Aurelia Butler

SHANGHAI/SINGAPORE (Reuters) – China’s central bank lowered a short-term lending rate for the first time in 10 months on Tuesday, to help restore market confidence and prop up a stalling post-pandemic recovery in the world’s second-largest economy.The cut to the lending rate signals possible easing for longer-term rates over the next week and beyond as demand and investor sentiment weaken, adding to the case for urgent policy stimulus to sustain growth.The People’s Bank of China (PBOC) cut its seven-day reverse repo rate by 10 basis points to 1.90% from 2.00% on Tuesday, when it injected 2 billion yuan ($279.97 million) through the short-term bond instrument.”The central bank’s rate cut decision was not a complete surprise to the market,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank.”Commercial banks have already lowered deposit rates, and PBOC governor Yi Gang also mentioned strengthening counter-cyclical adjustment recently.”The yuan hit a six-month low of 7.1680 per dollar after the rate decision while yields on China’s benchmark 10-year government bonds fell to a fresh 7-1/2-month low.Cheung said the PBOC may have wanted to mitigate the impact of any future policy easing on the Chinese yuan ahead of the Federal Reserve’s policy meeting this week, which is keenly watched by financial markets.China remains an outlier among global central banks as it loosens monetary policy to shore up growth while its major peers raise interest rates to counter surging consumer prices.Further interest rate cuts in China would only widen the yield gap with the United States, even if the Fed pauses this week, sending the yuan lower and accelerating capital outflows.China is due to release May credit lending data and activity indicators, including retail sales and industrial production, this week.Tuesday’s rate cut suggests policymakers are increasingly worried about the health of China’s recovery, traders and analysts said.”This reminds the market of the challenges that the Chinese economy faces during its recovery period,” said Marco Sun, chief financial market analyst at MUFG Bank (China).”However, the market is expecting the PBOC to cut the policy rate further. Looking ahead, the PBOC could make marginal adjustments to the policy rate in order to stimulate credit growth and avoid inflation issues in the coming quarters.”China’s central bank said on late Tuesday it lowered borrowing costs of standing lending facility (SLF), another type of loans that the PBOC lends to commercial banks to fulfill their temporary cash demand, by 10 basis points across all tenors. Bloomberg reported on Tuesday, citing unnamed sources, that China was considering at least a dozen stimulus measures including cuts to interest rates to support areas such as real estate and domestic demand.The next adjustment to rates could come as soon as Thursday, when the central bank is due to roll over 200 billion yuan ($27.93 billion) in medium-term lending facility (MLF) loans.”The 10 bp cut in the open market operations (OMO) reverse repo rate can be seen as a precursor to an MLF rate cut this Thursday,” said Frances Cheung, rates strategist at OCBC Bank.”Rates may continue to trade on the soft side but given much economic pessimism and a rate cut are already in the price, we see limited downside to rates from here.”Separately, markets expect the benchmark lending loan prime rate (LPR), which is used to set consumer loan and mortgage rates, could be lowered by the same margin at the monthly fixing next Tuesday. And some investment banks expect a 25 bp reduction to the reserve requirement ratio, or amount of cash banks must set aside as reserves, this year.”There could be less urgency to cut the RRR after these policy interest rate cuts … we now think the 25 bp RRR cut that we had previously forecast for June is likely to be delivered in Q3 instead,” Goldman Sachs (NYSE:GS) economists said in a note.”There could be another RRR or policy interest rate cut in Q4, depending on the economic outcome over the next several months.”($1 = 7.1610 Chinese yuan) More

TOKYO (Reuters) -Japanese Prime Minister Fumio Kishida unveiled on Tuesday a package of wide-ranging measures to reverse a dwindling birthrate, saying the problem needed to be tackled as an ageing population threatens the world’s third-largest economy.Kishida’s flagship policy comes amid speculation that he will dissolve parliament’s lower house this week and call a snap election, a move that could heighten calls from within his ruling party for big spending to boost its support amongst the electorate.”Now is the last chance to reverse the downtrend in childbirth by the 2030s,” Kishida told a televised press conference.”The low birthrate is a massive problem that concerns our country’s society and entire economy and can’t be put off,” he said. “Without arresting the fast-declining birthrate and populations, Japan’s economy and society would shrink, making it difficult to maintain social security systems.”With measures such as bigger payouts to families with children and providing homes for hundreds of thousands of such households, Kishida said he hoped to double child care spending by the early 2030s, from about 4.7 trillion yen ($33.7 billion) now.The package may help his party appeal to the public, fanning speculation of an early election.Although an election for parliament’s powerful lower house is not due until late 2025, Kishida, who swept to power in October 2021, is keen to boost his grip over the party ahead of a leadership race next September, analysts say.Kishida sidestepped queries on plans for a snap election, saying numerous factors would govern the decision as the approaching end of the parliament session could make for a fluid political situation. “I want to be sure that I can assess the situation appropriately,” he added. “I would like to refrain from commenting further on this matter.”Some opposition lawmakers may threaten to submit a no-confidence motion against Kishida’s cabinet by the end of the current parliamentary session on June 21, which could trigger a snap election.FUNDING SOURCESJapan’s birthrate has been on a steady decline, dropping last year to a record low of 1.26 from 1.57 in 1990, despite a series of government measures to reverse it. The number of births in 2022 was less than 40% the annual number of births during the second generation of babyboomers, who were born in the early 1970s.Kishida’s plan would see the government earmark about 3.5 trillion yen annually for the next three years for child care allowances and support for those taking child care leave.However, the government has yet to outline exactly how it would fund the measures, stoking fears of runaway debt.Kishida once again ruled out the prospect of a near-term tax hike, saying the funding gap would be filled by the issuance of special childcare bonds.The government will raise more from social insurance premiums – a move that could backfire on corporate efforts to hike wages – while also curbing increases in social security spending.It will work out the details of securing stable sources of funding by year-end, officials have said.It was “inappropriate” to criticise the government for pushing back a decision on funding sources, Kishida said.The government will also urge companies to allow employees to choose more flexible working styles such as taking three days off a week, according to a draft of the package seen by Reuters.($1=139.4600 yen) More

The Bank of England is having a bad decade. Not only has its credibility been undermined by egregious forecasting errors, the debate has gone mainstream around whether its independence mandate is a useful fiction or an obstacle.Energy costs help illustrate one problem. Last summer’s surge in wholesale gas prices went straight into Monetary Policy Reports based on the retail price cap methodology and financial support packages of the time, rather than accounting for a widely-expected state intervention. Independence locked the BoE into forecasting based on announced government policy rather than the likely path ahead.But independence also makes the BoE’s unforced errors, such as around UK population growth, harder to overlook.The bank has “very materially underestimated the supply-side potential of the UK economy because it failed to update its migration assumption — despite a body of evidence already in the public domain that net migration into the UK was poised to come in well ahead of the 2020-based population projections,” says Panmure Gordon chief economist Simon French in a note published today. The projection he refers to is an Office for National Statistics estimate for net migration of 692,000 over the three years from 2021/22 to 2023/24. When the figure went into the BoE’s February 2023 supply-side stock take it was already stale. An ONS update from November 2022 was disregarded and a January revision apparently arrived too late for inclusion. As a result, based on recent data, the projection used by the BoE was out by nearly 100 per cent. Net migration will probably be about 1.2mn over the same three-year period, more than 70 per cent of whom are working age.

“Given the materiality of the difference, and the pessimism of the broader supply side stock take, this was a poor judgment from the BoE,” French says:We have no evidence — and are not suggesting — that there was political pressure brought to bear on the bank given the salience of migration to UK public policy. However, it is either that or a poor attempt to use the latest data to accurately estimate the supply side capacity of the UK economy. Whichever way, it does not look good.When defending its record the BoE tends to highlight that price predictions come from the market, so failures are the fault of gas futures traders and forex dealers rather than its own economists. As governor Andrew Bailey said last month, forecasts are “conditional on commodity prices, they’re conditional on government policies. So, as those conditions change, we change our forecasts.”It’s an approach that looks increasingly flawed, says French, as it “introduces the potential for the market path and the expectations of Monetary Policy Committee members to decouple — with obvious challenges in standing, rhetorically, behind their central economic forecast”:The result of this is that communications resulting from [Monetary Policy Reports] have been frequently undermined as the MPC scrabble to disown or qualify their own forecasts.For the BoE, the path of interest rates should not be presented as a conditional assumption, says French, who argues in favour of adopting Federal Reserve-style dot plots. “That the MPC should know should know more than the market on the most likely forward path for UK interest rates should be a feature, not a bug, of their economic forecasts.”Berenberg economist Kallum Pickering was arguing something similar last week around policy uncertainty, and how using market forecasts “blurs its reaction function and contributes to often unreliable guidance about the policy outlook”:

Pickering also wants dot-plots introduced, as well as some deeper reform around forecasting and guidance:The BoE should no longer base any forecast on the market curve assumption and instead produce one central forecast based on the assumption of no change in monetary policy. [ . . . ]The BoE should temporarily introduce state-contingent forward guidance with “knockouts” to commit policymakers to keeping the bank rate at least at the current level until inflation is brought back under control on a sustained basis.But there’s also a question of whether the BoE is even listening to itself. Bailey told Jackson Hole in August 2020 about the value of “going big and fast” with quantitative easing, then kept buying bonds in what French calls “autopilot volumes” until December 2021, when financial conditions were exceptionally loose. The same speech now gets cited to explain why a short, sharp £80bn a year of quantitative tapering won’t make financial conditions tighter. Not only has the decision to keep adding to its balance sheet aged badly, it “looks like making policy that is at odds with the bank’s own research on the efficacy of asset purchases,” Panmure tells clients.All in all, the BoE “has managed to dent a well-deserved reputation for competence” in ways that can’t be blamed on fuel inflation alone. A functionally independent yet politically constrained central bank cannot be a market-leading forecaster because it’s compelled to apply policy positions that lack credibility; this “cannot be a sustainable position”, says French:The reputational road back will require difficult conversations with lawmakers, but it is very clear to us that those conversations need to happen. More

The aggressive posture comes at a time of pilot shortages and a rise in public support for unions. The following is the status of contract negotiations at various companies: AMERICAN AIRLINES GROUP INC:Pilots at American Airlines (NASDAQ:AAL) have reached an agreement in principle on a new contract, their union said on May 19.The Allied Pilots Association (APA), which represents over 13,000 pilots at the Texas-based carrier, said it will move forward with completing contractual language of the contract before presenting it to its board for an approval.SOUTHWEST AIRLINES CO:The Southwest Airlines (NYSE:LUV) Pilots Association (SWAPA) in May said its members at the company approved a strike mandate. It added that 98% of its members participated in the vote and 99% voted in favor of authorizing a strike. DELTA AIR LINES:In March, the Air Line Pilots Association (ALPA) said that pilots at Delta had ratified a new contract that includes over $7 billion in cumulative increases in wages and benefits over four years. The new contract, which covers 15,000 Delta pilots, provides a 34% cumulative pay increase, a lump-sum one-time payment, reduced health insurance premiums and improvements in holiday pay, vacation, company contributions to 401(k) and work rules. AIR CANADA:Air Canada’s pilots on May 29 ended a decade-long contract framework, opening the door to “full bargaining this summer,” their union leadership said in a note to members seen by Reuters.Previously, Air Canada pilots said they are pressing for “historic” gains to narrow the earnings gap with higher-paid aviators at U.S. carriers.WESTJET AIRLINES:WestJet Airlines pilots will get a 24% hourly raise over four years, plus other pay and benefits as part of a tentative agreement reached in May, according to a copy seen by Reuters on May 26. The tentative agreement was reached by Onex Corp’s WestJet and the Air Line Pilots Association (ALPA) less than 24 hours before the start of an expected strike at Canada’s second-largest carrier.UNITED AIRLINES HOLDINGS INC:The Chicago-based carrier’s pilots union has unanimously voted to authorize a strike vote, the union chair said in a letter to pilots on June 2.SPIRIT AIRLINES INC:In January, ALPA said pilots at Spirit Airlines (NYSE:SAVE) voted to ratify a new contract.The union that represents the ultra-low-cost carrier said 69% of the airline’s pilots voted in favor of the new collective bargaining agreement, which offers an economic gain of $463 million, or 27%, over the next two years.JETBLUE AIRWAYS CORP:In January, ALPA said pilots at JetBlue Airways (NASDAQ:JBLU) Corp have overwhelmingly approved a two-year contract extension. ALPA, which represents more than 4,600 pilots at JetBlue, said 75% of the pilots voted in favor of ratifying the agreement, which provides for a compensation increase of 21.5% over 18 months as well as other monetary improvements.FEDEX CORP:Governing body of ALPA unit representing FedEx (NYSE:FDX) pilots on June 12 said it has approved a tentative contract agreement that includes a 30% pay increase and a 30% increase to the pilots’ legacy pension.The FedEx Master Executive Council said the vote will open on July 5 and close on July 24. More

NEW YORK (Reuters) – For American kids, summer camps can conjure up some idyllic experiences: Canoeing on lakes, munching on s’mores by campfires.For parents trying to get their kids into popular camps, the vibe can be a little different: More like “The Hunger Games.”Just ask Ellen Sheng, a writer and editor whose local camp in Summit, New Jersey, is the “hottest ticket in town,” thanks to its reasonable price of $700 for eight weeks. “Sign-ups start in January, and it’s sold out in hours,” Sheng says. “You had to stand in line hours before sign-ups start, in the cold, to secure a spot.That particular camp has since shifted to a lottery system, to better handle the hordes of parents. But it is a common refrain around the U.S.: Top summer camps are the most popular they have been in years, requiring earlier planning and more money.“I was just talking to a camp director who has over 500 kids on his waitlist,” says Tom Rosenberg, president and CEO of the American Camp Association (ACA), which helps serve a network of more than 15,000 camps and more than 26 million campers. “So demand is soaring – but there is limited capacity.”The larger context, of course, is the COVID outbreak that began in 2020 when 82% of overnight camps did not even open that year, along with 40% of day camps, says Rosenberg.But now, the rebound is apparent. YMCA of Greater New York, for instance, is reporting a 20% jump in camp enrollment over the same time last year and is expecting its largest numbers since the pre-COVID days of 2019.“Summer camp is hot again,” Rosenberg says.As enrollments soar, the main challenge for parents is the serious legwork that needs to be done early in the year. Here are a few enrollment tips.THE EARLY BIRD GETS THE WORMMany day camps open registration in January, February and March, and overnight camps often start the previous fall. “Start researching summer camps well in advance to understand their offerings, reputation and costs,” advises Anna Sergunina, a financial planner in Los Gatos, California, who has been going through this process with her four-year-old son. “Create a shortlist of camps that align with your child’s interests and your budget. Then note down important dates such as registration opening, scholarship application deadlines, and early discounts.”Sergunina herself has preparation down cold, ever since she missed out on numerous sign-ups and scholarships last year. Now she uses the app Evernote to compile information, sets reminders in her calendar throughout the year, and signs up for newsletters from her top targets to stay on top of updates or deadlines.CRAFT A FINANCIAL STRATEGYSome camps can be very expensive, so if you are just winging it without any planning, you could find yourself with a big bill that you will have to put on plastic – at record-high interest rates.Indeed, in 2022 the average day camp cost rose to $87 per day, and the average overnight camp to $172 a day, according to an ACA survey of participating camps.That is why you need to be thoughtful about the financial hit beforehand. “Explore financial aid options and scholarships offered by the camps or external organizations,” Sergunina says. “Investigate if your employer provides any summer camp assistance as part of their benefits package. And create a budget specifically for summer camp expenses.”Early planning has multiple benefits because 93% of accredited camps offer some financial assistance to those in need, and you can also take advantage of early-bird discounts and extended payment plans, Rosenberg notes.DO NOT GIVE UP Even if you have left things until the last minute, that does not mean you are out of options. Various camps and regions of the country can have very different waitlists. Hunt for camps with openings via ACA’s ‘Find A Camp’ search tool: Even if your desired camp is full, family plans change and cancellations occur, so it is always worth checking in with the camp directly. You are more likely to have last-minute luck with day camps. They have the ability to scale up quickly, while overnight camps are restricted to the number of beds and cabins they have ready, Rosenberg says.Of course, if you really want to get a head start, think ahead to next year: Many camps offer in-person tours during the summer season, helping to refine your options for 2024. Says Rosenberg: “Summer camp is hot again.” More

(Reuters) – Federal Reserve officials sit down Tuesday for their first meeting in 15 months with no pre-determined interest rate hike on the table in what amounts to the debut gathering of the “will-they-or-won’t-they” era.With still-too-hot inflation riding their heels but abundant uncertainty about both the economic outlook and the lagged effects of 10 rate hikes since March 2022, a breather from increases looks to be in the cards when the rate-setting Federal Open Market Committee meeting concludes Wednesday.But it may be a very short-lived hiatus.That at least appears to be the latest “consensus” across the community of Fed watchers who’ve been either doubling down on longstanding calls, switching them, or – often in the same breath – throwing their hands and saying anything could happen.The Fed will likely “leave rates unchanged but warn that additional tightening is still possible in the months ahead,” analysts at Wrightson ICAP (LON:NXGN) said in predicting the Fed’s benchmark overnight lending rate would sit pat at 5-5.25%.But, reflecting the hard time the team at Wrightson and other private economists have had making up their own minds since the Fed in May set the stage for a meeting-by-meeting approach from there, the firm told clients: “We wouldn’t have been surprised if the Fed had chosen to tighten again this month, but a majority of FOMC members, including the leadership, seemed to favor a pause.”Over at Bank of America (NYSE:BAC), economists have come down on the same side as Wrightson, though they said it was a close call. “While incoming data point to resilience in activity and stickiness in inflation, the Fed appears to want additional time to monitor policy lags and regional bank stress,” they wrote. They expect the Fed to raise its target rate to 5.25%-5.5% at the July 25-26 meeting.While that is the majority view, it’s not unanimous.Citibank economists predict it will go the other way, with the Fed raising rates in June to temper what they also describe as “resilient” economic activity, a very-tight labor market and persistently strong wage and price inflation.FOCUS ON COMMUNICATIONS The same uncertainty is also apparent in Fed policymakers’ own assessments of their forecasts, last made in March and to be updated this week. The fresh economic projections, along with tweaks to the Fed’s post-meeting statement and Fed Chair Jerome Powell’s comments in the post-meeting news conference, shape expectations for the rates path ahead, economists said. And it’s quite likely that if the Fed does hold off on rates it will prep markets for action later on. “Among the key innovations for this meeting, we expect the statement will be hawkishly adjusted to note the potential for further tightening at ‘coming meetings,’” said forecasters at Deutsche Bank (ETR:DBKGn). What’s more, “given resilient data, easing financial conditions, and a desire to prevent a pull forward in rate cut pricing, at this point there is little downside from Powell delivering a hawkish message,” the bank said in a note.The last Fed forecasts released at the March meeting had penciled in a 5.1% stopping point for the federal funds rate target, where it is now. Economists are debating how much of an upgrade that rate forecast gets, with forecasters speculating Fed policymakers will add between one and two more quarter percentage point increases for this year as it continues to contend with persistent underling price pressures. Each Fed policymaker’s view of the appropriate year-end policy rate is depicted by an anonymous “dot” on a grid. “Communication will be important” and the dot plot will be key to managing expectations about the future, said Ryan Sweet, chief U.S. economist for forecasting firm Oxford Economics. “We expect seven dots to signal that the tightening cycle has ended but 11 dots to indicate more monetary policy tightening would be appropriate at future meetings.”But there was disagreement over the dot plot as well.”Once the Fed pauses at the June meeting, we think that the hurdle to resume hiking only increases,” Morgan Stanley (NYSE:MS) economists wrote, forecasting no change to the median 2023 “dot” this week. Some forecasters say that despite the uncertainty now surrounding the outlook the central bank would be best served by just going ahead and doing Wednesday what it probably expects it will have to do later this summer anyway.Favoring a rate rise this week, Oscar Munoz, chief U.S. macro strategist of investment bank TD Securities said “if the hard data points to an economy that remains strong enough to make the Fed signal a likely rate hike for July, perhaps it is more optimal to go now.” More