Aurelia Butler

The ECB has cut interest rates three times already this year and investors expect further cuts at every policy meeting until at least next June as the bloc is once again skirting recession. Portuguese central bank chief Mario Centeno said the economy was stagnating and “risks are accumulating downwards” with tariffs threatened by incoming U.S. President Donald Trump a further downside risk.Centeno warned the ECB not to leave rate cuts too late because the risk of inflation undershooting the target was rising. ECB Vice President Luis de Guindos, meanwhile, said that growth was becoming the bank’s top concern and tariffs risked setting off a vicious cycle of trade wars.”Concerns about high inflation have shifted to economic growth,” he told Finnish newspaper Helsingin Sanomat. “When you impose tariffs, you need to be prepared for the other side to retaliate, which can start a vicious circle,” de Guindos said. “Eventually, this could turn into a trade war, which would be extremely detrimental to the world economy.”This could weaken growth, push up inflation and impact financial stability in a “lose-lose” situation for everyone, de Guindos said. Trump, who has said Europe will pay a big price for having run a trade surplus with the U.S. for years, this week pledged to impose large tariffs on his country’s top three trading partners, Canada, Mexico and China, as soon as he took office. Even if European growth suffered from higher U.S. tariffs, the inflation impact may not be so large, France’s central bank chief told a retail investor conference in Paris.”The inflation effect could be relatively limited in Europe, however long-term interest rates set by the market have a certain tendency to cross the Atlantic,” Francois Villeroy de Galhau said. “I don’t think it changes much for European short-term rates, but long-term rates could see a transition effect.”Finnish central bank Governor Olli Rehn, added his own warning about growth, predicting subdued activity and only a tepid recovery, which could prompt the ECB to lower its key rate to the so-called neutral level – which no longer restricts economic growth – by early spring. While the neutral rate is not an exact number, most economists see it somewhere between 2.0% and 2.5%, well below the ECB’s current 3.25% level.ECB rates are unlikely to stop at the neutral rate, however, with money markets betting the deposit rate will fall to 1.75% next year, a level that would stimulate growth. “If the U.S. imposes tariffs on other countries’ products, whether they be 10% or 20%, and everyone responds, all countries lose,” Rehn said. “In this situation the U.S. would lose the most because other countries could direct their exports elsewhere while U.S. companies would face the same tariffs everywhere.” More

NEW DELHI (Reuters) – Betting big on the clean energy goals of Indian Prime Minister Narendra Modi, billionaire Gautam Adani found backers in France’s TotalEnergies (EPA:TTEF) and the Qatar Investment Authority as he set out to build the world’s biggest renewable energy project.The crown jewel of his company, Adani Green, is an energy park in western Gujarat state planned to be five times the size of Paris on completion, and producing 50 gigawatts by 2030, or roughly a tenth of India’s clean energy goals.Now the plan faces a hurdle in the form of a U.S. indictment of Adani, his nephew and executive director Sagar Adani and managing director Vneet S. Jaain, accusing them of paying bribes of $265 million to secure Indian power supply contracts, and misleading U.S. investors during fund raises there.Since the news, stock of Adani Green has nosedived 36%, losing $9.6 billion in market value. Adani Group has denied the accusations in the U.S. indictment as baseless, and vowed to seek all legal recourse.But fund-raising could get complicated. “To the extent of raising additional capital for newer projects, any sort of regulatory issues become problematic,” said Deepika Mundra, a senior analyst at M&G Investments based in Britain.”Particularly if you want to tap international markets.”Adani Green is one of many public and private companies key to helping India achieve its goals, she added. “It is quite important that all these (Adani Green) projects go through.” The Adani Green boom is reflected in a surge of 10,000% in its shares between 2018 and 2022 as power demand in India swells, spurring it to develop the energy park in Khavda in Gujarat.”For us, this renewable energy park is a symbol of our commitment to sustainability and a symbol of national pride,” Adani wrote in his annual report in June.When complete, its output would be “enough to power nations like Belgium, Chile, and Switzerland”, he added. Adani has committed investment of $100 billion in the renewables sector, seen as core to the ports-to-airports conglomerate that is worth more than $135 billion. Now the tide is turning for Adani Green, described by U.S. prosecutors as being at the heart of “The Corrupt Solar Project”. After the U.S. indictment, TotalEnergies, which holds a stake of nearly 19.8% in Adani Green, was among the first to react, saying it would not invest more in the group for now.It had not been made aware of the bribery case, even though Sagar Adani was served a grand jury subpeona last year by the U.S. Federal Bureau of Investigation, it added.The Qatar Investment Authority, with a stake of 2.7%, declined comment.But standing firm for now is GQG Investors, which holds a stake of 4.2%. In an internal client note seen by Reuters, it said, “We believe the fundamentals of the companies we are invested in remain sound.” Adani Green added power capacity of 37% each year to reach 11.2 GW by September this year, from a mere 2 GW in the 2018-19 financial year.Its next big target is 50 GW goal by 2030, or a capacity addition of 31% each year, it told investors in a presentation in November.’RENEWABLE ENERGY MARVEL’ Adani Green’s revenues of $574 million during the period from April to September this year were up 20% on the year, boosting its cash profit 27% to $313 million over that time.With large solar, wind and hybrid power developments in Gujarat and the desert state of Rajasthan, it is developing smaller pumped-storage hydro power projects in five Indian states.The facilities in Rajasthan and Gujarat were to have supplied the power contracted for in the Adani deals that U.S. prosecutors allege to have been granted after payment of bribes. One of them is the partly developed marquee project in Khavda, just 18 miles (30 km) from the international border with Pakistan. It is described by Adani as “a renewable energy marvel in the making”.Adani is targeting a massive jump in operational capacity at the location to 30 GW by 2029, up from 2.25 GW now. Energy from the park can power 16.1 million homes each year, Adani says.Reuters was among media which toured the project site in April, when thousands of labourers worked on construction and scores of solar panels were being installed. Engineers that day talked up the potential of the project, which would sprawl across 540 sq km (210 sq miles) when complete, saying it would be visible from space.”The kind of support being provided by the central government, and I must say, the state governments also, is extraordinary,” Managing Director Vneet S. Jaain said at the time.Jaain, one of three Adani executives, besides Gautam and Sagar Adani, indicted for offering bribes to Indian state officials to secure deals, has not responded to a request for comment from Reuters. More

(Reuters) – Several British police forces have largely withdrawn from Elon Musk’s X social media platform as concerns over its role in promoting violence and extreme content persist, a Reuters survey of forces’ social media output showed.X, formerly Twitter, was used to spread misinformation that sparked riots across Britain this summer, and has reinstated British-based accounts that had been banned for extremist content.Musk’s comment in August that civil war in Britain was “inevitable” drew rebukes from Downing Street and police leaders. Critics argue that Musk’s approach fosters hate speech, though Musk has said he is defending free speech and has described Britain as a “police state”.Reuters reported in October that North Wales Police had ceased posting on X. Others are moving in that direction, according to Tuesday’s survey.Reuters visually monitored posts on X from 44 territorial police and British Transport Police over the three months to Nov. 13 and focused on ones that had noticeably fewer posts, comparing their output to a year previously. Reuters then contacted those eight forces. West Midlands Police, one of Britain’s biggest police forces which serves the second city of Birmingham, reduced its X posts by around 95% in annual terms in that period. Lancashire Police in the north of England, cut its usage of X by around three-quarters compared with a year ago.”We understand that, as the digital landscape changes, so too does our audiences’ channels of choice,” the force said.And Derbyshire Police, which serves around a million people in central England, made its last original post on Aug. 12 and has responded only to queries since. It said it was reviewing its social media presence.X-COMMUNICATION Other forces said X remained useful for updates on things like road closures, but platforms like Facebook (NASDAQ:META) and Instagram were better for reaching communities. X did not respond to a request for comment.X has been a primary communication tool for the British government, public services, institutions and millions of people for over a decade. It had just over 10 million British app users in October, compared with 4.5 million for Threads and 433,000 for Blue Sky, according to data from digital intelligence platform Similarweb (NYSE:SMWB).But usage is dropping, with X’s British app users down 19% on a year ago, Similarweb data showed.The government still posts to X but does not use it for paid communications. It does, however, advertise on Meta’s Instagram and Facebook, a government source said last month.Several well-known organisations, including the Guardian and non-profit Center for Countering Digital Hate, have quit X due to concerns over its content.Cary Cooper, professor of organisational psychology and health at Alliance Manchester Business School, said many institutions were wary of Musk’s power over the platform, as well as his “very substantial views”. Asked why more police forces had not quit, Cooper told Reuters: “Institutions, just like individuals, get addicted. They invested in it over a period of time.” North Wales Police is the only force to officially quit X completely. “As X was no longer an effective communication medium, this change hasn’t affected our abilities to reach our communities,” it said. More

WASHINGTON (Reuters) – Federal Reserve officials say they are likely to keep reducing interest rates for now, and investors still expect them to do so at the U.S. central bank’s Dec. 17-18 meeting.But how far they will go beyond that remains a wide-open question, with the minutes of the Fed’s meeting earlier this month expected to show the start of a debate that will shape the financial landscape faced by the incoming Trump administration.The minutes of that session are due to be released at 2 p.m. EST (1900 GMT) on Tuesday and will provide a detailed account of the Nov. 6-7 session where officials grappled with data showing stronger-than-expected economic growth and higher-than-expected inflation. While job growth slipped in October, the sense among policymakers was that the U.S. economy was continuing to beat expectations.”It’s actually remarkable how well the U.S. economy has been performing, with strong growth, a strong labor market, inflation coming down,” Fed Chair Jerome Powell said in a Nov. 7 press conference after the central bank announced it was cutting its benchmark policy rate by a quarter of a percentage point to the 4.50%-4.75% range.”We’re on a path to a more neutral stance … We’re just going to have to see where the data lead us … I’m not ruling (December) out or in,” Powell said of the Fed’s plans to make monetary policy less restrictive and eventually be neither stimulating nor restraining economic activity.Public commentary since the meeting, which often reflects the positions staked out during the two days of deliberations, has shown a broad divide among Fed officials who feel monetary policy may already be close to the neutral level and, as a result, near a possible stopping point for rate cuts, and those expecting a likely more extended cutting cycle. Powell just a week after the meeting said the economy was “not sending any signals that we need to be in a hurry to lower rates,” and that the central bank could decide on further reductions in borrowing costs “carefully.”His comments contributed to what has been a steady slip in market expectations for a rate cut next month, with a quarter-percentage-point reduction given just a 53% probability as of Monday afternoon.TRUMP EFFECTWhile officials like Fed Governor Lisa Cook have focused on what she sees as a steady easing of inflation still to come alongside possible improvements in productivity, others say they still see inflation risk as paramount.”We have seen considerable progress in lowering inflation since early 2023, but progress seems to have stalled in recent months,” Fed Governor Michelle Bowman said last week at an event in Florida, adding that the central bank “may be closer to a neutral policy stance than we currently think.”If so, it may imply fewer Fed rate cuts overall, a possibility that has grown more distinct in the minds of many investors and economists since Republican former President Donald Trump won the Nov. 5 presidential election on a platform to cut taxes, restrict immigration, and raise import tariffs. The fallout from those policies, including possibly heightened inflation and wage pressures, could also lead to more caution about cutting rates too far and too fast. Investors now see the Fed’s benchmark rate falling only to around 3.9% next year, and no further, stopping a full percentage point higher than policymakers foresaw in their last set of projections in September. More

(Reuters) – President-elect Donald Trump on Monday pledged big tariffs on the United States’ three largest trading partners – Canada, Mexico and China – detailing how he will implement campaign promises that could trigger trade wars.Trump, who takes office on Jan. 20, said he would impose a 25% tariff on imports from Canada and Mexico until they clamped down on drugs, particularly fentanyl, and migrants crossing the border, in a move that would appear to violate a free-trade deal.Trump separately outlined “an additional 10% tariff, above any additional tariffs” on imports from China. It was not entirely clear what this would mean for China as he has previously pledged to end China’s most-favored-nation trading status and slap tariffs on Chinese imports in excess of 60% – much higher than those imposed during his first term.The two posts on Truth Social represent some of Trump’s most specific comments on how he will implement his economic agenda since winning the Nov. 5 election on promises to “put America first”.”On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” Trump said.The U.S. accounted for more than 83% of exports from Mexico in 2023 and 75% of Canadian exports. The tariffs may also spell trouble for overseas companies like the many Asian auto and electronics manufacturers that use Mexico as a low-cost production gateway for the U.S. market. Trump’s threatened new tariffs would appear to violate the terms of the U.S.-Mexico-Canada Agreement (USMCA) on trade. The deal which Trump signed into law took effect in 2020 and continued the largely duty-free trade between the three countries.Canada and the United States at one point imposed sanctions on each others’ products during the rancorous talks that eventually led to USMCA. Trump will have the opportunity to renegotiate the agreement in 2026, when a “sunset” provision will force either a withdrawal or talks on changes to the pact. After issuing his tariff threat, Trump held a conversation with Canada’s Prime Minister Justin Trudeau in which they discussed trade and border security, a Canadian source familiar with the situation said. “It was a good discussion and they will stay in touch,” the source said. Trump could be counting on the threat of tariffs to prompt an early renegotiation of USMCA, said William Reinsch, a former president of the National Foreign Trade Council.”This strikes me more as a threat than anything else,” Reinsch said. “I guess the idea is if you keep hitting them in the face, eventually they’ll surrender.”Mexico’s lower house leader Ricardo Monreal, a member of the ruling Morena party, urged “the use of bilateral, institutional mechanisms to combat human, drug and arms trafficking.””Escalating trade retaliation would only hurt the people’s pocketbooks and is far from solving underlying problems,” he said in a post on social media platform X.Trump’s announcement sparked a dollar rally. It rose 1% against the Canadian dollar and 1.6% against the Mexican peso, while share markets in Asia fell, as did European bourses in early trade. S&P 500 futures were little changed.[FRX/][MKTS/GLOB] CHINA: NO ONE WINS TRADE WARSOn China, Trump accused Beijing of not taking strong enough action to stop the flow of illicit drugs into the U.S. from Mexico. “Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America,” Trump said.A Chinese embassy spokesperson in Washington said China believed that China-U.S. economic and trade cooperation was mutually beneficial. “No one will win a trade war or a tariff war,” Liu Pengyu said. The embassy also cited steps it said China had taken since a 2023 U.S.-China meeting after which Beijing agreed it would stem the export of items related to the production of the opioid fentanyl, a leading cause of drug overdoses in the United States.”All these prove that the idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and reality,” the spokesperson said.Chinese foreign ministry said in a statement that China was willing to continue anti-drug cooperation with the U.S. on the basis of “equality, mutual benefit and mutual respect.””The U.S. side should cherish China’s goodwill and safeguard the hard-won sound situation of Sino-US drug control cooperation,” the ministry said.Chinese Vice President Han Zheng, speaking at a supply chain expo in Beijing on Tuesday, said China was ready to work with other countries to build an open world economic system and maintain the stability of global industrial and supply chains. China’s economy is in a vulnerable position amid a prolonged property downturn, debt risks and weak domestic demand.In the run-up to the Nov. 5 election, Trump floated plans for blanket tariffs of 10% to 20% on virtually all imports. He also said he would put tariffs as high as 200% on cars coming across the U.S.-Mexico border. Mexico’s finance ministry said of Trump’s tariff pledge: “Mexico is the United States’ top trade partner, and the USMCA provides a framework of certainty for national and international investors.”Economists say Trump’s overall tariff plans, likely his most consequential economic policy, would push U.S. import duties back up to 1930s levels, stoke inflation, collapse U.S.-China trade, draw retaliation and drastically reorder supply chains. More

Villeroy, who is head of the French central bank, said that President-elect Donald Trump’s plans to hike tariffs and cut taxes increased risks for the world economy, adding to U.S. inflation and weighing on growth abroad.”The inflation effect could be relatively limited in Europe, however long-term interest rates set by the market have a certain tendency to cross the Atlantic,” Villeroy told a retail investor conference in Paris.”I don’t think it changes much for European short-term rates, but long-term rates could see a transition effect,” he added. More

The decision concludes a week of speculation and competition among high-profile candidates vying for the influential role, which oversees economic policy, regulation, and international financial relations.Wall Street had been closely monitoring Trump’s pick, given his stated intentions to reshape global trade through tariffs and potentially expand the tax cuts implemented during his first term.The selection of Bessent, a 62-year-old veteran of the finance world, signals a move likely to resonate positively with markets. Analysts suggest his experience and market expertise may help temper fears of aggressive tariff policies.”Scott is widely respected as one of the World’s foremost International Investors and Geopolitical and Economic Strategists,” Trump said in a statement on Truth Social.”[He] has long been a strong advocate of the America First Agenda,” Trump continued, noting that Bessent would “support my Policies that will drive US Competitiveness, and stop unfair Trade imbalances.”Bessent, a known advocate for extending Trump’s initial tax cuts, is expected to champion similar measures in the administration. He has also defended the use of tariffs, which were a cornerstone of Trump’s campaign platform, describing them as a “useful negotiating tool.”But while he supports the use of tariffs, Deutsche Bank (ETR:DBKGn) strategists do not believe that Bessent is “a trade hardliner.”“He has generally argued in support of tariffs as a negotiating device and supported a gradualist approach with substantial forward guidance, even going as far as proposing implementing the 50- 60% tariffs on China by increasing 2.5 percentage points per month,” strategists noted.“Bessent’s presence should therefore act as a counterbalance to Trump’s most extreme impulses on tariffs,” they said, adding that his appointment “supports a baseline of a somewhat more strategic or gradualist approach to trade wars.”Separately, UBS strategists said the initial market reaction to Bessent’s appointment suggests that he is “seen by financial market participants as an anchor of stability and responsibility in the Trump cabinet.”“In fact, we think markets could start to see that the risks of higher inflation and interest rates are implicit constraints on the Trump policy agenda, with the eventual policy outcomes potentially less inflationary than some investors previously feared.”“While we do not rule out further volatility, we expect US Treasury yields to fall in the year ahead following the 65-basis-point rise over the past two months,” they added. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is chief economist of the International Center for Law & Economics and writes the Economic Forces blogDonald Trump has promised a renewed push for tariffs when he returns to the White House. The stated goal is to protect American manufacturing jobs, but some approaches would achieve this far more effectively than others. The historical record shows that, while tariffs can preserve specific manufacturing jobs in the short term, poorly designed trade barriers destroy more American factory jobs than they save.  Understanding these trade-offs is crucial for policymakers determined to use tariffs. Trump has said he will impose tariffs of 25 per cent on all imports from Canada and Mexico, and an extra 10 per cent on Chinese goods. But implementation will be key.The key lies in modern supply chains. Today’s factories rely heavily on imported components. Indeed, nearly 20 per cent of US imports are so-called intermediate inputs used by domestic producers to make other goods. Trump’s 2018 tariffs applied primarily to these intermediate goods. This transforms how tariffs affect jobs. Rather than a simple trade-off between protected workers and hurt consumers, the effects ripple through manufacturing.Steel tariffs illustrate the pitfalls. While they benefit US producers such as Nucor and US Steel, they harm the much larger manufacturing sector that uses the metal — from Caterpillar’s construction equipment to Ford’s auto parts. These downstream industries employ far more workers than steel production. When Trump imposed 25 per cent steel tariffs in 2018, manufacturing employment declined in industries that used steel intensively. These job losses outweighed any gains in steel production.Tariffs on finished goods can sometimes protect jobs effectively, but success requires careful design. The washing-machine industry provides an example. When the US first imposed China-specific duties in 2017, manufacturers simply shifted production to Thailand and Vietnam. Only after the US enacted global tariffs in 2018 did Samsung and LG build American factories. While this eventually achieved the political goal of creating US jobs, it required comprehensive trade protection and came with higher prices for consumers.Protection is also possible when foreign producers cannot easily shift production. Take semiconductors: building new chip fabrication plants requires massive capital investment (typically $10bn to $20bn) and years of construction. In that case, a tariff may raise chip prices, protecting Intel’s employees. But those same barriers — huge capital requirements, specialised worker training, complex supplier networks — also make it harder to establish new domestic production quickly. The auto industry also illustrates both effective and counterproductive approaches to tariffs. The so-called “chicken tax” — named after an initial tariff on poultry — was a 25 per cent tariff on imported light trucks imposed in 1964. It helped Ford and General Motors dominate the US pick-up truck market for decades. The tariff worked because it targeted finished vehicles, not parts, and because domestic manufacturers could readily expand production. Over time, it even prompted companies such as Toyota, Nissan, and Honda to build US plants to avoid the tariff.But modern vehicle production is far more complex. When the Trump administration imposed tariffs on Chinese auto parts in 2018, it did not protect American jobs at all. Instead, it raised costs for US automakers who relied on imported components. Higher input costs led to slower export growth and job losses in affected industries.If the goal is to support high-value manufacturing, policymakers should focus on protecting advanced industries where the US has existing expertise. Targeted support for semiconductor manufacturers such as Intel or electric-vehicle battery producers could help domestic companies to gain scale in strategic sectors. In contrast, broad tariffs on basic materials such as aluminium mainly result in higher costs across manufacturing supply chains.For businesses seeking to plan ahead, the lesson is straightforward: what matters most is where new tariffs hit their income statements. Tariffs on final goods mainly affect revenue through higher prices or units sold. But tariffs on inputs directly inflate the cost side, squeezing margins and often forcing harder choices about moving production. Modern manufacturing involves complex international supply chains that tariffs can easily disrupt. The iPhone is not just “made in China”, but represents a global production network that includes American innovation and Asian manufacturing. Policymakers need to update their thinking accordingly. More