventually having to pay too high a price in terms of declining activity was now seen as being at least as high as the risk of acting too early and overshooting the target over the medium term,” the ECB added. Markets now see up to three rate cuts this year, or two beyond June, most likely in September and December, when the ECB also publishes new economic projections.Euro zone inflation held steady at 2.4% last month and is expected to oscillate around this level for the rest of the year before easing back to the ECB’s 2% target in 2025.Policymakers emphasized throughout the account that incoming data kept confirming the bank’s own projections, which was increasing the ECB’s confidence in the quality of forecasts after a few bumpy years when these figures were wide of the mark. While the ECB has publicly declared that policy was not dependent on Fed moves, decisions taken by the world’s biggest central bank impact financing conditions around the globe, limiting the ECB’s freedom since a widening rate differential weakens the euro and pushes up imported inflation. More

LONDON (Reuters) -Global shares rose to one-month highs on Friday while the dollar held steady, giving commodities a boost, after softer U.S. jobs data gave investors confidence that interest rates will start to decline this year.In currencies, the pound headed for a modest weekly loss after the Bank of England (BoE) on Thursday paved the way for the start of rate cuts as soon as next month, while data showed the UK economy exited a mild recession in the first quarter of this year.The MSCI All-World index was up 0.3%, as equities in Asia and Europe took their lead from a rally on Wall Street overnight, after data showed the number of people filing for jobless benefits for the first time rose more than expected, suggesting the U.S. economy is beginning to slow.Rather than putting the brakes on the stock market, the numbers are giving investors confidence in the ability of the Federal Reserve to cut interest rates this year, as central banks in Europe have started to lower borrowing costs.The STOXX 600 rose 0.8% towards record highs on Friday, heading for one of its strongest weekly performances this year. U.S. stock futures were up 0.3-0.4%.”What could have been a crack in the overall market bullishness appearing has turned into an opportunity to get long again and that’s what we’re seeing now in May,” David Morrison, market strategist at Trade Nation, said. Thursday’s weekly jobless data followed last week’s report that showed U.S. job growth slowed more than expected in April and the increase in annual wages fell below 4.0% for the first time in nearly three years.INFLATION AHEADMarkets will be closely watching the April U.S. producer price index and the consumer price index out next week for signs that inflation has resumed its downward trend towards the Federal Reserve’s 2% target rate.Hotter-than-expected inflation reports last month quashed any lingering expectations of near-term U.S. rate cuts. Markets are now fully pricing in a cut only in November though there is still a chance of the Fed moving in September. In contrast, markets now imply a 50-50 chance of a BoE cut in June and are almost fully priced for August. They also imply an 88% chance the European Central Bank will ease in June.BOE Governor Andrew Bailey said there could be more reductions than investors expect, the latest sign of the growing divergence between the Europe and U.S. rate outlooks.Sterling was steady at $1.2524, having touched a more than two-week low of $1.2446 on Thursday.Traders currently anticipate roughly 45 basis points of cuts this year from the Fed. In comparison, traders are pricing in 58 bps of easing from the BoE this year, while anticipating 70 bps of cuts from the ECB. The dollar index, which measures the U.S. currency versus six others, was up 0.1% at 105.28, as the euro held steady at $1.0779, set for its fourth straight week of gains on the dollar.The yen remains in focus after last week’s suspected rounds of interventions from Japanese authorities totalling nearly $60 billion aimed at pulling the yen off its 34-year lows of 106.245 per dollar touched on April 29.On Friday, the yen was last at 155.74 per dollar, with Japan’s Finance Minister Shunichi Suzuki repeating Tokyo’s recent warnings that it was ready to take action against disorderly currency moves.Ben Bennett, Asia-Pacific investment strategist at Legal And General Investment Management, said the Ministry of Finance wants to avoid spikes in volatility which could negatively impact domestic financial markets. “So like we suspect a few days ago, they will intervene if intraday moves become too large. But I don’t think they’ll push against a steady depreciation, like we’ve seen since.” With the dollar taking a breather, commodities pushed higher. Brent crude futures were up 0.6% at $84.35 a barrel, while copper futures rose 1.6% to $10,066 a tonne and gold rose 1.1% to $2,371 an ounce. More

“I still have that belief” that interest rates can be lowered this year, Bostic said in an interview with Reuters published earlier Friday, despite inflation remaining well above the central bank’s target during the first quarter of this year.”There is an expectation for most of the employers I talk to that they will get back to pre-pandemic wage growth,” Bostic said in the interview. And with the possible exception of tech companies, “we’re hearing from pretty much everyone … their pricing power is pretty much at its limit.”That should result in inflation falling back as the year progresses, allowing the central back to start cutting interest rates.”I don’t think we’re going to know that for at least a couple of months,” he added. “I’m hopeful that we do continue to see this slowing down because my outlook really says that you’re going to have to see some slowing down in order to get inflation back to our 2% target … We still are seeing robust job growth.”The Federal Open Market Committee last week voted to hold the benchmark interest rate steady again in the 5.25%-5.50% range, a decision that Bostic supported.The Atlanta Fed head said last month that he would be open to lifting interest rates if inflation remains at elevated levels, comments that resulted in a sharp rise in bond yields and a selloff on Wall Street.”If inflation stalls out or even starts moving in the opposite direction, away from our target, I don’t think we’ll have any other option but to respond to that,” Bostic said in April. More

NEW YORK (Reuters) – A cryptocurrency nonprofit has launched a new political action committee (PAC) to raise money from its 440,000 members for crypto-friendly politicians, and is endorsing a bipartisan slate of candidates running in the House of Representatives and the Senate.Stand With Crypto’s PAC joins a deep-pocketed effort from the cryptocurrency industry to put political candidates in office who are committed to supporting crypto and blockchain.Crypto super PACs Fairshake, Defend American Jobs and Protect Progress have so far raised more than $110 million this election cycle, according to Federal Election Commission records.The involvement in this year’s elections comes as the industry faces some scrutiny after FTX founder Sam Bankman-Fried was found guilty last year of stealing from customers. Prosecutors allege he used those funds to donate more than $100 million to U.S. political campaigns.PACs like Stand With Crypto are typically set up to gather funds for candidates or political causes; they differ from super PACs, which can receive donations of unlimited size but cannot coordinate with campaigns directly.Endorsements include Jim Banks, a Republican running for Senate in Indiana; Jim Justice, a Republican running for Senate in West Virginia; Shomari Figures, a Democrat running to represent Alabama’s Second District; Eddy Morales, a Democrat running to represent Oregon’s Third District; and Troy Downing, a Republican running to represent Montana’s Second District.”The goal is to endorse candidates and support candidates that are protecting the rights of our advocates of Stand With Crypto throughout November,” Nick Carr, chief strategist at Stand With Crypto, told Reuters.The cryptocurrency industry says it is already playing a role this election cycle. Crypto super PAC Defend American Jobs claimed victory after four endorsed candidates won in their Indiana primaries on Tuesday, including Banks and Mark Messmer, a Republican running to represent the state’s Eighth District. More

LONDON (Reuters) -Britain’s economy grew by the most in nearly three years in the first quarter of 2024, ending the shallow recession it entered in the second half of last year and delivering a boost to Prime Minister Rishi Sunak ahead of an election.Gross domestic product expanded by 0.6% in the three months to March, the Office for National Statistics said, the strongest growth since the fourth quarter of 2021 when it rose by 1.5%.The data was welcomed by Sunak who said the economy had “turned a corner”, while the opposition Labour Party, which has a large lead in opinion polls, accused Sunak and finance minister Jeremy Hunt of being out of touch.”There is no doubt it has been a difficult few years, but today’s growth figures are proof that the economy is returning to full health for the first time since the pandemic,” Hunt said.Labour contested those claims. “This is no time for Conservative ministers to be doing a victory lap and telling the British people that they have never had it so good,” said Rachel Reeves, who hopes to succeed Hunt as finance minister after an election expected later this year.First-quarter economic growth was faster than the 0.3% in the euro zone and the 0.4% quarterly growth in the United States.However, Britain has still had one of the slowest recoveries from the effects of the coronavirus pandemic among major advanced economies, exacerbated by a surge in European natural gas prices after Russia invaded Ukraine in 2022.At the end of the first quarter of 2024, the country’s economy was just 1.7% bigger than its level in late 2019, before the pandemic, with only Germany in the G7 faring worse.”Despite the better near-term outlook, the improvement in GDP growth looks likely to be constrained by the ongoing weakness in productivity growth as well as reduced scope to increase employment levels,” Yael Selfin, chief economist at KPMG UK, said.SURPRISE FOR BOEThe first-quarter growth exceeded all forecasts in a Reuters poll of 39 economists which had pointed to a 0.4% expansion of gross domestic product in the January-to-March period, after GDP shrank by 0.3% in the final quarter of 2023. Friday’s data also showed that GDP in March was 0.7% higher than a year earlier, above expectations of a 0.3% rise. The Bank of England, which held interest rates at a 16-year high on Thursday, had forecast quarterly growth of 0.4% for the first quarter and a smaller 0.2% rise for the second quarter, and a weak expansion of just 0.5% for 2024 as a whole.Officials on the BoE’s Monetary Policy Committee signalled the central bank could shift to cutting rates as early as June, but some economists suggested on Friday that stronger GDP growth could delay the Bank’s efforts and stoke inflation.”This is likely to be a surprise to the MPC and may result in upward revisions to inflation at the next Monetary Policy Report,” economists at Japanese bank Nomura said.Sterling strengthened against the U.S. dollar after Friday’s ONS figures were released. LIVING STANDARDSOn a monthly basis, the economy grew by 0.4% in March, much faster than the 0.1% growth forecast by economists in the Reuters poll, reflecting strength in retail, public transport, haulage and health – partly due to fewer public-sector strikes.Car manufacturing also performed well, offset by continued weakness in construction, the ONS said.GDP per head rose for the first time in two years in the first quarter, up 0.4%, but was still 0.7% lower than a year earlier, highlighting the ongoing squeeze on living standards and Britain’s struggle to boost productivity.”In per capita terms, it could be said that UK households have seen little meaningful improvement in living standards in the last two years,” Gora Suri, economist at PwC, said. More