Aurelia Butler

ROME (Reuters) – Italy is likely to confirm its budget deficit targets for this year and next, people familiar with the matter said, as the Treasury aims for tighter fiscal policy to limit the impact of rising euro zone interest rates.In its Economic and Financial Document (DEF) to be unveiled next week, the Treasury aims for a 2023 fiscal gap at 4.5% of gross domestic product, unchanged from the target set last November, the people told Reuters.The government is also expected to keep its 3.7% deficit goal for 2024.Last year, Italy reported a budget gap of 8% of GDP, but Rome is gradually phasing out the strongly expansionary policy adopted since 2020 to soften the impact of the COVID-19 pandemic and an energy crisis exacerbated by Russian invasion of Ukraine.Reuters reported on Thursday that the actual deficit this year is now projected at 4.35%, which potentially allows leeway of up to 3 billion euros ($3.27 billion) of additional spending or tax cuts without going above the 4.5% goal.Any such spending, if confirmed, would come on top of a 5 billion euro package aimed mainly at curbing firms’ and consumers’ energy bills, which was approved last month.All figures in the document are still subject to changes as talks within the Prime Minister Giorgia Meloni’s government continue, the sources cautioned.Meloni’s office has called a cabinet meeting to approve the document on April 11 at 1300 GMT.The government is also expected to upgrade its growth estimate for this year to at least 0.9% from 0.6%, the sources said, but the outlook for 2024 is darkening amid growing difficulties in spending EU post-COVID recovery funds.Italy is due to receive roughly 200 billion euros in grants and cheap loans through 2026, making it the bloc’s largest beneficiary in absolute terms.However, the government is falling behind both on targets and milestones agreed with Brussels in return for the aid, and on spending money already received.($1 = 0.9163 euros) More

Moscow has warned that it could block Ukraine’s shipments of grain to international markets unless the west removes “obstacles” to Russia’s own exports. Russia in mid-March agreed a 60-day extension to a longstanding deal that has allowed Ukraine to continue to cheaply export its vital grain supplies, despite Russia’s invasion. But foreign minister Sergei Lavrov said on Friday the country was now prepared to let the deal lapse unless western capitals were willing to make concessions. “We suspended the agreement because we didn’t see anyone trying to solve these problems in real terms. Then we decided to extend for 60 days,” Lavrov said at a press conference in Ankara following a meeting with his Turkish counterpart, Mevlüt Çavuşoğlu. “But if no step is taken after 60 days, we will start questioning if we need this agreement.” The deal, which was negotiated by Turkey and the UN, is seen as a critical lifeline for Ukraine’s battered economy and its vast agricultural sector. The 27mn tonnes of grain and edible oils shipped, despite Russia’s Black Sea blockade, have also helped ensure that some of the world’s poorest countries would continue to have access to affordable food and avoid famine. Russia is also a major food exporter, and Lavrov said it was unfair that the west had cut Russia off from the Swift payments messaging system, which is crucial in facilitating global commerce. The lack of access to Swift was making it difficult for the country to ship grain and fertiliser, despite these products not being subject to sanctions from Ukraine’s western allies. Lavrov said restrictions on insuring Russian ships, put in place to enforce a cap on the price of the country’s oil, were also snarling its exports. The grain agreement was initially struck in July last year and then extended in November. Turkey had been pushing vigorously for a full 120-day extension to the deal, according to a senior official who had been briefed on the talks. However, Russia’s concerns over its own exports — as well as attempts by Ukraine to expand the deal to include more products — had complicated the negotiations. “The jury is still out on another extension,” the person said. The EU is also pushing heavily for an extension, which it sees as critical to sustaining Ukraine’s economy during the conflict. Brussels has set up expanded land export corridors for grain through Poland and other countries. But logistical difficulties along these so-called solidarity lanes have had a negative impact on EU markets, forcing the resignation this week of Poland’s agriculture minister, Henryk Kowalczyk.Lavrov’s visit to Turkey comes at a time when Moscow’s relationship with Washington and other western capitals continues to cool. The Biden administration has strongly rebuked Russia over its detention earlier this month of Wall Street Journal reporter Evan Gershkovich. Moscow, meanwhile, has been infuriated by Finland’s accession to the Nato military alliance. Lavrov declined to take a question from the Financial Times at Friday’s press conference on why Gershkovich was detained or whether Moscow would heed calls from the US and its allies to release him.Additional reporting by Funja Guler More

US jobs growth slowed in March but not enough to deter the Federal Reserve from considering another interest rate increase as the central bank battles high inflation.The world’s largest economy added 236,000 positions last month, according to a report from the Bureau of Labor Statistics published on Friday, a step down from the upwardly revised 326,000 jobs accrued in February and far below the 472,000 recorded in January. Most economists polled by Bloomberg forecasted job gains of 230,000 in March.The unemployment rate slipped to 3.5 per cent, just above a multi-decade low. Wage growth, meanwhile, remained firm, with average hourly earnings up another 0.3 per cent in March following a 0.2 per cent increase the previous period. On a year-over-year basis, wages are have increased 4.2 per cent.US government bonds came under selling pressure, with the policy sensitive two-year Treasury yield up 0.12 percentage points to 3.94 per cent. The benchmark 10-year yield rose 0.07 percentage points to 3.37 per cent. Prices fall when yields rise. Stock markets are closed in observance of Good Friday. Pricing in the futures markets indicated that investors continue to believe the Fed has implemented its last interest rate rise in this cycle.The jobs report follows other data this week which offered tentative signals that a year-long effort by the Fed to tame inflation is starting to weigh on a historically strong labour market. Jobless claims figures, which track new applicants for unemployment aid, came in higher than expected on Thursday and figures over the past 12 months were revised significantly higher as part of an annual review by the BLS.US job openings also dropped sharply in February, data on Wednesday showed, pushing the ratio of jobs available to unemployed people down to 1.7 from 1.9.Fed officials have long maintained that it would take a period of “below-trend growth and some softening in labour market conditions” to get inflation back down to the central bank’s 2 per cent target. Most policymakers, per forecasts published last month, project the unemployment rate will rise to 4.5 per cent this year and growth will slow to 0.4 per cent as they advance their monetary tightening campaign.

Following another quarter-point rate rise last month, the federal funds rate hovers between 4.75 per cent to 5 per cent. Most officials see it peaking between 5 per cent to 5.25 per cent this year and forecast no cuts until 2024, suggesting markets are in store for one more quarter-point rate rise.Complicating the outlook for the Fed, however, is the extent of the economic shock posed by the recent banking turmoil. Jay Powell, the chair, and other officials have suggested there is likely to be a credit crunch as lenders pullback, but the magnitude of the retrenchment is highly uncertain.“Such a tightening in financial conditions would work in the same direction as rate tightening,” Powell said last month, adding that it could potentially be the equivalent of a “rate hike or perhaps more than that”. More