Aurelia Butler

ROME (Reuters) -Italy has no plans to backdate upcoming curbs on costly fiscal incentives for home renovations to before 2024, a junior Treasury minister said on Thursday, in an effort to ease fears about the impact of the restrictions.The government has said it needs to restrict the incentives, which have cost the state more than 200 billion euros ($215 billion) over four years, to keep in check Italy’s creaking state finances that are under close scrutiny by rating agencies.The most generous incentive, the so-called ‘Superbonus’, allowed homeowners to deduct the cost of energy-saving work from their taxes over a 4-10 year period, or use the tax credit as a form of payment when dealing with builders or banks.Rome has said it plans to change the measures so people can only deduct the cost of work done from tax bills over a ten-year period. Some lawmakers had suggested the change could be back-dated to cover expenses incurred since early 2023 or even earlier, prompting protests from banks and businesses who said that move would devalue the tax credits they had already taken as payment.On Thursday, however, Treasury Undersecretary Federico Freni told reporters the changes would not be backdated to before January.”So an expense made in December 2023 is not eligible to mandatory accrual over 10 years,” he said.”The provision of the 10 equal annual instalments will be an obligation and not an option for the taxpayer.”Italy’s banking and building lobbies said on Wednesday that any retroactive intervention would have the biggest impact on businesses, banks and citizens.Rome had already sparked protests in March by blocking the option of selling tax credits stemming from building works with few exceptions.The new curb will now allow Italy to restore its previous deficit targets for the next two years which were set in September, Economy Minister Giancarlo Giorgetti told lawmakers on Wednesday, based on the minutes from the parliamentary session.At the time the government promised to cut the fiscal gap to 3.6% of GDP in 2025 from 4.3% this year, and to 2.9% in 2026. Under current trends, the deficit is seen by the Treasury slightly higher at 3.7% next year and 3% in 2026.Giorgetti said that restoring the targets would require cutting the deficit by 700 million euros in 2025 and 1.7 billion the following year, according to the minutes.Italy’s public debt, the second largest in the euro zone as a proportion of output, is seen rising to nearly 140% of GDP through 2026 due to the cost of the incentives.($1 = 0.9318 euros) More

LONDON (Reuters) – Global central banks that moved together to battle inflation are starting to scatter, with European rate setters turning dovish while the U.S. Federal Reserve stays cautious about cutting too soon.Following the most aggressive global monetary tightening cycle in decades, here’s where leading central banks stand and what they are expected to do next.1/ SWITZERLANDThe Swiss National Bank cut rates by 25 bps to 1.50% in a surprise move in March, leaving the Swiss franc trailing the dollar and the euro as traders bet on another cut in June. Swiss inflation ticked up to 1.4% in April, but stayed within the SNB’s target an 11th consecutive month. 2/ SWEDENSweden’s Riksbank lowered benchmark borrowing rates to 3.75% from 4% on Wednesday and said it would cut further if inflation stayed moderate. Consumer price increases have slowed to just over the 2% target as the Swedish economy stumbled under the pressure of high rates. The Riksbank’s next dilemma is the weak crown and the potential for higher import costs to re-stoke inflation. 3/ EURO ZONEThe European Central Bank is widely expected to lower rates in June, with inflation close to its 2% target and growth tepid. Markets anticipate almost three cuts this year.The big question is how far the ECB can diverge from the Fed. Policymakers might worry that sticky U.S. inflation is a harbinger of things to come across developed economies. 4/ CANADACanadian inflation ticked up to 2.9% in March and population growth is boosting the economy, yet optimism from Bank of Canada governor Tiff Macklem about price pressures moderating has bolstered rate cut bets. Traders see a roughly 60% chance of a June cut and fully expect lower borrowing costs by July.5/ BRITAIN The Bank of England held interest rates at a 16-year high of 5.25% on Thursday, but Governor Andrew Bailey said he was “optimistic things are moving in the right direction” and a deputy governor voted for a cut.Bailey said the BoE still needs to see more evidence that inflation – running at 3.2% in March – will stay low before cutting rates. Markets expect the first reduction in August.6/ UNITED STATESThe Fed has kept rates in the 5.25% to 5.5% range since July 2023. It held rates steady on May 1 and soothed some fears, following hot inflation readings, that its next move would be another hike. Wall Street’s S&P 500 share index, which tumbled around 4% in April, has recouped much of that loss as some Fed officials reaffirmed rate cuts were coming, eventually.. Traders, who back in January had expected up to 150 bps of Fed cuts this year, now price in just over 40 bps worth. A first rate reduction is priced in for September.7/ NEW ZEALANDInflation in New Zealand, at 4%, is likely to stay above the Reserve Bank of New Zealand’s 1%-3% target as migration raises domestic demand, the Organisation for Economic Co-operation and Development said this week. Investors don’t expect rate cuts until October or November. 8/ AUSTRALIA The Reserve Bank of Australia held rates at a 12-year high of 4.35% on Tuesday. It is not expected to lower borrowing costs this year as it forecasts higher inflation and the government primes households for tax giveaways from July. Futures markets price a 20% chance of a hike in August.9/ NORWAY Norway’s central bank turned more hawkish on May 3, when it held rates at 4.50% and warned they may stay there for “longer than previously thought.” That stance is because of a robust economy and core inflation, last reported at 4.5%, far exceeding its 2% target. The Norges Bank had eyed a September cut but most economists now expect no move before December or even next year. 10/ JAPANThe Bank of Japan is the outlier, raising rates out of negative territory in March in its first hike in 17 years.The move did little to close the yawning gap between Japanese and American borrowing costs, however, driving the yen to fresh 34-year lows and prompting government intervention to boost the currency.BOJ Governor Kazuo Ueda stepped up the hawkish rhetoric this week, saying the central bank could take action if the weak yen pushes up inflation. More

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DEKALB, Illinois (Reuters) – Falling crop prices are leaving agriculture equipment sellers with an excess of unsold tractors and combines. To cope with the surplus, dealers are discounting machines, suspending new orders, and even auctioning off equipment at reduced prices.The slower equipment sales are a knock-on effect of corn and soy prices dropping to more than three-year lows as U.S. farm income plummets and equipment makers and dealers are forced to pivot quickly after a period of booming business. Reuters interviewed ten equipment dealers, mostly in the Midwest, as well as farmers and analysts, who said low crop prices combined with persistently high interest rates are deterring farmers from purchasing machinery. As farmers make fewer purchases, inventories of equipment are swelling, cutting into profits for dealers and big manufacturers alike. Manufacturers Deere (NYSE:DE) and CNH Industrial (NYSE:CNHI) struggled to keep up with the strong demand for tractors in 2022 when farm income hit a record high and pandemic assistance payments gave farmers extra money to upgrade their fleets. Now both expect slower sales to hit their bottom line this year. Josh Gruett, dealer principal at Waupun Equipment in Waupun, Wisconsin, which sells farm, construction and other equipment, said his inventory has risen 30% to 35% since the end of 2023.The excess of unsold machinery prompted Gruett to halt new orders from companies including CNH, AGCO, and Polaris (NYSE:PII) in hopes of balancing supply and demand, he said.In April, inventory levels of high-horsepower tractors (300 and above) in the U.S. surged by almost 107% year-over-year, with combine inventory experiencing a 17.63% increase, according to Sandhills Global, a market research firm specializing in tracking used inventory for industrial manufacturers.SLASHING PRICESChris Tanner, a fourth-generation farmer, said some dealerships in his town of Norton, Kansas, have slashed prices up to 30% with an added incentive of zero percent interest to move machinery off their lots. “They’re heavily discounting combines and tractors — but after coming through a drought and experiencing poor prices we don’t have the money to spend,” Tanner said.The pain has also spread to those who sell spare parts.Guy Robinson, is a parts manager at Dekalb Implement Company, which sells Deere equipment in Dekalb, IllinoisDuring the peak years of the pandemic, Robinson said, the combination of supply chain troubles and rising demand made getting everything from parts to equipment to farmers “a nightmare.” And then demand began falling off in late 2022, he said. About 30 miles south of Robinson’s dealership, Aaron Rogers (NYSE:ROG), retail location manager at AHW, another Deere dealer in Somonauk, Illinois, said zero or low percentage financing is a popular way to try to bring in customers.”If you can get a good interest rate, that’s what’s driving the market right now,” he said. Offering lower financing rates to sell inventory can result in a loss for dealers, but carrying unsold machinery can prove costlier.Manufacturers give dealers free financing on equipment for a limited period while they sell it, but once that expires, dealers have to pay interest on their unsold inventory to manufacturers.With fewer sales forecast, equipment dealers are feeling pressure to auction off equipment “right away” to preserve margins, said Casey Seymour, a sales consultant for dealers.”Some of the stuff that is being put to auction is because dealers can’t afford to keep the floor plan,” Seymour said. “They can’t have millions of dollars worth of inventory sitting around at a floor plan [with a] 7.5% interest rate.” Particularly, inventory levels have been a big concern in the Midwest grain belt, said Ryan Dolezal, the manager of TractorHouse, a site for selling new and used farm equipment. “We do not see the inventory levels issues like we do in Midwest markets,” he said. Used agriculture machinery inventory, the bulk of machinery sold in the United States, is on a steady increase that is forcing dealers to auction equipment at a lower price point, said Mitch Helman, a sales manager at Sandhills Global.”There’s a 70% gap between auction and retail and that’s insane. A spread this high has not been observed since May 2015,” he said, referring to a time when grain oversupply was pummeling farmer income.Deere reports earnings on May 16. In February, the company announced plans to cut production and warned shareholders inflation would make farmers reticent to finance equipment purchases. Texas-based farmer, Scott Born said given his tighter budget, he’s forgoing buying new or used equipment for the remainder of the year.”We have to try to limp by without major repairs — it’s tough especially since (equipment and fertilizer) has gone so much higher in just a few years.” More

Below are comments from a news conference with BoE policymakers:BAILEY ON CUTTING BANK RATE BEYOND MARKET EXPECTATIONS”It’s likely that we will need to cut bank rates over the coming quarters and make monetary policy somewhat less restrictive over the forecast period, possibly more so than currently priced into market rates. “This will be consistent with ensuring that inflation does not fall noticeably below target at the end point of the forecast.”BAILEY ON RESTRICTIVE POLICY”One cut, we’re probably assuming it’s a small cut obviously, would still leave us with restrictive monetary policy.”BAILEY ON A POSSIBLE RATE CHANGE IN JUNE”Before our next meeting in June, we will have two full sets of data for inflation activity and the labour market and that will help us in making that judgement afresh, but in saying that, Let me be clear, a change in Bank Rate in June is neither ruled out nor a fait accompli.” BAILEY ON A RETURN TO MORE NORMAL TIMES:”(The) absence of data surprises is an indication that we’re now getting back to more normal times, at least compared to the highly unusual period we’ve been living through with a global pandemic and a major war in Europe.”Risks to the global economy remain including from the conflicts in the Middle East. But so far, economies have adjusted to withstand those risks.”BAILEY ON INFLATION:”Inflation has now fallen to just about 3% and we expect it to be close to the target in the coming months. That’s encouraging.” “The inflation dynamics of the UK, are different to the U.S. The U.S. is facing a different situation. It’s got stronger demand, and therefore I think it is important to make that distinction. “I think we’ve seen some response in markets to that of late where there have been some, some movement, some decoupling.”BEN BROADBENT ON INFLATION:”For my part, I probably look a little more closely at services inflation than wages, at least over very short periods of time.” More

LONDON (Reuters) -The Bank of England took another step towards lowering interest rates, as a second official backed a cut and Governor Andrew Bailey said more could be on the way than investors expect.The BoE said on Thursday its Monetary Policy Committee voted 7-2 to keep rates at a 16-year high of 5.25% after Deputy Governor Dave Ramsden joined Swati Dhingra in voting for a cut to 5%.Economists polled by Reuters had mostly expected another 8-1 split to keep rates on hold. Sterling dropped against the dollar and the euro after the announcement while British government bond yields fell sharply as investors added to their bets on the BoE rate cuts ahead.Bailey told a news conference it was possible that the BoE would need to cut rates by more than the market expected. The BoE’s next policy decision is on June 20.”Let me be clear, a change in Bank Rate in June is neither ruled out nor a fait accompli,” Bailey said.The MPC has now kept rates on hold at six meetings in a row. A first cut since March 2020 – at the onset of the COVID-19 pandemic – could offer a potential boost for Prime Minister Rishi Sunak.He has told voters that the economy is turning a corner but is struggling to reduce the opposition Labour Party’s big opinion poll lead before an election later this year.The BoE added a line to its post-meeting statement, saying it would be watching the next rounds of economic data closely.”The Committee will consider forthcoming data releases and how these inform the assessment that the risks for inflation persistence are receding,” the BoE said.”On that basis, the Committee will keep under review for how long Bank Rate should be maintained at its current level.”Paul Dales, chief UK economist at Capital Economics, said the BoE had given the impression it was getting closer to cutting rates. “We think some soft inflation and wages data may be enough to prompt it to cut rates at the next meeting in June, if not at the following meeting in August,” Dales said.Hetal Mehta, head of economic research at St. James’s Place, said the BoE might have a long wait for confirmation that inflation is moderating. “Any expectations of a rate cut in June would be premature as base effects will only temporarily get inflation down to target,” she saidOver a nearly two-year period from late 2021, the BoE – like other central banks – pushed up borrowing costs to tackle a surge in inflation which peaked at 11.1% in October 2022. Since then, headline inflation has fallen back and the BoE expects it slowed to around its 2% target in April, largely because of falling energy prices.But the BoE has remained on guard because of still-strong wage growth and services price inflation which threaten to push inflation back above 2%.Bailey said the news on inflation had been encouraging.”We need to see more evidence that inflation will stay low before we can cut interest rates,” he said in a statement. “I’m optimistic that things are moving in the right direction.”The pound fell by about a third of a cent against the U.S. dollar immediately after the BoE’s decision and statements were published and the yield on two-year British government bonds, which are most sensitive to BoE rate speculation, fell by 3 basis points.Financial markets fully priced in a first quarter-point BoE rate cut by August and see another in November or December taking Bank Rate to 4.75%, followed by more cuts in 2025. JUNE CUT?Investors have been trying to work out whether the BoE is likely to cut rates in June – when the European Central Bank has already signalled it will reduce borrowing costs – or, like the U.S. Federal Reserve, will hold out for longer.On Wednesday, Sweden’s central bank cut its key interest rate for the first time in eight years.The BoE sent a fresh message to investors that their bets on rate cuts might be too conservative as it cut its inflation forecasts for two and three years’ time to 1.9% and 1.6% – below its 2% target – from its February projections of 2.3% and 1.9%.The BoE’s inflation forecasts partly reflect market interest rate expectations in the run-up to its MPC meetings, which now predict fewer cuts this year than in February.Minutes of the BoE’s May meeting showed differences between the seven MPC members who voted to keep rates on hold around how persistent inflation pressures would be, and how much more evidence of a slowdown was needed to justify a rate cut.Ramsden and Dhingra said a cut was needed now because of the time lag in monetary policy decisions impacting the economy and because inflation might fall more than the BoE had forecast.The MPC’s decision to stress the importance of “forthcoming data releases” will add to the focus on the two official labour market reports and the two sets of inflation figures which are due before its next scheduled announcement on June 20. Wage growth and services price inflation of around 6% remain higher than in the United States or euro zone, even though British economic growth is more sluggish.The BoE slightly lifted its growth forecasts for Britain’s economy, saying it expected 0.5% growth in gross domestic product over 2024, up from 0.25% in its February forecast.It also said a recession in the second half of 2023 had probably ended, offering some relief to Sunak and the Conservative Party as they battle to turn around the opinion polls. More