Aurelia Butler

CIBC’s updated forecast includes a higher US growth rate, a delayed slowdown, and a third-quarter GDP boost to nearly 4%, up from its earlier estimate of 2.5%. The bank also sees a slight chance of negative growth in the fourth quarter.In the view of CIBC, the central bank can avoid a recession by easing rates in the second half of 2024 if it plays its cards right. However, it does not foresee any changes to its Bank of Canada terminal rates forecast.The bank is closely following speeches from Federal Reserve Bank of New York President John Williams and Federal Reserve Chair Jerome Powell next week for signals about rate setting influenced by long rates and higher long-dated yields, ahead of the Federal Open Market Committee blackout period.CIBC is also monitoring indicators such as an inverted yield curve, slowing bank lending, housing starts and resales, and the potential for US growth to stall in the first quarter of 2024 due to conditional elements of the rate hike call.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesFor up-to-the-minute news updates, visit our live blogGood evening.Contrasting updates from the world’s two biggest economies and a week of warnings from the IMF have kept global inflation firmly in the spotlight this week.China’s consumer prices remain on the brink of deflation, according to a batch of new data this morning highlighting the fragile state of the world’s second-largest economy. The CPI was unchanged year on year while producer prices fell 2.5 per cent. Financial sector authorities are considering setting up a stock market stabilisation fund to boost flagging confidence among domestic investors. US data yesterday told a quite different story, with its CPI for September higher than forecast at an unchanged 3.7 per cent year on year, raising the prospect of a further interest rate rise by the Federal Reserve. The “core” measure, which strips out volatile energy and food prices, edged down from an annual 4.3 per cent to 4.1 per cent. The data follows stronger than expected jobs numbers last week, fuelling concerns that inflation may be becoming stuck above the Fed’s 2 per cent target. According to the minutes of its last policy meeting published on Wednesday, officials agreed on the need to “proceed carefully” on interest rate decisions while the IMF on Tuesday urged the Fed to hold its nerve. Consumers are pessimistic: a survey today showed expectations for inflation in the coming year moving sharply higher. Across the Atlantic, monetary policy decisions are set to remain “tight” after Bank of England chief Andrew Bailey cautioned today that the last mile of getting inflation back to target would be the “hardest”. The BoE’s chief economist said yesterday future rate decisions would be “more finely balanced” after GDP data suggested the UK economy was near-stagnant in the third quarter. More signs of the impact of high borrowing costs on the economy came from yesterday’s quarterly Bank of England survey of banks and building societies and new data today showing a jump in corporate insolvencies.The IMF this week singled out the UK for its “quite persistent” levels of inflation, predicting the BoE may need to increase rates further from their current level of 5.25 per cent. It said headline inflation would be higher than other G7 countries at 7.7 per cent this year before dropping back to 3.7 per cent in 2024. On the positive side, UK grocery inflation continues to fall. The IMF also said the UK would have the weakest growth in the G7 next year.In the eurozone, the minutes from the last European Central Bank policy meeting published yesterday showed the decision to increase rates last month to a record high of 4 per cent was a close call, with a final decision concluding that “the risks of tightening too much and the risks of tightening too little had become more balanced”. Policymakers also have to contend with possible jumps in energy costs: European gas prices yesterday hit their highest level since March as pipeline problems added to concerns over tensions in the Middle East.On a global level, the IMF said that while central bank rate rises are having some success at taming price pressures, more than 90 per cent of economies with an inflation goal were expected to remain above target, with the global figure next year projected to hit 5.8 per cent, an increase of 0.6 percentage points from its previous forecast.Premium subscribers can sign up here for Chris Giles on Central Banks, your essential guide to money, interest rates, inflation and what central banks are thinking. The weekly newsletter launches on Tuesday at 12.30GMT.Need to know: UK and Europe economyUK chancellor Jeremy Hunt warned of “difficult decisions” on the public finances in his forthcoming Autumn Statement, with no scope for immediate tax cuts. Political instability has made the UK an unattractive place to invest in new infrastructure projects, according to IFM Investors, which singled out U-turns on the HS2 rail line and net zero for deterring new investment. Those net zero U-turns could also raise household bills, according to the parliament’s Climate Change Committee. Meanwhile, the country’s energy regulator is considering increasing those bills to help suppliers suffering from record customer debts. Ofgem is keen to avoid a repeat of the situation in late 2021 and 2022 when soaring wholesale gas prices triggered the collapse of 30 suppliers, ultimately adding £82 to each household bill to cover the cost of bailing out the failed operators.The rouble climbed against the dollar after the Kremlin reintroduced capital controls for the first time since the aftermath of Russia’s invasion of Ukraine last year, forcing some 43 companies to sell some of their foreign currency revenues for roubles. Here’s a new explainer on how western allies are trying to tap profits from frozen Russian assets.Need to know: Global economyEmployment in developed economies rose to a record high in the second quarter, the OECD said. The share of the working-age population in employment in the group’s 38 member countries has now risen above 70 per cent. New Zealand elects a new government on Saturday, with the ruling Labour party facing the prospect of defeat following the resignation of former leader Dame Jacinda Ardern. Polls point to a victory for a centre-right coalition headed by National party leader Christopher Luxon.Cross-border trade and foreign direct investment stats do not tell the full story of how conflict between geopolitical blocs affects supply chains, writes US editor-at-large Gillian Tett. More worrying for investors than outright trade bans is the more subtle lengthening of supply chains that will raise inflation and possibly curb growth too, she argues.Need to know: businessAs DT reported on Wednesday, the EU is taking on social media platform X over disinformation about the Israel-Hamas war. It has now opened an official investigation, the first to be launched under the newly approved Digital Services Act.Israel’s tech start-ups are due to lose up to 15 per cent of their workforce as the country calls up reservists to fight in Gaza, leaving the self-styled “Start-up Nation” facing an unprecedented test. WD Lab Grown Diamonds, the second-largest US producer of man-made diamonds, filed for bankruptcy, becoming the sector’s first big casualty of a growing glut of fabricated gemstones. A disappointing update from LVMH highlights the falling back to earth of the luxury sector, which had grown at a record pace during the pandemic, boosted by a growing affluent class in China. A new FT investigation suggests Indian conglomerate Adani has been inflating fuel costs, leading to millions of Indian consumers and businesses overpaying for electricity. Science round-upNasa is set to launch a pioneering mission to Psyche, a metal-rich asteroid, with the hope of gaining more insights into Earth’s origins. The eight-year venture will be the first chance for a spacecraft to observe a predominantly metallic celestial object, rather than one formed of rock, ice or gases. Global water cycles are “spinning out of balance” as climate change drives new patterns of extreme flooding as well as drought, the World Meteorological Organization said, highlighting the need for better monitoring and sharing of cross-border data.Researchers have altered parts of chickens’ DNA to reduce the spread of bird flu without damaging their health, an intervention that could prove a simple and cost-effective way of protecting animals and humans from the disease. A UK biotech company exploring new ways of treating Alzheimer’s and other neurodegenerative diseases has raised £48mn ($61mn) in its first big funding round. Doubts over the usefulness of Merck’s Covid drug molnupiravir have raised further questions about the costly procurement of antivirals during the pandemic.Read our profile of Katalin Karikó, joint winner of the Nobel Prize in medicine for discoveries leading to the messenger RNA vaccines that stemmed the tide of coronavirus infections during the pandemic.Some good newsA world-first trial of a gene therapy to cure a form of deafness has begun with children from the UK, Spain and the US, potentially heralding a revolution in the treatment of hearing loss.Something for the weekendTry your hand at the range of FT Weekend and daily cryptic crosswords.Interactive crosswords on the FT appSubscribers can now solve the FT’s Daily Cryptic, Polymath and FT Weekend crosswords on the iOS and Android appsRecommended newslettersWorking it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from work & careers editor Isabel Berwick. Sign up hereThe Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up hereThanks for reading Disrupted Times. If this newsletter has been forwarded to you, please sign up here to receive future issues. And please share your feedback with us at [email protected]. Thank you More

It said measures already being implemented or under consideration by the MDBs could yield $300 billion to $400 billion of additional lending capacity to help developing countries confront “a perfect storm of intertwined crises — from climate shocks and conflicts to pandemics and surging debt.”Increased collaboration among the multilateral development banks is a key part of the World Bank’s new playbook, and one supported in a statement at the ongoing annual meetings of the Bank and International Monetary Fund by Group of 20 finance leaders.The African Development Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, the Council of Europe Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, the Islamic Development Bank, and the New Development Bank joined the World Bank in the collaboration agreement.”Working together for a common cause, we can bring more experience, expertise, knowledge, and, especially, more funding to the massive challenges facing the world today,” World Bank President Ajay Banga said. “Together, we are greater than the sum of our parts.”The banks agreed to boost financing capacity through portfolio guarantees and hybrid capital, while stepping up a joint approach to credit rating agencies.They said they would boost collective efforts on climate, with better tracking and reporting of climate outcomes, while enhancing country-level collaboration for greater impact. They would also work to catalyze private sector engagement.The World Bank is strengthening efforts to partner with the private sector, civil society, other multilateral institutions, and charitable organizations. More

The company and the union representing healthcare workers resumed negotiations on Thursday, more than a week after contract talks broke off at the start of a 72-hour strike by 75,000 nurses, medical technicians and support staff.”We are excited to have reached a tentative agreement with the frontline health care workers of the @UnionCoalition this morning,” Kaiser Permanente said on social media platform X. Terms of the agreement were not immediately disclosed, but higher pay and increased hiring to address what union officials called crisis-level staffing shortages topped the workers’ list of demands. The previous four-year contract expired on Sept. 30.The company has acknowledged staffing shortages plaguing the entire healthcare sector, a consequence of occupational “burnout” from the pandemic, leading to more than 5 million medical workers leaving their jobs.Kaiser Permanente and its coalition of healthcare workers unions did not immediately respond to requests for details on the agreement.The unions had said Kaiser outsourcing healthcare duties to third-party vendors and subcontactors also was a major sticking point in talks that have dragged on for six months. Company and union spokespersons had said on Thursday the two sides met in person late in the day at a San Francisco Bay-area hotel. Acting U.S. Labor Secretary Julie Su was present, as previously announced, to play a role as mediator, a spokesperson said.”We are thankful for the instrumental involvement of Acting U.S. Labor Secretary,” Kaiser said on X. The clash put Kaiser at the forefront of growing labor unrest in the healthcare industry – and across the U.S. economy – driven by the erosion of workers’ earning power from inflation and pandemic-related disruptions in the workforce.Unions across the U.S. have grown bolder in their demands in the last two years, pressing for higher wages and better benefits in a tighter labor market.The largest number of workers previously involved in a major work stoppage in the healthcare sector was 53,000 in 2018, according to the U.S. Bureau of Labor Statistics. More

MARRAKECH (Reuters) – European Central Bank policymakers are planning a springtime push to cut interest payments made to commercial banks, in part to recoup some of the costs associated with a decade worth of stimulus, sources familiar with discussions said. With banks now earning generous profits, in great part at the expense of the central bank and the taxpayer, policymakers have already cut to zero the rate they pay to lenders on a certain pool of their excess deposits kept at the ECB.Some policymakers have also been pushing for an increase in that asset pool, known as the minimum reserve ratio and roughly equivalent to 1% of deposits.That would mean overall interest payments to lenders – which still earn the ECB deposit rate, currently 4%, on other excess cash parked with the central bank – would be reduced further. But the ECB rejected the proposal in July, partly on resistance from its Executive Board, the sources said. Still, the battle is not over and proponents are looking to make a fresh push to raise the ratio next spring, when the ECB reviews its operational framework, conversations with eight sources indicate.”This issue must come back, by the framework review, at the latest,” one of the sources said. “The reserve requirement is artificially low.”EXCESS LIQUIDITY At the core of the issue is the 3.6 trillion euros worth of excess liquidity sloshing around in the banking system, much of it created by the ECB when inflation was too low and policymakers were trying to stimulate the economy through a cash injection.Interest rates are now at a record high, so the ECB’s interest expense has soared on this large pool of debt and several national central banks, including the Bundesbank, are generating a loss. Bundesbank chief Joachim Nagel, his Austrian counterpart Robert Holzmann and Latvia’s Martin Kazaks have all made the case for a new discussion on jacking up minimum reserve requirements, a sentiment shared by at least another half a dozen on the 26-member Governing Council.But the sources say the ECB’s board – including Isabel Schnabel, who is in charge of market operations – has not softened its opposition to the change, so any proposal faces an uphill battle.An ECB spokesperson declined to comment. Austria’s Holzmann made the case this week for jacking the minimum reserves up tenfold to 10% but most sources dismissed this as too large and mentioned numbers in the 2% to 5% range. They note that Croatia’s rate was 9% before it joined the euro on Jan 1 and its banking system functioned well.PROS AND CONSA key question is whether the change serves a policy purpose or is simply viewed as a punitive device. Its supporters say that if cutting the rate to zero this year had a policy purpose, then so does increasing the multiplier, since the outcome is similar. There are also historical precedents, and the overall impact would be to restrict banks’ ability to lend, and this would help dampen inflation. They also say that since banks benefited from the ECB’s copious asset buys in the past, it is only fair they pay for some of the cost now, especially because their large profits are now being paid out to shareholders, a morally debatable outcome. As a public institution, the ECB’s job is to conduct policy at the lowest cost, so reducing losses is not inconsistent with that mandate, they argue.Opponents — who also include France’s Francois Villeroy de Galhau and Belgium’s Pierre Wunsch — meanwhile say that the main policy instrument is the interest rate and the bank is already using too many tools, so one more would overcomplicate policy.The board’s key argument is that excess liquidity is distributed unevenly across the euro zone and raising the ratio would put an excessive burden on smaller banks with a larger portion of deposits. “The gain is miniscule and I’m yet to be convinced there is a monetary policy justification,” another source said. “We’re not in the business of making social policy, so punishing banks is not a legitimate objective.”In an interview last week, Schnabel said the ECB should be cautious about making such changes before it decides on how much excess liquidity it wants to maintain over the longer term.Higher charges could also force banks to move liquidity outside the euro zone, while a small increase in ratio would cut central bank losses only by tiny amounts, so the ECB would engage in a risky policy with a modest benefit. “Any sensible tweak – a 1% increase to 2% – in the minimum reserve requirement would have a second-order impact on the level of excess liquidity and would only save the Eurosystem (around) 6 billion euros on yearly interest payments at the current deposit rate,” Barclays said in a note. Deutsche Bank CEO Christian Sewing argued that the change would add to banks’ financial burdens and restrict their lending options. More

NEW YORK (Reuters) – Most young Americans have cut their spending in response to persistent inflation over the past year, a Bank of America survey showed on Friday.Seventy three percent of Gen Z consumers between the ages of 18 and 26 have changed their lifestyles because of increased prices, according to a Bank of America poll of more than 1,100 respondents. Of those, 43% chose to cook at home instead of dining out, 40% spent less on clothes and 33% pared down grocery purchases to the essentials. “Gen Zers are definitely looking for ways to improve their financial health,” said Holly O’Neill, president of retail banking at Bank of America told Reuters. “They are proactively making lifestyle changes to combat inflation.Gasoline and food prices have been rising in the U.S., eroding consumer finances, prompting the Fed to keep interest rates elevated.Bank of America’s CEO Brian Moynihan said last month that consumer cash balances are coming down, even though their finances are healthy. “Consumer repayments still remain strong,” O’Neill added. “From a delinquency perspective, we are still not where we were pre-pandemic. Even though there has been a change in spending and payment behavior, the consumer is still very healthy.” Nearly four out of 10 Gen Z respondents also experienced a financial setback in the last year, prompting them to stop saving or take on more debt. They also remain less optimistic on economic conditions improving. A majority of respondents said the economy was unlikely to improve over the next year.While Gen Z is cutting back, older generations, including Boomers, increased spending as much as 5%, the report showed. More