Aurelia Butler

The RBA kept its official cash target rate at 4.35%, in line with market expectations. The move was largely priced-in by markets, amid growing bets that easing Australian inflation will give the RBA little impetus to raise interest rates further.But the bank challenged this notion by warning that while inflation had fallen in recent months, it still remained “too high,” which in turn kept Australia’s economic outlook uncertain. The RBA stuck to its earlier forecast that it only expects inflation to come back within its 2% to 3% annual target range by 2025, and that inflation will reach a midpoint in that range only by 2026. “While recent data indicates that inflation is easing, it remains high… The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out,” the RBA said in a statement.The RBA hiked rates by a cumulative 425 basis points over the past two years to combat a post-COVID spike in inflation.Australian consumer price index inflation has fallen considerably in recent months, with a reading for the fourth quarter- released last week- showing a sharp slowdown in inflationary growth.But CPI inflation still remained well above the RBA’s annual target.Governor Michele Bullock has also repeatedly voiced concerns over upside risks to inflation, with particular emphasis on services price inflation, which was proving to be more sticky than headline inflation. Recent economic data showed that the Australian economy was cooling under the weight of high interest rates and inflation. Retail sales data for December showed a large, unexpected decline in consumer spending. The labor market- another key consideration for the RBA in changing interest rates- also showed some signs of cooling in 2023, although the central bank said on Tuesday that the sector still remained tighter than it was comfortable with. The Australian dollar rose 0.3% after the RBA’s announcement, while the ASX 200 index slightly deepened its losses. More

In its quarterly Statement on Monetary Policy, the Reserve Bank of Australia (RBA) said inflation was now expected to be back in the central bank’s 2-3% target range in late 2025 and reach the midpoint of 2.5% in 2026. “Inflation is expected to decline a little quicker than previously thought,” said the RBA. “But, services inflation remains high and is expected to decline only gradually as domestic inflationary pressures moderate.”The central bank noted that while the growth in demand has slowed, the level of demand is still robust and is assessed to be above the economy’s capacity to supply goods and services, thereby creating inflationary pressures. Overall, policymakers judged the risks to the domestic outlook were broadly balanced.The RBA is widely expected to hold interest rates steady on Tuesday at 4.35%, having last hiked in November, but the focus will be on whether the central bank retains a hiking bias after recent downside surprises on inflation and growth. Markets have already priced out any chance of further hikes and wagering a cut in June is a coin flip. Futures imply about two quarter-point cuts by the end of the year.Consumer inflation, which slowed to 4.1% in the fourth quarter, is now forecast to be a fraction lower at 2.8% by the end of 2025, and is seen hitting 2.6% by mid 2026. The key trimmed mean measure of inflation is also seen slowing at much the same pace. Reflecting weak consumer spending, the economy was now expected to expand at an annual 1.3% pace in the June quarter this year, down from 1.8% previously. Growth for end 2024 was lowered to 1.8%, while the forecast for late 2025 and June 2026 were the same at 2.4%.That in turn meant unemployment rate – which was running at 3.9% – is now seen to hit 4.4% in June 2025 and to remain there for the rest of the forecast period. The forecasts, the central bank judged, were consistent with a return to full employment without adding to inflationary pressures.The projections were based on the technical assumptions that interest rates remain around the current level of 4.35% until mid-2024, before falling to 3.9% by the end of this year. Markets are pricing in around 40 basis points of easing.The cash rate is assumed to then decline to 3.2% by mid 2026. More

MANILA (Reuters) – Philippine annual inflation was at 2.8% in January, versus the previous month’s 3.9%, the statistics agency said on Tuesday.Economists in a Reuters poll had forecast annual inflation of 3.1% in January, within the central bank’s 2.8% to 3.6% projection for the month. More

WASHINGTON (Reuters) -The Biden administration has sent five senior U.S. Treasury officials to Beijing this week for economic talks that will include China’s “non-market” policies that are adding excess industrial capacity, a Treasury official said on Monday.The delegation, led by Treasury Undersecretary for International Affairs Jay Shambaugh, planned to hold frank conversations on Monday and Tuesday as part of the U.S-China Economic Working Group about Beijing subsidies that the U.S. says encourage overproduction of goods, potentially flooding global markets.Affected industries include electric vehicles, a sector whose development in the United States the Biden administration is trying to boost with its own tax subsidies.The group will discuss the U.S. and Chinese economic outlooks, investment screening regimes for national security in both countries, and opportunities to cooperate on climate change and debt relief to poor countries, the Treasury official said. The emphasis on China’s industrial subsidies comes as the Biden administration is continuing a review of U.S. tariffs imposed on hundreds of billions of dollars worth of Chinese imports by former President Donald Trump.U.S. Treasury Secretary Janet Yellen and other senior administration officials have called for the punitive duties of up to 25% to be shifted to a more strategic focus.Trump, the expected Republican presidential nominee, has signaled he would double down on stronger tariffs if elected, calling for China’s most-favored nation trading status to be revoked, a move that would effectively raise nearly all tariffs on Chinese goods. Biden is expected to take a tough but more nuanced approach to China.The meeting is the third since Yellen and her Chinese counterpart, Vice Premier He Lifeng, launched the group in September alongside the parallel Financial Working Group.That group met in Beijing in late January, with Treasury officials receiving assurances that Chinese banks were “doing well” despite China’s real estate and financial market turmoil, according to Yellen.The meetings are the first for the economic group in Beijing. The group last met in San Francisco ahead of November’s Asia Pacific Economic Cooperation Summit after an initial virtual meeting. More

WASHINGTON (Reuters) – World Bank President Ajay Banga on Monday rejected allegations that the bank’s International Finance Corp arm sought to cover up reports of sexual abuse at a for-profit school chain in Kenya in which it held a stake from 2013 to 2022.Banga, asked during a Center for Global Development public event about the IFC’s response to an independent investigation into the allegations at Bridge International Academies, said he disagreed with the characterization of a cover-up by the IFC.Civil society groups have expressed concern that IFC ignored evidence of child sexual abuse at the some of Bridge’s Kenya schools until the World Bank’s Office of Compliance Advisor Ombudsman (CAO) received complaints from parents in 2018 and opened an investigation.The IFC’s Board of Executive Directors this month is expected to formally discuss an action plan following the CAO’s findings related to the $13.5 million Bridge equity investment, which was divested in March 2022 as part of a plan to exit for-profit education.The divestment came nearly a year before Banga was nominated for the World Bank’s top job, but he will have to deal with its aftermath as he seeks to improve the lender’s operations.”I think there’s a series of things management could have done better. And that’s the discussion we’re going to have with the board shortly,” Banga said in response to an audience question on the matter.”So I’m not going to pre-empt that. I just disagree that there was a legal effort to cover it up. That, I will not accept as a question,” he added. If a cover-up “is proven to be so, I will take all the action that is necessary, but merely conjecture that is in a public space, I will refuse to sign up. That’s who I am, I’m sorry if you don’t like it,” Banga said.Banga, a former Mastercard (NYSE:MA) CEO, took office in June with a mandate to shift the World Bank’s mission to fight climate change and other global crises. He has pledged to make the World Bank nimbler and more focused on improving lives in the process. Bridge did not immediately respond to a Reuters request for comment. The firm acknowledged some cases of sexual abuse in its Kenyan schools in a study it commissioned by the Tunza Child Safeguarding consultancy, but at rates far less than in Kenyan public schools.SEEKING TRANSPARENCYU.S. Senators Elizabeth Warren and Peter Welch asked Treasury Secretary Janet Yellen in a letter last October to take necessary steps to ensure that Kenya abuse allegations were thoroughly investigated.A Treasury official said the department is “profoundly concerned, alarmed at the prospect that children may have been sexually abused in the context of an IFC project.”Treasury “vehemently condemns” violence against children and other human rights violations, the official said, and it will press for transparency and accountability in the investigation and seek policy changes based on lessons learned. “Treasury has engaged IFC management and the CAO to understand what may have gone wrong given IFC’s robust policies intended to prevent or detect any such harm. We likewise believe any threat to the independence of the CAO – be it in fact or perception – is unacceptable,” the official told Reuters in an emailed statement.’DEEPLY DISTURBED’IFC Managing Director Makhtar Diop wrote in a letter to non-profit group Inclusive Development International in November that IFC was “deeply disturbed” by the reports of child sexual abuse,” saying it “does not tolerate any form of abuse in the projects we finance.”Diop said the IFC was reviewing the CAO report into abuse at Bridge and would publish a plan for “remedial actions” when it is approved by the board. He said a confidentiality agreement between the IFC and Bridge – criticized by civil society groups – was designed to allow CAO to complete its investigation after the divestment.Bridge International Academies operates hundreds of low-cost schools in Africa and South Asia with hundreds of thousands of students. More

TOKYO (Reuters) – Japan’s real wages fell for a 21st straight month though at a slower pace, while household spending dropped for a tenth consecutive month, showing that inflation outpaced wage recovery and continued to weigh on consumer spending.Japan’s wage trend, along with inflation, is closely watched, with the Bank of Japan regarding both indicators among the key data to consider in preparation for phasing out its massive stimulus policy.Prime Minister Fumio Kishida has repeatedly called for business leaders to increase wages at spring labour negotiations to a level higher than last year’s to beat inflation. Japan needs price increases to be propelled by demand and higher pay, instead of the cost-push inflation led by energy prices and a weak yen. Inflation-adjusted real wages, a barometer of consumer purchasing power, fell 1.9% in December from a year earlier, but the pace of the decline slowed from a revised 2.5% drop in November, data from the labour ministry showed. It was the slowest pace of decline since June 2023.The consumer inflation rate the government uses to calculate real wages, which includes fresh food prices but excludes rent or equivalent, slowed to a 3.0% gain, the slowest pace of increase since June 2022, reflecting receding inflationary pressure from raw material costs.Total cash earnings, or nominal pay, climbed 1.0% for the month, after a revised 0.7% gain in November. Japan’s biggest business lobby Keidanren and trade unions started annual labour talks earlier this month that may pave the way for the BOJ to exit its decade-long super-loose monetary policy. Keidanren last month also called for wage hikes this year that exceed the inflation rate, setting the tone for annual wage talks. Labour talks last year brought pay rises of nearly 3.6%, the highest in three decades.For the full year, over 40-year-high consumer inflation weighed down on Japan’s real wages, which dropped 2.5%, the biggest decline since 2014 when the nation raised sales taxes. Nominal wages grew 1.2% last year, slowed down from a 2.0% increase the previous year. SUBDUED HOUSEHOLD SPENDING Japanese household spending in December fell 2.5% from a year earlier, government data showed on Tuesday.That was slightly worse than the median market forecast for a 2.1% decline.On a seasonally adjusted, month-on-month basis, spending slipped 0.9%, versus an estimated 0.2% increase.Spending on household durable goods such as air-conditioners dropped due to warm weather, while expenditure on dining out and auto related goods rose, the data showed. More

(Reuters) – Inflation and the U.S. presidential election will be the biggest drivers of global markets this year, while liquidity challenges are a growing focus, according to traders surveyed by JPMorgan.Some 27% of traders see inflation as having the biggest impact, followed by 20% for the November election, the survey published on Tuesday showed.Bonds and equities rallied late last year on hopes that slowing inflation would prompt hefty central bank rate cuts this year. But those bets have been scaled back, with Friday’s blowout U.S. jobs data prompting the biggest sell-off in U.S Treasuries since September.Markets are bracing for further volatility as the U.S. presidential election looms, with former president Donald Trump’s victory in the New Hampshire Republican primary bringing him closer to a rematch with Democrat President Joe Biden. JPMorgan’s Global Head of Digital Markets Eddie Wen said greater focus this year on macro and risk events may create short-term volatility, with particular focus on the release of U.S. monthly jobs and inflation numbers.Recession fears, which topped last year’s survey, fell to third place at 18% as economic growth beats expectations, the survey said.War in Europe, where Russia’s invasion of Ukraine heads into its third year, and the Middle East, where the Hamas-Israel conflict is watched for signs of escalation, followed at 14%. Traders expected volatile markets to remain their top trading challenge, but the share of respondents putting it in first place dropped 18 percentage points from last year to 28%. Liquidity availability neared the top of the list of trading challenges at 24%, up from 22% last year, while access to liquidity remained traders’ biggest market structure concern. Chi Nzelu, global head of macro e-Trading at JPMorgan, said as electronic trading grows in prominence, having consistent access to liquidity across a breadth of providers was becoming more important to investors. “They want to know that it will continue to be reliable even in shock times, which has broadly been the case across different markets in recent years,” he said. Traders in credit markets and cash equities named liquidity availability as their top challenge.”The market structure within the credit markets is becoming more complicated,” said Wen. “There are more trading platforms to support trading of corporate bonds alongside the emergence of portfolio trading, bloc trading, larger trades, all now becoming more electronic over time.”This meant selecting the best way to execute trades was becoming a key question for investors, he said. More

TOKYO (Reuters) – Japanese Finance Minister Shunichi Suzuki said on Tuesday that he expected the Bank of Japan to guide monetary policy appropriately to achieve stable and sustainable inflation accompanied by wage growth.”The government respects independence of the BOJ, so I won’t comment on monetary policy management. I expect the BOJ to work closely with the government,” Suzuki told reporters. More