Aurelia Butler

NEW YORK/WASHINGTON (Reuters) -Treasury Secretary Janet Yellen said on Tuesday U.S. growth needed to slow to a pace more in line with its potential rate to bring inflation back to target levels since the economy was operating at full employment.But demand-supply imbalances in the labor market have abated, she said, which was a healthy sign for the economy. “Growth has to slow. I mean, you want growth to slow, you want it to be in line with potential when you’re operating at full employment,” Yellen told reporters on Tuesday after a climate finance event in New York during the U.N. General Assembly week. “It’s completely natural and desirable, that growth — the pace of growth — is slowing.”U.S. gross domestic product is still expanding at a pace well above what Federal Reserve officials regard as the non-inflationary growth rate of around 1.8%, often referred to as the “potential” growth rate.U.S. GDP expanded at a 2.4% annualized rate in the second quarter, and some estimates put the current quarter’s pace at more than twice that. The robust U.S. economy has defied an aggressive campaign of Fed rate hikes over the past 18 months, creating a conundrum for policy makers.Yellen did not specify what she regards as the U.S. economy’s potential growth rate, except to say that it has been growing above potential since it raced out of the COVID-19 pandemic in 2021.Federal Reserve officials on Wednesday are due to reveal a policy decision widely expected to keep rates on hold for now, but also flagging in new economic projections whether they feel rates still need to rise further before the end of the year to bring inflation back to their 2% annual target.Yellen said that pressure was coming out of the labor market, with demand for labor softening, which was helping to bring down core inflation. Surveys of companies showed that difficulty in hiring workers had abated, job opening are down and the “quit rate” of workers leaving for higher paying positions was lower – all healthy signs for the labor market.Yellen said she saw a lower risk that a recent rise in oil and gasoline prices would trigger a rise in inflationary expectation, because core inflation was lower”The Fed has been focused on that, we’re in a somewhat safer environment with low inflation,” Yellen said.CHINA SPILLOVERSOn China, Yellen said she expected Chinese authorities to use their fiscal and monetary policy space to avoid a major slowdown of its economy, and this would help limit spillovers to the U.S. economy.”There could be spillovers. I wouldn’t rule it out,” Yellen said.China, the world’s second-largest economy, has lost steam since the second quarter and showed only tentative signs of stabilization last month with policy support. It has sought to court foreign capital as its economic recovery from the COVID-19 pandemic slows in the face of tepid overseas demand and property weakness.”I think the Chinese would most likely use the policy space they have to try to avoid a slowdown with major proportions,” she added. More

MANILA (Reuters) – Economic growth in developing Asia this year will be slightly lower than previously expected as the weakness in China’s property sector and El Niño-related risks cloud regional prospects, the Asian Development Bank (ADB) said on Wednesday.Updating its regional economic outlook, the ADB trimmed its 2023 growth forecast for developing Asia to 4.7%, from 4.8% projected in July.But the growth forecast for next year for the grouping, which consists of 46 economies in the Asia-Pacific and excludes Japan, Australia and New Zealand, was revised slightly upwards to 4.8% from 4.7% previously. “We see resilient growth in the region really based on pretty strong domestic consumption and investment, and despite reduced external demand, which is a dampener on export-driven growth,” Albert Park, ADB’s chief economist, told a press conference.The ADB tempered its growth forecasts for East Asia, South Asia, and Southeast Asia this year, with China and India expected to grow 4.9% and 6.3%, respectively, slightly lower than the July growth projections of 5.0% and 6.4%.China’s property crisis “poses a downside risk and could hold back regional growth,” the ADB said in its report. The Manila-based lender maintained its 2024 growth forecasts for China and India at 4.5% and 6.7% respectively.While growth has so far been robust and inflation pressures are receding in developing Asia, Park said governments need to be vigilant against the many challenges the region faces, including food security.Inflation in developing Asia is forecast to ease to 3.6% this year from 4.4% last year, and continue to slow to 3.5% in 2024, giving central banks policy space, but the ADB said interest rate hiking and easing cycles will vary going forward. GDP GROWTH 2021 2022 2023 2023 2023 2024 2024 2024 APR JULY SEPT APR JULY SEPT Caucasus and 5.8 5.1 4.4 4.3 4.6 4.6 4.4 4.7 Central Asia East Asia 7.9 2.8 4.6 4.6 4.4 4.2 4.2 4.2 China 8.4 3.0 5.0 5.0 4.9 4.5 4.5 4.5 South Asia 8.4 6.7 5.5 5.5 5.4 6.1 6.1 6.0 India 9.1 7.2 6.4 6.4 6.3 6.7 6.7 6.7 Southeast Asia 3.5 5.6 4.7 4.6 4.6 5.0 4.9 4.8 Indonesia 3.7 5.3 4.8 4.8 5.0 5.0 5.0 5.0 Malaysia 3.1 8.7 4.7 4.7 4.5 4.9 4.9 4.9 Myanmar -5.9 2.0 2.8 n/a 2.8 3.2 n/a 3.2 Philippines 5.7 7.6 6.0 6.0 5.7 6.2 6.2 6.2 Singapore 8.9 3.6 2.0 1.5 1.0 3.0 3.0 2.5 Thailand 1.5 2.6 3.3 3.5 3.5 3.7 3.7 3.7 Vietnam 2.6 8.0 6.5 5.8 5.8 6.8 6.2 6.0 The Pacific -1.4 6.1 3.3 3.3 3.5 2.8 2.8 2.9 Developing Asia 7.2 4.3 4.8 4.8 4.7 4.8 4.7 4.8 INFLATION APR JULY SEPT APR JULY SEPT Caucasus and 9.0 12.9 10.3 10.6 10.6 7.5 7.8 8.0 Central Asia East Asia 1.1 2.3 2.3 1.3 1.0 2.0 2.1 2.1 China 0.9 2.0 2.2 1.0 0.7 2.0 2.0 2.0 South Asia 5.8 8.2 8.1 8.1 8.6 5.8 6.4 6.6 India 5.5 6.7 5.0 4.9 5.5 4.5 4.5 4.2 Southeast Asia 2.0 5.1 4.4 4.3 4.2 3.3 3.2 3.3 Indonesia 1.6 4.2 4.2 3.8 3.6 3.0 3.0 3.0 Malaysia 2.5 3.4 3.1 3.1 3.0 2.8 2.8 2.7 Myanmar 3.6 18.4 10.5 n/a 14.0 8.2 n/a 8.2 Philippines 3.9 5.8 6.2 6.2 6.2 4.0 4.0 4.0 Singapore 2.3 6.1 5.0 5.0 5.0 2.0 2.0 3.0 Thailand 1.2 6.1 2.9 2.9 2.5 2.3 2.3 2.3 Vietnam 1.8 3.2 4.5 4.0 3.8 4.2 4.0 4.0 The Pacific 3.1 5.2 5.0 5.0 4.9 4.4 4.4 4.5 Developing Asia 2.6 4.4 4.2 3.6 3.6 3.3 3.4 3.5 More

Increases in basic pay deals fell to a median 5% in the three months to the end of August compared with the same period in 2022, human resources data provider XpertHR said.That represented a slowdown from a rise of 5.4% in the three months to July which was the first fall in 2023.”This month’s data reinforces the XpertHR view that we have reached the peak of higher pay awards, ” Sheila Attwood, XpertHR’s senior content manager, said.”For the remainder of the year we can expect settlements and increases in pay to slowly begin to fall.”Pay awards across the economy as measured by XpertHR hit levels not seen in three decades earlier this year. After a wave of pay disputes that led to bigger than usual increases for state workers, public sector pay deals in the three months to August were the strongest since 1992 at 6.4%.However, pay awards were still below consumer price inflation. Economists polled by Reuters expect data due to be published at 0600 GMT on Wednesday to show that inflation picked up in August to 7.0% from July’s 6.8% before falling again.The BoE is watching pay growth as it tries to gauge how much further it needs to increase interest rates to squeeze inflation pressures out of the economy. It is expected to raise Bank Rate to 5.5% from 5.25% on Thursday in what would be its 15th but possibly final rate hike of the current monetary policy cycle.XpertHR said its data covered 61 pay awards, covering more than 600,000 employees. More

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NEW YORK/LONDON (Reuters) -Global debt hit a record $307 trillion in the second quarter of the year despite rising interest rates curbing bank credit, with markets such as the United States and Japan driving the rise, the Institute of International Finance (IIF) said on Tuesday.The financial services trade group said in a report that global debt in dollar terms had risen by $10 trillion in the first half of 2023 and by $100 trillion over the past decade. The latest increase has lifted the global debt-to-GDP ratio for a second straight quarter to 336%. A slowdown in growth, alongside a deceleration in price increases, have caused nominal GDP to expand less slowly than debt levels and were behind the debt ratio rise, the report said.”The debt-to-GDP ratio actually has resumed its upward trajectory,” said Emre Tiftik, director of sustainability research at the IIF at a news conference.”Notably this rise comes after seven consecutive quarters of declining debt ratios and it mostly reflects the impact of easing inflationary pressures.”The IIF said that with wage and price pressures moderating, even if not to their targets, they expect the debt to output ratio to surpass 337% by year-end.Experts and policy makers have warned in recent months of rising levels of debt, which can force countries, corporations and households to tighten their belts and rein in spending and investments, in turn crimping growth and hit living standards.More than 80% of the latest build up had come from the developed world with the U.S., Japan, Britain and France registering the largest increases. Among emerging markets, the biggest rises came from the largest economies, namely China, India, and Brazil.”For the first time in a long time there’s a better trend among emerging markets than there has been among developed markets,” said Todd Martinez, co-head of the Americas sovereign team at Fitch Ratings, which sponsored the IIF report.”Developed markets after the pandemic, they’re taking longer to get back to their pre-crisis fiscal positions than EM did, and then a lot of them got hit by this energy shock (from the war in Ukraine).” The report found that household debt-to-GDP in emerging markets was still above pre-COVID-19 levels, largely due to China, Korea and Thailand. However, the same ratio in mature markets has dropped to its lowest level in two decades in the first six months of the year. “The good news is that consumer debt burdens appear to have remained largely manageable,” Tiftik said. “If inflationary pressures persist, the health of the household balance sheet, especially in the U.S., will provide a cushion against further Fed rate hikes.”Markets are not pricing in a U.S. Federal Reserve rate hike in the near future, but the target rate of between 5.25% and 5.5% is currently expected to remain in place until at least May of next year, according to the CME FedWatch tool. U.S. rates are expected to remain high for a long period, which could pressure emerging markets as needed investment is funnelled to the less-risky developed world. The Fed is expected to leave rates unchanged on Wednesday, but could signal that it is open to further rate hikes. More

Strategists Oscar Munoz, Gennadiy Goldberg, and Mark McCormick (NYSE:MKC) expect a slight increase in the 10-year Treasury yield from Tuesday’s level of around 4.3%. This forecast is based on their primary scenario where the Federal Reserve retains the option for another rate hike in either November or December.The TD Securities team’s projections stem from their analysis of the ongoing messaging about interest rates from the Federal Reserve. Their study suggests that a continuous low-interest-rate message could lead to significant movements in both Treasury yields and the U.S. dollar.These insights highlight how future decisions by the Federal Reserve could have substantial implications for key financial market indicators. The expected policy decision on Wednesday is set to be closely monitored by investors and financial experts seeking to understand potential shifts in the financial landscape.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More