Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Kristalina Georgieva has won a second five-year term as IMF managing director, ahead of the start of the fund’s spring meetings in Washington next week. Georgieva, who has been in the role since the autumn of 2019, was the sole candidate for the position. However, it was only after European leaders signalled that they would endorse her last month that her candidacy was assured.The Bulgarian economist faced controversy in 2021 over her role in a scandal relating to her time at the World Bank, with an internal inquiry accusing her of directing efforts to artificially boost China’s ranking in the lender’s influential annual Doing Business report.Georgieva said at the time that she fundamentally disagreed with the conclusions of the World Bank report. The IMF executive board later declared it had “full confidence” in the managing director, after launching its own internal probe. Her desire for the IMF to play a bigger role in mitigating climate change, and the departure of former senior official David Lipton, are also thought to have led to some criticism from shareholders and fund staff. However, Georgieva also managed to steer the IMF through the pandemic, with it approving more than $360bn in new financing; debt service relief to the poorest countries; and an allocation of special drawing rights, the IMF’s in-house unit of account, worth $650bn. In 2023, the fund also approved a $15.6bn aid package for Ukraine, the first time it had done so for a country at war.“In taking this decision, the board commended Ms Georgieva’s strong and agile leadership during her term, navigating a series of major global shocks,” board co-ordinators Afonso Bevilaqua and Abdullah BinZarah said on Friday.Georgieva said she was “deeply grateful for the trust and support” the board had placed in her.She is set to welcome leaders to the US capital over the coming days, where IMF officials are expected to warn finance ministers and central bank governors that they need to do more to boost productivity and lower fast-rising debt burdens. That is despite upgrades to their global economic projections showing that the global economy has managed to avoid a much-feared recession.The fund will also host a Global Sovereign Debt roundtable, where it is hoped China and other big bilateral creditors can make progress on restructuring the debts of some of the world’s most vulnerable economies.Europe holds sway in nominating successful candidates for the managing director job at the IMF, with the position taken by someone from the continent. World Bank presidents tend to hail from the US or hold US citizenship.Paschal Donohoe, Ireland’s former finance minister, was mooted as a possible candidate earlier this year, but eventually decided not to run.  More

NEW YORK/LONDON (Reuters) -U.S. stocks sold off sharply on Friday while the dollar jumped as investors grappled with rising geopolitical tensions and persistent inflation that could lead to diverging monetary policy between the U.S. and Europe.MSCI’s gauge of stocks across the globe was last down 1.2%, its biggest one-day drop in about six months, dragged down by U.S. performance. Wall Street’s main indexes all slumped well over 1% with the S&P 500 posting its biggest one-day drop since Jan. 31, as first-quarter earnings season kicked off on a dour note with reports from major banks.”We have a mix of elevated geopolitical risk, inflation worries and mild (earnings) disappointments,” said Angelo Kourkafas, senior investment strategist at Edward Jones.Worries that Iran might retaliate for an airstrike on its embassy in Damascus that it blamed on Israel have hovered over markets, propping up oil and prompting moves into gold and other safe-haven assets. Israel did not claim responsibility for the airstrike on April 1.U.S. President Joe Biden said on Friday he expected Iran to attack Israel “sooner, rather than later” and warned Tehran not to proceed.There are “concerns that there may be an attack on Israel by Iran,” said Kristina Hooper, chief global market strategist at Invesco. “Geopolitical risk has been driving a lot of the moves.”Central bank outlooks were also in focus. The European Central Bank signaled on Thursday it could start cutting rates, while a hotter-than-expected inflation reading on Wednesday pushed back bets for the Federal Reserve’s first cut until later in the year.The dollar index gained 0.69% and hit its highest level in over five months. The euro was down 0.76%.”We’ve got a dollar, U.S. interest rate strength play, that’s what’s going on here,” said Joseph Trevisani, senior analyst at FX Street in New York.The Japanese yen bucked the trend, firming 0.02% against the dollar in a rebound after hitting a 34-year low during the day as investors watched for signs of intervention from Tokyo officials.On Wall Street, the Dow Jones Industrial Average fell 475.84 points, or 1.24%, to 37,983.24, the S&P 500 lost 75.65 points, or 1.46%, to 5,123.41 and the Nasdaq Composite lost 267.10 points, or 1.62%, to 16,175.09.Investors were digesting results from JP Morgan, Citigroup and Wells Fargo, with the S&P 500 Banks index dropping 3.3%.Europe’s STOXX 600 index rose 0.14%.The yield on benchmark U.S. 10-year notes fell 5.9 basis points to 4.518% from 4.576% late on Thursday. Federal Reserve Bank of Boston President Susan Collins is eyeing a couple of interest rate cuts this year amid expectations it could still take some time to get inflation back to targeted levels.Market pricing implied investors expect the Fed to reduce its main funds rate by about 48 basis points this year after traders started 2024 betting on about 150 bps of cuts.Oil prices rose on Middle East tensions.U.S. crude settled up 0.75% at $85.66 a barrel and Brent settled at $90.45 per barrel, up 0.79% on the day.Spot gold lost 1.24% at $2,343.76 an ounce, taking a breather after rising above $2,400 per ounce to an all-time high. More

“Policy’s in a good place right now, and I need to be fully confident that inflation is on track to come down to 2%, which is our definition of price stability, before we would consider a rate cut,” Daly said at an event at the regional Fed bank.With the labor market strong and inflation falling more slowly than it did last year, she said, the Fed will maintain its current stance “as long as necessary” to bring down inflation.”There’s absolutely, in my mind, no urgency to adjust the policy rate,” she said, echoing a sentiment also expressed by several of her colleagues this week.A government report earlier this week showed consumer price inflation was stronger than expected in March, a third upside monthly surprise this year that prompted traders and economists to pare their expectations for how soon the Fed will cut rates, and how deeply. In March Fed policymakers generally anticipated three rate cuts, suggesting a June start to what many analysts had thought would be once-per-quarter rate reductions through year end. After this week’s inflation data financial markets are pricing in just two rate cuts. Daly declined to say how the data affects her assessment of the number of rate cuts that will eventually be needed. “I actually think there’s too much discussion about is it going to be two or three or four or one, and not enough discussion on what are we trying to accomplish and are we still committed to accomplishing it?” she said.Inflation’s progress downward was always going to be bumpy she said, but “the commitment we have remains the same: restore price stability as gently as we can and maintain our policy stance as long as is necessary to be fully confident that we’re on that path. More

Ben Bernanke was brutally honest about the failings of the Bank of England’s economic modelling when he published a long-awaited review of its forecasting processes on Friday. But the man who led the US Federal Reserve in its response to the 2008-09 global financial crisis ducked the big question for economists: whether the UK’s central bank should start publishing its own views on how interest rates are likely to evolve beyond the immediate policy decision. Bernanke’s review, commissioned after the BoE was fiercely criticised for failing to predict the post-pandemic surge in inflation, was billed as a “once-in-a-generation opportunity” to improve the UK’s framework for monetary policy. This has been largely unchanged since the inflation-targeting regime was put in place by Tony Blair’s Labour government in 1997. Yet his verdict, in a strongly worded 75-page document that ranges over flaws in the BoE’s software to the way it deploys staff with doctoral degrees, was “strikingly technocratic”, according to James Smith, a former staffer at the central bank who is now research director at the Resolution Foundation think- tank. Bernanke gave a detailed prescription for the BoE to fix “significant shortcomings” in the main model it uses to produce forecasts — paying more attention, for example, to problems with labour markets and productivity, and the interaction between prices and wages. He slammed the central bank for “material under-investment” in its forecasting tools, with “makeshift fixes” resulting in “a complicated and unwieldy system” that sucked up staff time. The BoE had been slow to spot structural changes in the economy because it had been forced to use human judgment to “paper over problems with the models”, he noted. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Bernanke also urged the Monetary Policy Committee, which sets interest rates, to end a heavy reliance on its central economic forecast as a communication tool. Instead, the nine-member panel, which has lifted rates to a 16-year high of 5.25 per cent, should regularly publish a range of alternative scenarios — a move that would help rate-setters compare possible policy choices and learn from previous mistakes, as well as explain their decisions. Bernanke said putting more weight on alternative scenarios would help the BoE address one of the biggest communication challenges it faces: the fact that its central forecast is based on market expectations of how interest rates will evolve in future.This convention means the MPC can find itself forecasting a recession against its own best judgment, Bernanke said, noting: “There can be instances where the committee is basically thinking market rates are too high . . . if they give a forecast based on those higher rates, they will get a different forecast from what they actually think is going to happen.”Yet Bernanke said recent forecasting errors had been no worse than those of other central banks and independent analysts. He also refrained from passing judgment on the BoE’s policy decisions, although UK politicians have castigated the central bank for allowing inflation to peak, at 11.1 per cent, higher than in either the US or eurozone. Governor Andrew Bailey, right, said the BoE would give a ‘clear steer’ on how it planned to act on the recommendations of Ben Bernanke, left, by the end of the year More