Aurelia Butler

The Fed had pressed ahead with a hike in March as well, even though the U.S. banking crisis raised the specter of a recession as lending conditions tightened.Money markets are currently pricing in a roughly 65% chance of a 25bps hike from the Fed in May. Such a hike will bring the Fed Funds rate increase for this cycle to 5%, taking the rate to the 5% to 5.25% range. Traders expect a pause thereafter and see rate cuts beginning in the second half of the year.Following are forecasts from some big U.S. banks and their global counterparts: May Fed Terminal Rate U.S. recession forecast Bank forecast Expectation J.P.Morgan 25 bps hike 5% – 5.25% Sees a U.S. recession occurring in Q4 2023 Morgan 25 bps hike 5% – 5.25% – Stanley BofA 25 bps hike 5% – 5.25% Sees meaningful risk of contraction in Q2 UBS 25 bps hike 5% – 5.25% – Deutsche 25 bps hike 5.10% Expects moderate recession Bank starting in Q4 2023 Goldman 25 bps hike 5% – 5.25% Sees 35% probability of U.S. Sachs entering a recession over the next year Barclays (LON:BARC) 25 bps hike 5% – 5.25% – Citigroup (NYSE:C) 25 bps hike 5.5% – 5.75% – Societe 25 bps hike 5.5% – 5.75% – Generale Wells Fargo (NYSE:WFC) 25 bps hike – Sees recession as likely in the back half of the year Nomura No hike – – More

PARIS (Reuters) -Union activists barged into the Paris headquarters of luxury goods company LVMH on Thursday, saying the French government should shelve plans to make people work longer for their pension and tax the rich more instead.In a 12th day of nationwide protests since mid-January, striking workers also disrupted garbage collection in Paris and blocked river traffic on part of the Rhine river in eastern France.”You’re looking for money to finance pensions? Take it from the pockets of billionaires,” said Sud Rail unionist Fabien Villedieu, as the LVMH headquarters filled with red smoke. The protesters then left peacefully.Trade unions urged a show of force on the streets a day before the Constitutional Council’s ruling on the legality of the bill that will raise the state pension age by two years to 64.If the Council gives its approval, possibly with some caveats, the government will be entitled to promulgate the law, and will hope this will eventually put an end to protests, which have at times turned violent, and coalesced widespread anger against Macron.Demonstrators briefly blocked an access road to the Council with rubbish bins, hanging a banner across the street reading “Constitutional Censorship”.The industrial action has lost some steam and the protests have rallied thinner crowds in past weeks compared with the more-than 1 million-strong numbers seen earlier in the movement.But unions remained defiant.”This is certainly not the last day of the strike,” Sophie Binet, the new leader of the hard-left CGT union, said at blockade of an incinerator outside Paris. ‘WE WON’T GIVE UP’Macron has said he will organise a meeting with unions after the Council’s decision to work on other proposals — an initiative union leaders say will be short-lived if he is not ready to discuss withdrawing the pension reform. “After three months of mobilisation, I would lie if I told you that there is no fatigue. We are tired, but a mobilisation is like a marathon,” Sud Rail’s Villedieu said. “We won’t give up.” Political observers say the widespread discontent over the government’s reform could have longer-term repercussions, including a possible boost for the far right. “I’m not that optimistic about the Constitutional Council’s decision,” far-right leader Marine Le Pen, who opposes the pension legislation, told BFM TV. “But what do you want me to do? Burn cars? We’ll just tell the French: Vote for the National Rally.”Macron and his government argue the law is essential to ensure that France’s generous pension system does not go bust.Unions say this can be done by other means.”The president of the republic is completely disconnected from the preoccupations of workers,” the head of the CFDT union, Laurent Berger, told reporters ahead of the Paris rally.Earlier this week, refining operations resumed at TotalEnergies’ Gonfreville refinery, France’s largest by barrels-per-day, the last of the company’s domestic refineries to restart after a month-long shut down.Some deliveries of refined products from two of those sites were disrupted on Thursday, a TotalEnergies spokesperson said. On the Rhine river, cargo traffic was disrupted after workers cut power at a waterway lock near the border with Germany and Switzerland and run by France’s state-owned energy company EDF (EPA:EDF), a union official told Reuters. More

WASHINGTON (Reuters) – European Central Bank policymakers are converging on a 25 basis point interest rate hike in May, even if other options remain on the table and the debate is not yet settled, according to five sources with direct knowledge of the discussion.The ECB has raised rates by at least 50 basis points each at six successive meetings — the fastest pace on record — to fight stubbornly high inflation. But a host of factors now support the case for increased caution, the sources, who declined to be named, told Reuters. Uncertainty remains high after last month’s financial sector volatility and past rate hikes have yet to work their way through the economy, so less is needed because past moves are still taking hold, the sources said. They added that the peak in rates is now in sight and that this “last mile” is safer to navigate in smaller steps. Another argument put forward for gradualism was that the ECB’s deposit rate, now at 3%, is at a level which restricts growth. The sources said the debate was still open and the outlook could still change – especially on April inflation data and the ECB’s quarterly bank lending survey, both of which are due just two days before the May 4 meeting.An ECB spokesman declined to comment.Some of the sources said they would prefer the ECB not to provide any guidance about its June move, the same way it is keeping its options open now, so that policymakers would have a free hand in acting on the new economic projections due then. The sources said that some are advocating no change in May – mostly the same Southern European policymakers who did not support last month’s 50 basis point increase, while others – also a small group – argue for another 50 basis point hike. So far only few policymakers have publicly commented on the possible size of the ECB’s next move. Klaas Knot of the Netherlands said it was unclear whether 50 basis points would be needed or if 25 was enough. Slovakia’s Peter Kazimir said the ECB could perhaps slow down the pace of its increases while Austria’s Robert Holzmann meanwhile backed another 50 basis point move.Markets currently price 25 basis point hikes each in May and June, while a third such increase is fully priced in by September. The sources reasoned that rate hikes are needed because overall inflation remains too high and core inflation – stripped of volatile food and energy prices – could rise for several more months, thus making any pause the wrong signal to send. French central bank chief Francois Villeroy de Galhau made a similar point on Wednesday, saying that a “turnaround in the trajectory of underlying inflation” should be a trigger for the ECB to level off interest rates. The sources added that wage growth remained an oversized concern because labour markets are tight and that could easily fuel big demands from workers who lost a large portion of their real earnings in the past two years. Last month’s banking turmoil only had a modest impact on the euro zone so the economy continued to perform along the baseline outlined in the ECB’s March projections, which were based on market expectations of more rate hikes. More

China views democratically-governed Taiwan as its own territory and strongly objects to all high-level engagements between foreign and Taiwanese officials, especially if it involves Taiwan President Tsai Ing-wen.McCaul visited Taipei last week and met Tsai, pledging to help provide training for Taiwan’s armed forces and to speed up the delivery of weapons.China’s Foreign Ministry said McCaul, a Republican, had frequently interfered in China’s internal affairs with his words and actions and harmed China’s interests.He recently led a delegation to Taiwan “seriously harming China’s sovereignty and territorial integrity, and sending a serious wrong signal to Taiwan independence separatist forces”, it added.According to China’s anti-sanctions law, McCaul will not be allowed to enter the country, be banned from interacting with organisations and individuals in China and any assets of his in China will be frozen, the ministry said.Reuters was not immediately able to reach McCaul for comment.China says Taiwan is the single most important and sensitive issue in its relations with the United States. Taiwan’s government rejects Beijing’s sovereignty claims.China has a track record of sanctioning foreign lawmakers and officials, often for criticising China, speaking in support of Taiwan, or visiting the island, as happened to a deputy Lithuanian minister following her visit to Taipei last year.In early 2021, China sanctioned some Trump administration officials including former Secretary of State Mike Pompeo, minutes after Joe Biden was sworn in as the new president of the United States.China has also sanctioned several senior Taiwanese officials. (This story has been refiled to say ‘most’, not ‘more’, in paragraph 8) More

At the spring meetings of the IMF and World Bank, the fund’s economic forecasts were carefully calibrated to place the institution in its traditional sweet spot. It was reluctant to point to genuine signs of improving global economic performance because that would look complacent. Equally, it could not predict the world was about to enter a financial crisis for fear of a self-fulfilling prophecy. So, it chose to warn of hard-landing risks —especially if inflation was not properly controlled.More compelling than this assessment of current conditions was the IMF analysis of its long-term forecasts over the past 15 years. These show a dire trend. Instead of thinking the world could sustain a growth rate of almost 5 per cent a year, which it believed in 2008, the fund now reckons the sustainable rate is only 3 per cent.In the 30 twice-yearly forecasts it has produced since April 2008, the IMF has revised down the long-term outlook almost every time. Pierre-Olivier Gourinchas, IMF chief economist, says now that the slowdown was “predictable”. Perhaps so, but it was not predicted by the IMF.

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The truth is that this persistent slowing of medium-term global growth prospects was not at all easy to forecast. As China, India and other significant emerging economies became a larger part of the global economy, their dynamic performance pulled global medium-term growth rates higher. Emerging economies represented 37 per cent of global output in 1990 compared with 59 per cent now. This was the dominant global force until 2008.But that has had to be balanced with the tendency of these countries’ annual growth rates to slow as they became richer. Each new rail or road link, for example, represented a smaller boost to their economies and growth rates.What the IMF and most other forecasters repeatedly got wrong was that the domestic slowing of emerging economies has been much more powerful since 2008 than their still rapid relative growth rates and ever greater weight in the world economy. More worrying still is that the slowing growth story is not really one of convergence with the richest countries at all. It is much more accurate to say that over the past 15 years, medium-term growth prospects have slowed everywhere — in the US and other advanced economies, in China, in other large emerging economies and in poor countries. The only notable exception is India.

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Some of this deterioration is the inevitable effect of slower population growth and ageing societies. But that is not the whole story; much of it comes from countries prioritising short-term resilience over efficiency and dynamism. The pandemic taught companies and governments the importance of resilient supply chains. Putting eggs in many baskets is safer, but has a cost. The two largest economies, China and the US, view each other as strategic rivals and prioritise resilience and security over trade and integration. Although politicians talk about jobs created at home, when trade goes down, the cost of trade barriers outweighs the benefits.In terms of domestic politics, resilience when defined as political stability can mean avoiding difficult and unpopular but necessary reforms. Only the braver politicians, such as Emmanuel Macron, try to implement changes as unpopular as France’s decision to raise the retirement age.The question is whether the balance is right. Too often, resilience is presented as a benefit without costs. But a constant weakening in global economic growth rates will hamper the transition to net zero and the fight against global poverty; it will raise geopolitical tensions and leave many populations extremely dissatisfied. There is a place for resilience in policymaking. But we need to understand the costs. As the IMF has shown this week, they are [email protected] More