Aurelia Butler

MARRAKECH (Reuters) -Colombian Finance Minister Ricardo Bonilla said on Saturday his ministry was working with the central bank towards cutting its benchmark interest rate from 13.25% to 13% at October’s policy meeting, with another reduction seen before year-end.”The expectation is for another cut in December,” Bonilla told Reuters on the sidelines of the World Bank and International Monetary Fund meetings in Marrakech. “The message of reducing the key rate is for all the banks, because today the rate is an obstacle for economic recovery,” he added. The central bank held the key rate steady at 13.25% in September for the third time in a row, citing stubborn inflation. Bonilla said inflation was set to reach 9.2% at the end of 2023.Bonilla, who represents the government on the seven-member board, has pushed before for rate cuts.Two members voted for a borrowing cost decrease at the board’s September meeting, though the bank does not reveal how each member voted. Five members voted to keep borrowing costs stable at 13.25%.Colombian President Gustavo Petro voiced disappointment over the September decision and said he hoped cuts would come soon.Colombia’s consumer prices rose by 0.54% in September, taking cumulative 12-month price growth to 10.99%. That was down from highs in 2022, but still more than double the central bank’s long-term target of 3%.The central bank’s technical team expects Colombia’s economy to grow 0.9% this year, compared with an expansion of 7.3% in 2022.Bonilla said the conflict between Israel and Hamas “will surely impact in oil prices,” and could force the government to make an additional hike to domestic fuel prices.He added that Congress should be able to pass labor, pension and health reform bills during the first half of 2024 as part of the government’s efforts to reduce poverty and inequality. More

Israel was focusing its fighting on the Palestinian enclave, from which Hamas gunmen wreaked an unprecedented massacre in Israel’s southern towns a week ago, and “trying not to be drawn into a two-front war”, Tzachi Hanegbi said in a televised briefing. Speaking after Netanyahu visited troops on the Gaza periphery in a possible precursor to a ground invasion, Hanegbi said more limited clashes across the Lebanese border showed Hezbollah was staying “under the escalation threshold”.”We hope Hezbollah won’t, de facto, bring about the destruction of Lebanon, because if there is a war there the result will be no less,” he said, alluding to long-standing Israeli threats to launch heavy strikes on the country in a bid to stem launches of Hezbollah’s extensive missile arsenal.Just days before the Hamas incursions which killed some 1,300 people, Hanegbi had said in a media interview that the Palestinian Islamist group was deterred from attacking Israel.”That was a mistake,” he said, adding that the wrongful assessment was shared across the Israeli intelligence community. “There is no doubt that the State of Israel did not fulfill its mission.”He dismissed as “fake news” media reports that Egypt gave Israel forewarning of a possible dangerous development, while confirming a separate report that, ahead of the attack, the chief of Israel’s Shin Bet had received unusual intelligence.The Shin Bet chief, Ronen Bar, held a meeting about that information at 4 a.m. on the morning of the Hamas assault but it was not deemed to be a concrete warning of what followed 2.5 hours later, Hanegbi said. More

MARRAKECH, Morocco (Reuters) -The yen’s recent declines are driven by fundamentals and do not meet any of the considerations that would call for authorities to intervene in the currency market, a senior International Monetary Fund official said on Saturday.”On the yen, our sense is that the exchange rate is driven pretty much by fundamentals. As long as interest rate differentials remain, the yen will continue to face pressure,” Sanjaya Panth, deputy director of the IMF’s Asia and Pacific Department, told reporters.Authorities in Japan are facing renewed pressure to combat a sustained depreciation in the yen, as investors bet on higher-for-longer U.S. interest rates while the Bank of Japan remains wedded to its super low interest rate policy.The IMF sees foreign exchange intervention as justified only when there is a severe dysfunction in the market, a heightening of financial stability risks, or a de-anchoring of inflation expectations, Panth said.”I don’t think any of the three considerations are existing right now,” he said, when asked whether recent yen falls call for authorities to intervene in the currency market.Japan bought yen in September and October last year, its first foray in the market to boost the currency since 1998, to stem sharp declines that eventually pushed the yen to a 32-year low of 151.94 to the dollar. The dollar fetched 149.57 yen on Friday.The BOJ has been a dovish outlier among a wave of central banks raising interest rates, even as cost-driven price rises have kept inflation above its 2% target for more than a year.BOJ Governor Kazuo Ueda has stressed the need to keep rates ultra-low until inflation durably stays around 2% backed by robust demand and sustained wage increases.Panth said there were more upside than downside risks to Japan’s near-term inflation outlook as the economy was running near full capacity, and price rises were increasingly driven by solid demand.But he said it was “not yet the time” for the BOJ to raise short-term rates due to uncertainty on how slowing global demand could affect Japan’s export-reliant economy.In the meantime, the BOJ should continue to take steps that allow long-term interest rates to move more flexibly to lay the groundwork for an eventual monetary tightening, he said.The BOJ guides short-term rates at -0.1%. It also sets a 0% target for the 10-year bond yield under its yield curve control (YCC) policy. As rising inflation put upward pressure on yields, the bank loosened its tight grip on long-term rates by raising a de-facto cap for the yield in December last year and July.”What it did in December and July to increase flexibility on long end of the yield curve, was very much steps in the right direction,” Panth said. More

“The labor market still shows no real sign of weakening,” Lagarde told a conference. “The numbers we see both in terms of actual participation in the unemployment and unemployment in nominal numbers are quite striking.”The ECB has been raising rates to dampen demand and persistently low unemployment is a key reason why some policymakers worry that high inflation could get stuck above target as workers enjoy the some of the best wage growth in years. More

Discussions in the Moroccan city of Marrakech ranged from the prospects for a world economy weighed down by debt, inflation and conflict to the growing wealth gap between rich and poor countries and floundering efforts to tackle climate change.Here are the main takeaways: “LIMPING” ECONOMYThe new IMF outlook – signed off before the escalation of the conflict between Israel and Hamas – sees global economic growth slowing from 3.5% last year to 3% this year and 2.9% next year, a 0.1% point downgrade from a previous 2024 estimate. Global inflation is seen dropping from 6.9% this year to a still-high 5.8% next. Central bankers signalled readiness to end interest rate hikes if events allow, hopeful that inflation can be finally tamed without too hard a landing. Most agreed it was too early to say how Middle East strife would affect a global economy which IMF chief economist Pierre-Olivier Gourinchas described as “limping along, not sprinting”.DEBT SQUEEZEThe heavy debt burdens of advanced economies – from the United States to China and Italy – was a recurrent theme in the meetings, which came after financial markets in recent weeks pushed U.S. bond yields higher. Italian central bank governor Ignazio Visco said there was an impression markets were “reevaluating the term premium” as investors become more nervous about holding longer term debt. JPMorgan chair of global research Joyce Chang put it another way. “The bond vigilantes are back, and the Great Moderation is over,” she told a panel of the two-decade era of relative economic calm before the 2008/09 financial crisis.One policy area where this could have a knock-on effect is the fight against climate change. Vitor Gaspar, head of the IMF’s fiscal division, warned current subsidies-based policies were failing to deliver net zero emissions and that scaling them up would explode public debt. “Countries will need a new mix of policies with carbon pricing at the centre,” the Fund concluded.DEBT DEALS AND REFORMSLooking beyond the major developed economies, higher policy rates, a strong dollar and geopolitical uncertainties are adding to challenges for the rest of the world.Turkey was in the spotlight as Finance Minister Mehmet Simsek pitched its reform plan. “The biggest structural issue is to bring inflation down. And they’re working on it,” said Murat Ulgen, Global Head of Emerging Markets Research at HSBC. Kenya is looking to avoid slipping into debt distress and its central bank governor told Reuters it plans a buyback of a quarter of its $2 billion international bond maturing in June – pushing its 2024 bond up 1.2 cents on the dollar.One debt restructuring deal emerged: Zambia finally agreed a debt rework memorandum of understanding with creditors including China and France. Progress on Sri Lanka was less clear. Sri Lanka said on Thursday it reached an agreement with the Export-Import Bank of China covering about $4.2 billion of debt, while talks with other official creditors are stalling.RISKS SKEWED TO DOWNSIDEHigh interest rates will put some borrowers in more precarious positions, the IMF warned in its Global Financial Stability Report. Around 5% of banks globally are vulnerable to stress if those rates remain higher for longer, it estimated, and a further 30% of banks – including some of the world’s largest – would be vulnerable if the global economy enters a prolonged period of low growth and high inflation.JOSTLING FOR INFLUENCEThe Ukraine war, growing trade protectionism and tensions between the United States and China are all making consensus-building tougher: In the end, there was not enough agreement to issue the usual final communique at the end of the meetings. There was much talk ahead of Marrakech on revamping the IMF and World Bank to better reflect the emergence of economies like China and Brazil. A U.S. proposal to boost IMF lending power but save a review of shareholdings in the fund till later won broad support. A pact announced on Saturday spoke of a “meaningful increase” in quotas by end-2023 but gave few other details. Anti-poverty groups were sceptical of what had been achieved.”The big theme this week is G7 countries papering over the cracks of shattered promises,” said Kate Donald, Head of Oxfam International’s Washington DC Office. “Despite the wringing of hands about the billions of dollars needed to tackle poverty and climate breakdown, there has been no sign of new money.” (Reporting in Marrakech by Ahmed El Jechtimi, Andrea Shalal, David Lawder, Leika Kihara, Elisa Martinuzzi, Rachel Savage, Jorgelina do Rosario, Balazs Koranyi; Compiled by Mark John; Editing by Christina Fincher) More