Aurelia Butler

By Aftab AhmedNEW DELHI (Reuters) -India’s annual retail inflation in February rose at a faster than expected pace due to elevated food prices, government data showed on Tuesday.Annual retail inflation eased slightly to 5.09% in February from 5.10% in January, but was higher than 5.02% forecast by a Reuters poll of 42 economists.Food inflation, which accounts for nearly half of the overall consumer price basket, rose 8.66% in February, compared with a 8.30% rise in January.Despite retail inflation being within the mandated band of 2%-6%, uncertainties in food prices have worried policymakers. Last month, the Reserve Bank of India (RBI) left its rates unchanged and signalled it would not lower interest rates until it achieves inflation of 4% on a durable basis. It expects inflation of 5.4% for the current fiscal year that ends on March 31, and has projected 4.5% for the next fiscal year. “It will take a few more months before it reaches the RBI’s 4% long-term target,” said Thamashi De Silva from Capital Economics. “We think that food price inflation will drop back only slowly over the coming months.”Prices of cereals were 7.60% higher year-on-year in February compared to 7.83% in the previous month, while vegetable prices rose 30.25% compared to 27.03% in January, data showed. Pulse prices rose nearly 19% year-on-year in February.Core inflation, which strips out volatile food and energy prices, is estimated at 3.3%-3.37% in February, compared with 3.6% in January, according to two economists.The Indian government does not release core inflation figures.Core inflation has been falling despite strong growth in India’s economy.The economy expanded 8.4% in the final three months of December, its fastest pace in one-and-a-half years. The government revised its growth estimate for the current fiscal year to March 31 to 7.6% from 7.3%.”Weak core inflation at a time of strong growth is a conundrum – the only reason could be the weak input price growth. Expect a status quo on policy rates in near term,” said Devendra Kumar Pant, economist at India Ratings. More

LONDON (Reuters) -Global shares pared some gains on Tuesday after data showed U.S. inflation was hotter than expected in February, dampening expectations for the Fed to cut borrowing costs any time soon.Gold fell, the dollar held on to its gains and government bonds came under some selling pressure, which pushed up yields.The MSCI All-World index was up 0.1%, encouraged by gains on Wall Street overnight and by a pickup in technology stocks in Asia. Investors are pricing in the prospect of at least three interest rate cuts by the Fed this year, most likely starting in June. Tuesday’s CPI did little to shake this conviction. “The inflation situation is going to likely drag out for several more months, thus possibly keeping the first Fed rate cut still on the sidelines for a bit longer than expected,” Russell Price, chief economist at Ameriprise Financial (NYSE:AMP) Services, said.”We’ll have to see another month or two of the data to see if we truly do get a deceleration in some of the core costs. It’s still a wait-and-see situation. There are still components that are running hot that need to decelerate,” he said.U.S. stock index futures were up 0.4-0.5%, suggesting gains at the opening bell later, while in Europe, the STOXX 600 was 0.5% higher, having traded up by as much as 0.7%.A stronger majority of economists in the latest Reuters poll also expect the Fed to start cutting rates in June. The survey showed more respondents expected any change in Fed policymakers’ rate projections at the March meeting to signal fewer cuts overall this year, not more.The yield on 10-year Treasury notes edged up 1 basis point to 4.118%, while the dollar index, which measures the performance of the U.S. currency against six others, was up 0.14% at 102.93, having hit a roughly two-month low of 102.33 last week.YEN BACK UNDER PRESSUREThe yen fell against the dollar after Bank of Japan Governor Kazuo Ueda offered a slightly bleaker assessment of the country’s economy than he had in January.This doused some of the optimism that the central bank might ditch its negative rate policy when it meets this month, which weighed on the Japanese currency, allowing the dollar to rise 0.4% to 147.53 yen.A growing number of BOJ policymakers are warming to the idea of ending negative rates this month, four sources familiar with the central bank’s thinking told Reuters last week. The changing expectations have helped the yen perk up over the past week. Futures now imply a 47% chance the BOJ will shift rates to zero at its meeting on March 18-19, though some traders still think it might wait until its April 26 meeting.”The question for investors is whether the BOJ will stop at ending negative rates, or start a tightening cycle. We think the former,” Frank Benzimra, head of Asia equity strategy at SocGen, told the Reuters Global Markets Forum.Sterling eased, falling 0.1% to $1.279, after data showed UK wage growth cooled a little more than expected last month, putting a bit more pressure on the Bank of England to cut rates sooner rather than later.Spot gold fell 0.4% to $2,173 an ounce, still in sight of last week’s record high of $2,194.99. More

(Reuters) – Wall Street was set to open higher on Tuesday, as traders held on to bets that the Federal Reserve will cut rates in the coming months following inflation data. A Labor Department report showed the Consumer Price Index (CPI) rose 0.4% on a monthly basis in February, in line with the 0.4% increase expected by economists polled by Reuters.Excluding volatile food and energy components, consumer prices increased 0.4% in February after rising by the same margin in January.”We’re on a glide path to a June rate cut and I don’t think that there’s any kind of change to that yet,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.”I’m still expecting three rate cuts sometime this year.”Traders are now seeing a 70% chance of the first rate cut coming in June, according to the CME FedWatch Tool, from 71% ahead of the data. Last month’s stock market rally was slowed by data showing signs of a robust economy and sticky inflation, as traders pushed back their expectations on the timing of the Fed’s first rate cut to June from March.At 08:45 a.m. ET, Dow e-minis were up 126 points, or 0.32%, S&P 500 e-minis were up 32.5 points, or 0.63%, and Nasdaq 100 e-minis were up 148.5 points, or 0.83%.Megacap growth stocks advanced in premarket trading, led by AI darling Nvidia (NASDAQ:NVDA), which was up 2.8%.Oracle (NYSE:ORCL) jumped 12.3% on signs the firm was making progress in its plan to grab a share of the cloud-computing market, thanks to its tie-up with AI chip giant Nvidia.Boeing (NYSE:BA) shed 1.4% after a report said an audit by the Federal Aviation Administration found dozens of problems with the 737 MAX’s production. More

The consumer price index (CPI) rose 0.4% last month after climbing 0.3% in January, the Labor Department’s Bureau of Labor Statistics said on Tuesday. Gasoline and shelter, which includes rents, contributed more than 60% to the monthly increase in the CPI. In the 12 months through February, the CPI increased 3.2%, after advancing 3.1% in January. Economists polled by Reuters had forecast the CPI gaining 0.4% on the month and increasing 3.1% year-on-year. The annual increase in consumer prices has slowed from a peak of 9.1% in June 2022, but progress has stalled in recent months.Inflation picked up in January, largely blamed on beginning- of-year price raises by service providers, which economists said were not fully addressed by the model used by the government to strip out seasonal fluctuations from the data. There was also a jump in owners’ equivalent rent (OER), a measure of the amount homeowners would pay to rent or would earn from renting their property, which diverged from rents. That was partly the result of some methodology changes by the government.The BLS last week held a webinar to discuss the underlying methodology related to the January OER and rent data. “There is a high likelihood that OER inflation will exceed rent inflation more often moving forward,” said Stephen Juneau, an economist at Bank of America Securities in New York. “However, we think that much of the 20 basis points divergence was noise and not signal. Rent and OER inflation should continue to moderate over the course of this year, helping to drive core inflation lower as goods price deflation dissipates.”Excluding the volatile food and energy components, the CPI increased 0.4% last month after rising by the same margin in January. In the 12 months through February, the so-called core CPI advanced 3.8%. That was the smallest year-on-year increase since May 2021 and followed a 3.9% rise in January. The Fed tracks the personal consumption expenditures price indexes for its 2% inflation target. These measures are running at rates more tamer than the CPI. Though job growth accelerated in February, the unemployment rate increased to a two-year high of 3.9% and annual wage inflation moderated a bit.Prior to the release of the CPI data, financial markets saw a roughly 70% chance of the Fed cutting rates in June. Since March 2022, the U.S central bank has raised its policy rate by 525 basis points to the current 5.25%-5.50% range. (This story has been refiled to insert a dropped word in paragraph 1) More

(Reuters) – Federal Reserve policymakers are still seen starting interest-rate cuts in June, even as a government report showed consumer prices rose last month more than expected, based on prices of futures contracts that settle to the U.S. central bank’s policy rate. And though the 3.2% rise in the February consumer price index versus a year earlier was a slight acceleration from the 3.1% increase in January, traders actually added to bets that the policy rate will end the year a full percentage point lower than its current  5.25%-5.5% range.  More

WARSAW/BRUSSELS (Reuters) – Polish Prime Minister Donald Tusk has secured the release of funds worth up to 137 billion euros from the European Union, ending years of feuding with Brussels over democratic standards in a boon to central Europe’s largest economy.Last December, a coalition of pro-EU parties took power, ousting the nationalist Law and Justice (PiS) party after eight years marked by frequent clashes with the European Commission, notably over judiciary reforms the Commission said harmed the independence of Polish courts.PiS said the changes were necessary to make the system fairer and more efficient and rid it of vestiges of communism. It has accused the EU of using the funds to blackmail Poles into electing a government that’s more compliant to the bloc’s wishes.In February, the EU welcomed Tusk’s plan to “restore the rule of law” and dismantle PiS’ policies. Poland now faces a tight end-August 2026 deadline to make the required reforms and spend a large chunk of the available funds to modernise its economy.HOW WILL THE DECISION AFFECT POLISH ASSETS?The economic impact will be spread out over several years, but the near-term benefit is already seen, with the Polish zloty blowing past a 4.30 per euro mark strategists recently projected on a 12-month horizon, scaling a fresh four-year-high on Monday.The National Bank of Poland, which has held its main rate steady at 5.75% since October, has welcomed gains in the zloty, saying they help ease some inflationary pressures.Yields on Poland’s five-year bonds traded around 5.16% on Tuesday, near levels hit last November following a rally from around 5.7% fuelled by investor optimism that Warsaw’s pro-EU turn could finally help release the funds.Traders said market optimism over the renewed inflows was largely priced in, with attention turning towards the transfer timings and any additional conditions Warsaw will have to meet.HOW MUCH OF THE RECOVERY FUNDS CAN POLAND GET?The 137 billion euros ($149.6 billion), equivalent to 15.6% of Poland’s projected 2024 gross domestic product, include 60 billion euros to mitigate the impact of the COVID-19 pandemic and help EU members transition away from fossil fuels.The 60-billion-euro recovery fund envelope consists of more than 25 billion euros worth of grants and nearly 35 billion euros of favourably priced loans.Warsaw will also regain access to 76.5 billion euros in so-called cohesion funds designed to help raise living standards in the EU’s poorest members, which joined the bloc two decades ago.Poland submitted its first payment request for recovery funds in December and said it planned to submit two additional payment requests merging the next four instalments by the end of this year, worth 23 billion euros combined.HOW CAN POLAND SPEND THE FUNDS?A revised plan approved by the EU in early December saw Poland, Europe’s most coal-reliant nation, spending just under half of its recovery funding on climate-related projects, including energy transformation towards renewables.Poland’s new government is working on a further revision focusing on wind farms, increasing funds for thermal insulation of apartments, grants for school facilities and an additional 3 billion zlotys to support farmers.HOW WILL THE FUNDS AFFECT POLAND’S ECONOMY?Unlocking the recovery funds will boost Poland’s economy by about 2 percentage points in the long term, according to a report by Polish Economic Institute (PIE).Although this impact will not be large in 2024, in 2025 it will account for about half of total investment growth and much of public consumption.PIE estimates show that the recovery funds will lead to a 0.2 percentage point increase in Poland’s economic output in 2024, 1.2 points in 2025 and 0.6 points in the following years.Polish Finance Minister Andrzej Domanski said the funds would add one percentage point to economic growth next year, lifting the pace of expansion to 3.5% after central Europe’s largest economy narrowly avoided recession last year.WHAT ARE THE CHALLENGES?Poland has just 2.5 years left to implement projects under the recovery plan that other EU members will have had around 6 years to complete, with even some countries accessing the funds from the start falling behind in commissioning projects.The European Commission has not given any indication of how much money could be at risk with an end-2026 deadline set to use the funds, saying member states should “do their best efforts” to implement the required reforms and projects included in their national recovery plans.Domestic hurdles could include PiS-aligned President Andrzej Duda’s possible opposition to Tusk’s reform drive, which could make it more difficult for Warsaw to overhaul the judiciary and pass other reforms, analysts at think tank Eurasia Group said.(1 euro = 4.2984 zlotys)($1 = 0.9158 euros) More