Aurelia Butler

Lula, speaking in an interview with a pool of radios from Goias state, said Brazil was regaining international credibility under his watch, a day after S&P revised its outlook for the country to “positive” from “stable”.”I’m convinced – you can call me for another interview at the end of the year and I’ll show you that GDP has grown and Brazil’s economy has stabilized,” said Lula, who took office in January.The leftist leader once again criticized interest rates that are at a six-year high of 13.75%, a level the central bank sees as necessary to tame high inflation, but which Lula views as hindering economic growth.Lula said it was inexplicable to have rates at that level while 12-month inflation runs around 4%, adding that he met on Wednesday with retailers who also voiced concern over it.Annual inflation in May reached its lowest in more than two years, but an uptick is expected from July due to unfavorable base effects.Central bank Governor Roberto Campos Neto indicated earlier this week that an improvement in market conditions was paving the way for a shift in monetary policy. More

It raised its 2023 and 2024 projections for inflation excluding volatile energy and food, which the ECB watches closely, citing past upward surprises and the implications of a robust labour market for the speed of disinflation. Euro zone inflation soared into double-digit territory last year but has nearly halved since, even if price growth remains uncomfortably high, particularly for food and services. While projections showing inflation at target would normally mean a pause in rate hikes, the ECB has underestimated price growth for years already and some policymakers openly question the reliability of its forecasts, given that poor track record. Policymakers have also said the ECB should err on the side of tightening policy too much rather than too little because an early pause would mean having to keep policy tight for longer.That is among the reasons why the bank raised interest rates for the eighth consecutive time on Thursday, taking its benchmark deposit rate to 3.5%, its highest in 22 years.The ECB also slightly cut its growth projection for this year after revised data showed the bloc dipped into a shallow recession at the turn of the year, and more recent indicators pointed to poor manufacturing output. The following are the ECB’s projections for inflation and economic growth. Previous projections from March are in brackets.2023 2024 2025GDP growth: 0.9% (1.0%) 1.5% (1.6%) 1.6% (1.6%)Inflation: 5.4% (5.3%) 3.0% (2.9%) 2.2% (2.1%) More

ANKARA (Reuters) -Turkey will take steps to lower inflation and will follow free market rules as it acts to raise competitiveness and productivity, Vice President Cevdet Yilmaz said on Thursday after chairing a meeting of a key economic coordination board.Since his election victory last month, President Tayyip Erdogan has appointed a new finance minister and central bank governor who are expected to pivot to a more orthodox policy after years of rate cuts that fueled a cost-of-living crisis.In what were among the first remarks from the government’s economic team setting out its policies, Yilmaz said Ankara would maintain fiscal discipline and would implement a consistent set of policies.”We will take effective and determined steps in the fight against inflation, which we see as the main problem,” Yilmaz said in closing remarks at the board meeting in the presidential palace.Inflation touched a 24-year high of 85.5% last October and dropped to just below 40% in May. In comments this week, Erdogan said he was determined to lower inflation to single digits under a “low inflation, low interest rate” policy.”Within the free market rules, we will continue to take steps to increase the competitiveness and efficiency of our economy,” Yilmaz said after Thursday’s meeting.Erdogan had said in comments released on Wednesday that new Finance Minister Mehmet Simsek will take steps swiftly with the central bank, despite the president maintaining his own unorthodox view that high interest rates cause inflation.Analysts at leading investment banks now expect Turkey’s central bank to start ramping up rates at its monetary policy committee meeting on June 22.Erdogan has pursued unorthodox policies for years, aiming to flip the current account deficits to a surplus. But rate cuts carried out despite high inflation sparked a currency crisis in 2021 and the lira has continued to slide since then.The lira was 0.4% weaker at 23.66 against the dollar on Thursday, near a record low, after weakening more than 20% so far this year.Yilmaz said the government would work towards achieving its investment, employment, production and export targets and was determined to remove the current account deficit from being an obstacle to sustainable growth.The current account deficit widened to $5.4 billion in April and is expected to amount to more than $45 billion this year.Yilmaz said the government’s medium-term economic plan, which would be shared with the public in September, will reshape public policies and practices. More

The ECB has now increased borrowing costs by a combined 4 percentage points in a year, its fastest pace on record, but a peak is now clearly in sight and the debate is slowly shifting to how long rates will need to be kept at current levels. “The Governing Council’s future decisions will ensure that the key ECB interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target,” the ECB said after lifting the deposit rate by 25 basis points to a 22-year high of 3.5%. Policymakers need to reconcile opposing forces.At 6.1%, inflation is already well below double-digit readings from last autumn and a recession, along with sharply lower commodity prices, will cool price growth quickly over the rest of the year. But the labour market remains tight, nominal wage growth is quick and underlying price pressures, particularly for services, appear to be stubbornly high. This is why a long list of policymakers have already put a July rate hike on the table, with nearly all also saying they were keeping an open mind about September. “Staff have revised up their projections for inflation excluding energy and food, especially for this year and next year, owing to past upward surprises and the implications of the robust labour market for the speed of disinflation,” the ECB added. Complicating the decision, the U.S. Federal Reserve paused its rate hikes on Wednesday after 10 straight increases, signalling that a global tightening cycle could soon come to an end, even if a little more tightening is still possible.Prior to Thursday’s decision, markets had priced in another 25 basis point ECB rate hike in July or September and saw a moderate chance of another move later this year, perhaps in September or October. The ECB also decided on Thursday to end reinvestments in its 3.2 trillion euro Asset Purchase Programme from July 1, a widely expected and long-flagged decision that will catch no investor off-guard. Attention now turns to ECB President Christine Lagarde’s 1245 GMT news conference. More

The European Central Bank has raised interest rates by a quarter-point to 3.5 per cent, warning that inflation is far from vanquished.The ECB’s decision on Thursday to raise its benchmark deposit rate to its highest level in 22 years comes as the central bank grapples with both an apparent wage-price spiral and a stagnant economy. The bank, which raised its inflation forecast and trimmed its growth prediction for the next three years, repeated its warning that it expects inflation “to remain too high for too long” as it will not return to its 2 per cent target for another two years.The yield on the two-year German government bond rose 0.13 percentage points to 3.18 per cent after the announcement. The euro was up 0.1 per cent against the dollar, to $1.08.The central bank’s latest rate rise contrasts with the US Federal Reserve’s decision to pause rate increases a day before.The ECB started raising rates several months after the Fed and, at 6.1 per cent, inflation is now higher in the eurozone than in the US.Eurozone inflation has fallen from a record 10.6 per cent in October. But that mainly reflects lower energy costs and the ECB worries that a long period of high inflation risks a spiral of rising wages and costs that keeps price pressures elevated.Pay per eurozone employee rose 5.2 per cent in the first quarter compared with a year ago, up from 4.8 per cent in the fourth quarter, according to ECB data published last week. The ECB raised its forecast for core inflation to 5.1 per cent this year, 3 per cent next year and 2.3 per cent in 2025 — in part because of the strength of the labour market. Jörg Asmussen, a former ECB executive who now runs the German insurance association, said he expected rate-setters to remain in tightening mode for some time. “I would not be surprised if markets had to correct their interest rate expectations, especially regarding the time of the first rate cut.” Despite low unemployment, the eurozone economy remains weak, shrinking slightly for the past two quarters, although it has proved more resilient than first feared after Russia’s full-scale invasion of Ukraine. Additional reporting by Philip Stafford More

European stocks fell on Thursday as global investors digested contrasting policy decisions from some of the world’s most influential central banks.The benchmark Stoxx Europe 600 was down 0.4 per cent at midday, easing after three consecutive days of gains ahead of the European Central Bank meeting to set interest rates for the eurozone. Germany’s Dax fell 0.7 per cent, France’s Cac 40 dropped 0.8 per cent and the FTSE 100 was flat.Stocks rallied in Asia after the People’s Bank of China cut its medium-term policy rate in the face of slowing economic growth. Overnight on Wall Street, the benchmark S&P 500 finished 0.1 per cent higher in a choppy session after the Federal Reserve held interest rates steady following 10 consecutive increases.Traders expect the ECB will increase its deposit rate by 0.25 percentage points to 3.5 per cent, its highest since July 2001, to tame stubborn inflation.“If that is the outcome, this means that if the ECB wants to land a hawkish message, it has to do so via its communication on where it sees policies heading further after today”, said Antoine Bouvet, head of European rates strategy at ING.Markets are less certain about how much higher borrowing costs will go in the 20-country zone, and one of the signals on future policy will be whether the central bank lowers its inflation forecast, also due on Thursday.In Asia, the Hang Seng China Enterprises index, which tracks mainland Chinese companies listed in Hong Kong, rose 2 per cent and the CSI 300 of Shanghai- and Shenzhen-listed stocks gained 1.6 per cent. The gains came after the PBoC lowered its medium-term lending facility rate by 0.1 percentage point to 2.65 per cent, having cut its seven-day lending rate earlier in the week by the same amount, which was its first move to boost short-term liquidity in the country’s interbank market in nine months.Data released alongside the announcement underscored the slowing pace of China’s economic recovery. Growth in industrial output and retail sales fell short of economists’ expectations, while the pace of contraction in property investment and sales also worsened in May.Analysts were sceptical that the cut to the medium-term rate, which serves as the floor for China’s benchmark prime loan rate, would be enough to get growth back on track.“The underlying story on the economy is extremely disappointing right now,” said Robert Carnell, head of Asia-Pacific research at ING. He said the renminbi could weaken to Rmb7.2 against the dollar “in days” and that policymakers would regard a weaker currency “as one of the policy tools they will need to lean on to help the economy”.The moves come a day after the US central bank announced a widely-anticipated decision to keep the federal funds rate steady, maintaining its target range of between 5 per cent to 5.25 per cent. The meeting marked the first pause in more than 14 months of the Fed’s aggressive tightening campaign aimed at bringing down persistently high inflation.The dollar, which strengthens when investors expect higher rates, gained 0.4 per cent against a basket of six peer currencies.In government debt markets, the policy-sensitive two-year Treasury yield added 0.04 percentage points to 4.74 per cent. The yield on the benchmark 10-year note gained 0.03 percentage points to 3.83 per cent. Bond yields fall as prices rise. Contracts tracking Wall Street’s benchmark S&P 500 slipped 0.1 per cent and those tracking the tech-heavy Nasdaq 100 lost 0.2 per cent ahead of the New York open.  More