Aurelia Butler

BENGALURU (Reuters) – The Bank of Korea will keep its key policy rate unchanged for a 10th straight meeting on Friday but was expected to embark on a shallow cutting cycle next quarter as inflation remains elevated, a Reuters poll of economists found.While inflation moderated to 3.1% in March from a peak of 6.3% in July 2022 it was still higher than the central bank’s 2% target, suggesting a cut to interest rates was not imminent.All 39 economists in the April 3-8 Reuters poll expected the BOK to leave the base rate unchanged at 3.50% on April 12. A strong 86% majority of economists, 31 of 36, expected rates to remain at the current level until at least end-June.”The monetary policy board is expected to freeze the base interest rate. It is expected to be a unanimous decision, while market participants are also keen to see whether there will be more board members arguing for the need for interest rate cuts,” said Ji-man Kim, an economist at Samsung (KS:005930) Securities in Seoul.”More countries starting to discuss interest rate cuts may have an impact on domestic monetary policy.”The central bank will probably not cut interest rates this year despite growth momentum not being robust as the battle against inflation was far from over, former Deputy Governor Lee Seung-heon told Reuters in an interview on Monday.However, median poll forecasts showed the BOK cutting rates by 25 basis points in Q3 and Q4, ending the year at 3.00%. The U.S. Federal Reserve and the European Central Bank will cut rates by 75 basis points in 2024, according to market expectations.”There are signs policymakers are becoming more concerned by the economic outlook. While exports have picked up in recent months, domestic demand has been much weaker, with consumer spending struggling badly,” said Shivaan Tandon, emerging Asia economist at Capital Economics.”The BOK is also keeping an eye on interest rate differentials…by July – particularly if we’re right that the U.S. Fed will have begun its easing cycle by then – we think the BOK will be ready to move.”(For other stories from the Reuters global economic poll: nL5N3GE2QG) More

WASHINGTON (Reuters) – The U.S. Treasury Department fears terrorist groups will increase their use of virtual currencies and other digital assets unless Congress approves new regulatory tools, Deputy Secretary Wally Adeyemo said on Monday.In testimony prepared for a hearing of the Senate Banking, Housing and Urban Affairs Committee on Tuesday, Adeyemo warned groups like al Qaeda, Hamas and even state actors like Russia and North Korea were finding new ways to hide their identities and move resources using virtual currency.Adeyemo said Treasury had shown some success in rooting out illicit finance in the digital ecosystem, but said the United States needed to expand enforcement to prevent such activities by “malign actors.””While we continue to assess that terrorists prefer to use traditional financial products and services, we fear that without congressional action to provide us with the necessary tools, the use of virtual assets by these actors will only grow,” Adeyemo said in the prepared remarks.He said while Treasury was using its authority to cut off these groups from the traditional financing, their use of virtual assets was expanding.North Korea, he said, had been able to acquire, launder and store illicit revenue through complex cyber heists, relying on anonymity-enhancing technologies like mixers to hide the sources of funds.Treasury had also seen Russia increasingly use alternative payment mechanisms such as the stable coin tether to circumvent sanctions and finance its war against Ukraine, he said.Adeyemo urged Congress to pass legislation aimed at strengthening its tools to go after such actors, including secondary sanctions targeted at foreign digital asset providers that facilitate illicit finance.Such tools would help Treasury evolve its targeting capabilities to go after foreign cryptocurrency exchanges and some money services that do not use correspondent accounts.He also called for steps aimed at closing gaps in existing authorities by expanding their reach to explicitly cover entities such as virtual asset wallet providers and cryptocurrency exchanges that sprang up after current laws were enacted.Congress should also address jurisdictional risks from offshore cryptocurrency platforms to ensure Treasury can reach overseas when digital asset entities harm U.S. national security, he said.Adeyemo said Treasury, which sent the committee recommended reforms in November, was eager to keep working with lawmakers on legislation. More

(Reuters) – A look at the day ahead in Asian markets.Consumer confidence surveys from Japan and Australia and Taiwan’s latest inflation print top the Asia-Pacific calendar on Tuesday, with risk appetite more broadly managing to hold up in the face of U.S. Treasury yields breaking out to new 2024 highs.The 10-year U.S. Treasury yield on Monday rose to 4.464%, the highest since November, yet Wall Street avoided losses and the three major indices ended the day flat.Benchmark Asian, emerging market and world equity indices all made modest gains on Monday too despite the rise in global yields. The 10-year U.S. yield is up 11 bps since Friday’s U.S. jobs report, yet equity markets have held the line.It is yet further evidence that investors may be getting used to higher yields and the ever-decreasing amount of rate cuts the Fed is seen delivering this year. A June rate cut is now only a 50-50 probability, and barely 60 bps of easing is expected this year, futures markets show.Figures on Tuesday are expected to show that annual inflation in Taiwan cooled last month to 2.51% from 3.08% in February. This would mark a notable cooling, but inflation would still be comfortably above the central bank’s 2% target.The rise in February of almost 1.3 percentage points was the biggest in three years. Taiwan’s central bank followed that with a surprise interest rate rise last month. Shares in Taiwanese chipmaker TSMC, meanwhile, could get a boost on Tuesday after the U.S. Commerce Department said it would award the firm’s U.S. unit a $6.6 billion subsidy for advanced semiconductor production in Phoenix, Arizona, and up to $5 billion in low-cost government loans. The same goes for shares in Samsung (KS:005930). The Biden administration plans to award $6-7 billion to the South Korean tech giant as it seeks to ramp up chipmaking in the U.S., two people familiar with the matter said.Chinese stocks, meanwhile, have bucked the wider trend. They started the week with a third consecutive daily decline, with the troubled property sector once again front and center of investors’ concerns.Developer Shimao Group said on Monday that China Construction Bank (OTC:CICHF) (Asia) had filed a liquidation petition against it in Hong Kong over unpaid debts, a rare case of a state-owned bank taking such legal action.The petition centers on Shimao’s failure to repay loans of just over $200 million, and contrasts with legal processes against rival firms China Evergrande (HK:3333) Group and Country Garden for defaulting on their debts that were launched by overseas-based creditors.China’s currency remains under scrutiny too. The onshore yuan is around its weakest level in five months and close to the upper limit of the central bank’s daily trading band, while the offshore yuan is still trading above the band’s ‘ceiling’. Here are key developments that could provide more direction to markets on Tuesday:- Taiwan inflation (March)- Japan consumer confidence (March)- Australia consumer confidence (April) (By Jamie McGeever) More

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WASHINGTON (Reuters) – Former U.S. President Donald Trump’s secretary of state, Mike Pompeo, added his voice on Monday to growing calls from prominent Republicans to pass billions of dollars in aid for Ukraine, after some party members accused aid opponents of succumbing to Russian propaganda.Democratic President Joe Biden’s request for $95 billion for Ukraine, Israel and other allies passed the U.S. Senate with 70% support but has been stalled for weeks in the House of Representatives as Republican House Speaker Mike Johnson has refused to allow a vote.As lawmakers returned to Washington from a two-week break on Monday, Johnson gave no word of any plans for a vote on Biden’s supplemental request.Pompeo, a former House member, issued a public letter on Monday urging Johnson to bring up the bill in the House.”We encourage you to lead with conviction and bring the aid package to a vote,” Pompeo said in a letter written with John Walter, president of the Hudson (NYSE:HUD) Institute, where Pompeo is a fellow.Johnson’s office did not comment on the letter, or recent assertions by the Republican chairpersons of two House national security committees that “Russian propaganda” is influencing party members.Representative Michael McCaul, who leads the House Foreign Affairs Committee, told Puck News last week: “Russian propaganda has made its way into the United States, unfortunately, and it’s infected a good chunk of my party’s base.”And on Sunday, Representative Mike Turner, who heads the House Intelligence Committee, told CNN’s “State of the Union” McCaul’s contention was “absolutely true.”Turner said: “We see directly coming from Russia attempts to mask communications that are anti-Ukraine and pro-Russia messages, some of which we even hear being uttered on the House floor.”For example, Turner said some members of Congress “incorrectly” say that the conflict between Russia and Ukraine is over NATO. “To the extent that this propaganda takes hold, it makes it more difficult for us to really see this as an authoritarian versus democracy battle,” Turner said. More

BRASILIA (Reuters) – Brazil’s government is expected to loosen its fiscal target for 2025 though it will still target a surplus, two sources familiar with the matter told Reuters on Monday.Leftist President Luiz Inacio Lula da Silva’s government currently targets a primary surplus of 0.5% of gross domestic product (GDP). It must set next year’s fiscal target by April 15 as part of the budget guidelines bill it sends to Congress.The government, however, has struggled to stabilize the country’s growing public debt despite its efforts to increase revenue.A “significant revenue difference” exists between the current projections for public accounts next year and what is necessary to deliver the primary surplus of 0.5% of GDP, according to the first source, who spoke on condition of anonymity.The second source said the adjustment would be “in the realm of balance towards the positive territory,” removing uncertainty associated with potential aggressive tax increase measures in pursuit of the previous target that could impact the economy.Local newspaper Folha de S. Paulo reported earlier on Monday that the government was mulling lowering the primary surplus target to between 0% and 0.25% of GDP.Finance Minister Fernando Haddad and other cabinet members will discuss the matter on Tuesday and Wednesday, with an announcement likely next week, Haddad’s deputy, Dario Durigan, said at an event in Sao Paulo on Monday. Speaking to reporters, Haddad said there is still uncertainty about the 2025 fiscal target, referring to the impacts of Congress bills on public accounts.When it introduced a new fiscal framework limiting spending growth to 70% of the increase in revenues but allowing for a minimum expansion of 0.6% and a maximum of 2.5% above inflation every year, Lula’s government stipulated that alongside these rules, it should continue pursuing primary budget targets.The government set the target to eliminate the primary deficit this year and signaled a primary surplus of 0.5% of GDP in 2025 and 1% of GDP in 2026, with a tolerance margin of one-quarter of a percentage point on either side.Now, it must formalize the 2025 target in a budget guidelines bill and make a new forecast for the next two years.Private economists surveyed weekly by the central bank are forecasting a primary deficit of 0.7% of GDP this year, followed by a 0.6% deficit in 2025. More

Fed funds futures contracts for December on Monday reflected expectations of around 60 basis points in rate cuts this year, compared to some 150 basis points that had been priced at the start of 2024. The prospect of a first 25 basis point cut in June stood at 49%, down from 57% a week ago, CME Group (NASDAQ:CME) data showed on Monday.Expectations for how deeply and how soon the Fed will cut rates have shifted rapidly over the last few months, as investors grow increasingly doubtful that policymakers will be able to lower borrowing costs without sparking an inflationary rebound in a strong economy. The Fed has projected it will cut rates by 75 basis points this year. Treasury yields, which are swayed by interest rate expectations, have moved higher as a result. The benchmark 10-year yield, which moves inversely to bond prices, hit its highest level since November on Monday. Data on Friday showed unexpected strength in the labor market, the latest in a series of reports reflecting stronger-than-expected growth.In January, policymakers introduced language saying they would keep the policy rate in its current 5.25%-5.5% range until they have “greater confidence” that inflation is headed to the Fed’s 2% goal.The combination of strong data and limited progress on inflation in the last couple of months has amplified the calls among top officials – including Chair Jerome Powell – to be “patient” as they approach the decision on when to cut rates.Investors will be closely watching the Consumer Price Index for March, which will be released on Wednesday, to further assess the chances of rate cuts this year. More

(Reuters) – Chicago Federal Reserve President Austan Goolsbee said on Monday the U.S. central bank must weigh how much longer it can maintain its current interest rate stance without it damaging the economy. “You’ve got to pay attention to how long do you want to be that restrictive,” Goolsbee said of monetary policy, noting in an interview with Chicago radio station WBEZ that “if you’re there too long, the unemployment rate is going to start going up.” Goolsbee did not comment directly on the Fed’s monetary policy outlook. U.S. central bankers are seeking data that would allow them to deliver on their projected three rate cuts in 2024. But the timing of the start of the easing has been challenged by sturdy inflation data since the start of the year. The Fed’s benchmark overnight interest rate is currently in the 5.25%-5.50% range, which is widely viewed as slowing the economy. Goolsbee said the economy has been solid but has been growing slower this year than in 2023. He said there’s a disconnect between the data and how the public feels about the economy, and that he’s placing more emphasis on the former as part of his decision-making process. More