Aurelia Butler

The bank, which was announcing the outcome of a policy review, said inflation was likely to increase “significantly” in September, but it expected it to then slow in October and maintain a downward trajectory from then. The bank noted that the 27.4% annual CPI inflation recorded in August had slowed less than expected from the 28.3% recorded the previous month due to a surge in global oil prices.Battling rising inflation and dwindling foreign exchange reserves, the crisis-ridden country is trying to navigate a path to economic recovery under a caretaker government in the wake of a critical $3 billion IMF loan programme, approved in July.Reforms under the programme have complicated the task of keeping price pressures in check and protecting an already weak rupee from further declines.The State Bank of Pakistan’s (SBP) monetary policy committee also kept the key interest rate unchanged when it last met in July, having earlier raised it by 12.25 percentage points to 22% in a series of hikes since April 2022.Fahad Rauf, Head of Research at Ismail Iqbal Securities, a Karachi-based brokerage firm, said the decision to leave rates unchanged was warranted as there were no signs of an overheating economy, and that a rate hike in a cost push inflationary environment would have little benefit. Cut-off yields in a recent treasury bill auction – the highest yield at which a bid is accepted – indicated that market participants had already priced in a rate hike. “Yields should follow central bank not lead the State Bank of Pakistan. The cut off yield decision is taken by the Finance Ministry, whereas the policy rate decision is taken by the central bank,” said Shahbaz Ashraf, Chief Investment Officer at FRIM Ventures, a Karachi based investment company.However, some analysts said the central bank was being optimistic with its inflation expectations. “We believe there is a high risk that inflation may remain higher than the SBP estimate due to rising global oil prices and adjustment in energy prices in Pakistan,” said Mohammed Sohail, CEO of Topline Securities, a Karachi-based brokerage firm.Pakistan’s currency has slid to all-time lows, falling 6.2% in the last month alone, though it has recovered some ground in recent days after a crackdown on illegal foreign exchange transactions.During an analyst briefing, central bank governor Jameel Ahmed said the decision to keep rates unchanged had taken that crackdown into account. More

The central bank for the 20 countries that share the euro also raised its forecasts for inflation, which it now expects to come down more slowly towards its 2% target over the next two years, while cutting its expectations for economic growth.That illustrated the dilemma the ECB faced, with prices still rising, but economic activity struggling.MARKET REACTION: FOREX: The euro fell and was last down 0.6% at $1.0669, having hit its lowest level in over three months.BONDS: Euro area government bond yields fell, with two-year yields in the bloc’s benchmark issuer Germany last at 3.15%, down 2 basis points on the day. Italy’s 10-year bond yield was down 8 bps on the day at 4.377%STOCKS: The pan-European STOXX 600 index rose and was last up 0.8%.COMMENTS:POOJA KUMRA, SENIOR EUROPEAN AND UK RATES STRATEGIST, TD SECURITIES, LONDON:”Markets are basically rejoicing that this is the end of the cycle and that’s why even this 25-basis points rate hike is being met by a strong rally.””Basically, now we are at restrictive territories and the key focus right is to remain here till they get inflation back to target. The ECB is at the stage where they can rely on growth and tighter financial conditions to get there (inflation target) rather than hiking rates to get there.”MARK WALL, CHIEF EUROPEAN ECONOMIST, DEUTSCHE BANK RESEARCH, LONDON:”In the end, the ECB decided to hike again. A lingering pause is being signalled, but it’s a low-conviction pause. The ECB has retained the option to hike further if necessary. There is no declaration of victory on inflation.”JAMES ROSSITER, HEAD OF GLOBAL MACRO STRATEGY, TD SECURITIES, LONDON:”Key to the policy statement was that the Governing Council ‘considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target'”. “This is a clear sign that absent any further notable upside surprises to inflation and its drivers, they are done hiking rates.”JOHN LEIPER, CIO, TITAN ASSET MANAGEMENT, LONDON:”Markets went into the ECB meeting expecting a rate hike and that’s what we got. The ECB stated that inflation risks remain skewed to the upside and are seen as too high for too long. “My concern is this tips the economy further into recessionary territory, coming as it does, against a backdrop of deteriorating economic data and shrinking euro zone money supply which declined for the first time in 13 years in August. “If I had to provide an analogy… it seems to me like the ECB keeps adding chips to one side of the inflation-growth weighing scales… which is now teetering dangerously close to falling over.”MIKE BELL, STRATEGIST AT JPMORGAN ASSET MANAGEMENT, LONDON:”With the business surveys indicating an imminent sharp slowdown in growth, the ECB are probably done hiking.”The new orders component of the latest business surveys were very weak. Incoming new business for the service sector is contracting now, joining new orders for the manufacturing sector in the doldrums.”Against the weaker growth backdrop, the ECB can probably pause at the next meeting and if the growth outlook continues to deteriorate a pause could morph into a peak.”However, unless unemployment rises sharply and rapidly, the outlook for euro zone interest rates could end up looking like Table Mountain, with rates on hold for quite some time.”ANNA STUPNYTSKA, GLOBAL MACRO ECONOMIST AT FIDELITY INTERNATIONAL, CAMBRIDGE, UK:”I wasn’t surprised because, in that choice between hiking and sending a hawkish message and waiting, the more hawkish message to signal that the ECB is very serious about inflation clearly won.” DEAN TURNER, CHIEF EUROZONE AND UK ECONOMIST, UBS GLOBAL WEALTH MANAGEMENT:”The ECB didn’t blink in the face of growing speculation that it would hit pause on the rate-hiking cycle. To be sure, economic data have raised questions about the health of the economy, but it is clear that still-high inflation trumps these concerns.””We expect this to be the last hike from the ECB in this cycle, but that does not mean the era of tight monetary policy is over. Interest rates are likely to remain at these levels well into next year. Moreover, the ECB will continue to, and may even accelerate, the shrinking of its balance sheet.” SIMONA MOCUTA, CHIEF ECONOMIST, STATE STREET GLOBAL ADVISORS, U.S.:”The ECB pushed through another 25 bp rate hike today… The move was neither a surprise, nor a done deal: odds of another step higher had only crept above 50% in the days immediately preceding the decision, having hovered around 25% at the start of the month. “To be sure, arguments in favour of continued tightening and those in support of a pause – if not an outright end to the tightening cycle altogether – have become rather finely balanced of late, given a backdrop of near-stagnation and visible progress on inflation. “For now, the Governing Council still judged the scales as tipping in favour of additional pre-emptive action. But, with policy rates deeply in restrictive territory and earlier tightening still feeding through the economy, we believe this should be – and likely will be – the last hike in this cycle.” (Reporting the Markets Team; Compiled by Dhara Ranasinghe; Editing by Amanda Cooper) More

(Reuters) – European shares rose on Thursday after the European Central Bank raised interest rates for a tenth straight time, lifting borrowing costs to a record high while also signalling an end to their monetary policy tightening cycle.The central bank raised rates by 25 basis points, taking the rate the ECB pays on bank deposits to 4%, the highest level since the euro was launched in 1999.”Based on its current assessment, the Governing Council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target,” the ECB said.The pan-European STOXX 600 climbed 0.6% by 1235 GMT, supported by banks and commodity-linked stocks. Rate-sensitive banking stocks gained 1.2%. “Markets are basically rejoicing that this is the end of the cycle and that’s why even this 25 basis points rate hike is being met by a strong rally,” said Pooja Kumra, Senior European and UK rates strategist, TD Securities.The energy index rose 1.7% as crude prices hit 2023 highs, while miners added 3.5% on firmer metal markets.Neste climbed 3.4% as Goldman Sachs raised the Finnish oil refiner and biofuels producer’s stock rating to “buy”.A European Commission investigation into Chinese electric vehicles believed to have benefited from state subsidies will have a “negative” impact on economic and trade ties, China’s commerce ministry warned.Bucking the trend, auto stocks declined 1.2%, with Germany’s Mercedes, BMW (ETR:BMWG) and Volkswagen (ETR:VOWG_p) and France’s Renault (EPA:RENA) falling between 0.5% and 2.0%.THG slumped nearly 20% after the British e-commerce firm forecast its annual revenue from continuing operations to come in flat or drop up to 5%. More

The escalation comes as negotiations over a new deal, which began in July, between the union and automakers Ford Motor (NYSE:F), General Motors (NYSE:GM) and Stellantis NV (NYSE:STLA), are yet to result in an agreement.Here is a timeline of events beginning with the election of the new UAW chief in March:Date Development March 25 Shawn Fain wins the race for the role of UAW president; vows to take a tough stance with the Big Three automakers. July 10 The union says it will open contract talks with Detroit’s Big Three automakers starting July 13. July 11 Fain says the union is not afraid to hold a strike at any of the automakers without a fair contract. July 19 Fain meets President Joe Biden at the White House as the union briefed the staff on contract talks with the Detroit Three automakers. Aug. 1 The UAW presents demands to Stellantis, says the union is seeking ambitious benefit increases from the Detroit Three, including double-digit pay rises and defined-benefit pensions for all workers. Aug. 2 The union presents contract demands to General Motors Aug. 3 The union presents contract demands to Ford Aug. 8 Fain angrily tosses contract proposals from Stellantis in a trash can, citing numerous concessions that the Chrysler parent is seeking in labor talks. Aug. 25 The UAW says 97% of voting members were in favor of authorizing a strike at the Detroit Three if an agreement is not reached before Sept. 14. Aug. 31 The union says it has filed unfair labor practice charges with the National Labor Relations Board (NLRB) against GM and Stellantis, saying they have refused to bargain in good faith. Aug. 31 Ford makes a contract offer to the UAW, providing hourly employees with 15% guaranteed combined wage increases, lumpsum payments and improved benefits over the life of the contract Sept. 1 The U.S. NLRB says it will investigate unfair labor practice charges filed by the UAW union against GM and Stellantis. Sept 6 The UAW makes a labor contract counterproposal on economic issues to Ford Sept. 7 GM makes counteroffer to the UAW that includes a 10% wage hike and two additional 3% annual lumpsum payments over four years. Fain calls the offer “insulting.” Sept. 8 Stellantis says it offered U.S. hourly workers a 14.5% wage hike over four years but no lumpsum payments. Sept. 8 Fain says the UAW union wants a deal to avoid walkouts at the Detroit Three but expects to go on strike against all of them next week if they do not improve their contract offers. Sept. 11 Stellantis says it plans to make a new counteroffer to the UAW after the union made its own revised offer on Sunday ahead of the expiration of the current four-year labor deal Thursday night. Sept. 13 The UAW rejected counteroffers from the automakers and outlined plans for strikes targeting individual U.S. auto plants in what would be its first-ever simultaneous strike against the Detroit Three. More

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