Aurelia Butler

The IMF’s managing director has warned that the global economy is facing years of slow growth, with medium-term prospects their weakest in more than 30 years.Speaking in Washington ahead of the World Bank and IMF spring meetings next week, Kristalina Georgieva said the world economy would expand at an average annual rate of about 3 per cent over the next five years. The figure is well below the average 3.8 per cent forecast of the past two decades and marks the weakest projection for medium-term growth since 1990. In the decades since then, globalisation has helped raise growth rates and pull hundreds of millions of people out of poverty. But with trade protectionism on the rise and large emerging markets such as China now better off, the pace of global economic expansion is expected to slow. Highlighting a likely theme of the meetings next week, the fund’s managing director said key impediments to growth were increasing economic fragmentation and geopolitical tensions.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

Speaking on Russia’s invasion of Ukraine, Georgieva said: “This calamity not only kills innocent people; it also worsens the cost of living crisis and brings more hunger around the world. It risks wiping out the peace dividend we have enjoyed for the past three decades, adding also to frictions in trade and finance.”She added: “The path back to robust growth is rough and foggy, and the ropes that hold us together may be weaker now than they were just a few years ago.” The weaker outlook would make “it even harder to reduce poverty, heal the economic scars of the Covid crisis, and provide new and better opportunities for all”.For the coming quarters, the IMF is backing calls from the OECD and other international organisations for central banks to stay the course with high interest rates. Georgieva said defeating inflation was a vital foundation of better medium-term economic performance. The failure of Silicon Valley Bank and Credit Suisse “exposed risk management failures at specific banks, as well as supervisory lapses”, she said, but added that “policymakers have been remarkably swift and comprehensive in their actions in recent weeks”.Further financial instability should be dealt with by central banks offering ample liquidity to banks facing funding difficulties, she said. But if turmoil worsened, she acknowledged that monetary authorities might have to ditch that stance and cut rates. Were this to happen, central banks would face “difficult trade-offs between their inflation and financial stability objectives, and the use of their respective tools”, she said. Georgieva indicated that the IMF’s latest growth forecasts, published next week, would be little changed from those in January. More

BENGALURU(Reuters) – The Bank of Canada will keep its key interest rate steady at 4.50% through 2023, according to most economists polled by Reuters, with an even smaller minority now expecting an interest rate cut by year-end than a poll taken a month ago.Markets still expect more than 50 basis points of cuts, pricing fuelled by fears last month over stresses in the U.S. and European banking sector, despite Canada’s economy and labor market performing better than expected.In a speech last week, BoC Deputy Governor Toni Gravelle said the Canadian banking system had a well-earned international reputation for stability, suggesting policymakers are more focused on inflation and how the economy is performing.In March, the BoC was the first major central bank to stop its aggressive hiking cycle and is on what it calls a conditional pause. So all 33 economists polled March 31-April 6 said it will hold its overnight rate at 4.50% on April 12.A majority of forecasters, 23 of 31, said the rate would remain unchanged for the rest of 2023. Only seven expected at least one 25-basis-point rate cut by end-year, down from 13 in a survey taken about a month ago. Derek Holt, head of capital markets economics at Scotiabank, said the fundamentals of the Canadian economy do not support current market pricing for rate cuts later this year.”In my view, central banks are likely to set a higher bar against easing than market participants … The plague that has driven thinking (is) that they can’t possibly hike because, gosh, that might damage growth, when that’s the point.”At 5.2%, inflation is still running well over twice the Bank’s 2% target and is unlikely to reach the goal until at least 2025, the poll suggested, a view also shared in the latest BoC business outlook survey.The economy, which expanded at a better-than-expected pace in January, was forecast to have grown 1.7% last quarter, significantly higher than the 0.3% contraction predicted just three months ago and the BoC’s own expectation of 0.5% growth.Quarterly growth forecasts were largely downgraded from a January survey. The economy was predicted to grow 0.7% and 1.4% this year and next, compared with 0.5% and 1.5%, respectively.While a recent expansionary federal budget and the latest surge in oil prices are good news for the oil-exporting economy, it could make the BoC’s job tougher as both risk pressuring inflation higher than the central bank wants. Indeed, 10 of 13 economists who replied to an additional question said the bigger risk was inflation in 2023 would be higher than they expect.Asked what was more likely from the Bank this year, 18 economists in response to a separate question were evenly split on whether it would be to hike again or cut rates.”If momentum continues to remain strong, that could be something that pushes the BoC towards tightening again later this year,” Robert Both, macro strategist at TD Securities, said.”The current level of inflation and signs of a rebound in Q1 GDP growth are something that are going to make it very difficult for the BoC to cut in the near term.”The Canadian dollar is forecast to rise over the coming year on expectations the export-driven economy avoids a hard landing and its U.S. counterpart weakens as the rate gap with its peers stops widening, a separate Reuters survey showed.(For other stories from the Reuters global economic poll: () More

(Reuters) – Wall Street’s main indexes were set to open lower on Thursday as a stronger-than-expected weekly jobless claims report pointed to growing signs that rapid interest rate hikes by the Federal Reserve was slowing down economic growth.Initial claims for state unemployment benefits stood at 228,000 last week, a fresh Labor Department report showed, much higher than economists’ projection of 200,000 in the latest week.The latest report adds to evidence of a cooling labor market after weak data on private payrolls and job openings earlier this week fueled hopes of a pause in rate hikes.”The last strongholds of the economy are beginning to weaken and that signals recession,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.”The labor market is beginning to weaken and that’s basically playing into the hands of the Fed.”Fed fund futures are indicating a 62.5% chance of the U.S. central bank pausing its rate hikes in May and a 51.3% chance of a rate cut at its July meeting, according to CME Group’s (NASDAQ:CME) Fedwatch tool.All eyes will now be on the report on non-farm payrolls, which are expected to have increased by 239,000 in March, down from the 311,000 jobs added in the prior month.At 8:44 a.m. ET, Dow e-minis were down 17 points, or 0.05%, S&P 500 e-minis were down 4.5 points, or 0.11%, and Nasdaq 100 e-minis were down 50.25 points, or 0.38%.Major technology and growth stocks such as Apple Inc (NASDAQ:AAPL), Tesla (NASDAQ:TSLA) Inc and Nvidia (NASDAQ:NVDA) Corp fell between 0.9% and 1.5% in premarket trade.Bucking the trend, Alphabet (NASDAQ:GOOGL) Inc rose 0.8% on report that Google Chief Executive Sundar Pichai said the company plans to add conversational artificial intelligence features to its search engine.The S&P 500 and the tech-heavy Nasdaq are on track to notch weekly declines for the first time in four weeks. The U.S. stock market will be shut on Friday for the Good Friday holiday.Remarks by St. Louis President James Bullard on the economy and monetary policy, later in the day, will also be parsed for clues on the Fed’s policy.A slew of major U.S. banks will kick off the first-quarter earnings season for big-ticket companies next week, providing investors more insight into the health of corporate America.Among major stock moves, AMC Entertainment (NYSE:AMC) Holdings Inc jumped 13.6% after a U.S. court denied the theater operator’s request to lift a status quo order necessary for its stock conversion plan. The preferred APE stock dropped 11.1%. Levi Strauss & Co (NYSE:LEVI) fell 3.9% after the apparel maker posted a fall in quarterly profit. Retailer Costco Wholesale Corp (NASDAQ:COST) shed 3% on weak comparable sales in March. More

BRUSSELS (Reuters) – Planned new European Union public debt rules should require governments of highly indebted countries to cut debt every year by at least 1% of GDP, a German paper prepared for discussions on the rules to be held in the coming months proposes.The paper, seen by Reuters, also said countries with medium debt challenges should be asked to cut their debt-to-GDP ratios by 0.5% of GDP as a minimum. While the EU has yet to define which countries it would classify as “high debt”, Greece and Italy – with public debt to GDP ratios of 178% of GDP and 147% of GDP respectively – are obvious candidates.The German paper is part of a discussion among the EU’s 27 countries, and especially the 20 that share the euro, on how to adapt EU debt rules that underpin the common currency to new realities of high post-pandemic public debt and the need for high investment to prevent climate change.It aims to build on proposals by the European Commission to allow each country to negotiate their individual debt reduction paths with the EU executive, rather than impose a one-size-fits-all rule on everybody.The existing rules require every country to cut debt annually by 1/20th of the excess above the EU ceiling of 60% of GDP, but that is now seen as unrealistic after governments borrowed heavily to pay for COVID-19 relief measures.Berlin and several other EU countries are worried that the proposal for individually negotiated debt reduction paths would give the Commission too much political discretion. “(The rule) should fix a binding lower limit for a necessary decline in the debt ratio of an appreciable magnitude in each year,” the German paper said.”As a floor, it could for example be foreseen that the debt-to-GDP ratio must decline by at least 1 percentage point per year for member states with high debt challenge/debt ratios and by at least 0.5 percentage points per year for MS with medium debt challenge/debt ratios above 60%.”The paper also called for the use of the expenditure benchmark as a way to steer public spending, keeping increases in net primary expenditure below increases in potential growth rate of the economy. The bigger a country’s debt, the bigger the gap between increases in spending and potential growth would have to be, leading to a overall decline in the government deficit and therefore also debt, the paper said.To prevent governments from back-loading any painful spending cuts or pushing them until after elections, Berlin called for deficit reduction paths to be no longer than a regular electoral cycle. More

Kazuo Ueda takes over the helm at the Bank of Japan while U.S. bank earnings kick off and Switzerland’s parliament debates the UBS-Credit Suisse tie up. Here’s a look at the week ahead in markets from Kevin Buckland in Tokyo, Ira Iosebashvili in New York, Jorgelina do Rosario, Naomi Rovnick and Karin Strohecker in London. 1/ BANKS’ BOTTOM LINESThe uneasy calm that has settled over the U.S. banking sector after the collapse of Silicon Valley Bank will be tested as U.S. financials kick off their earnings season. The S&P 500 bank index is down 18% since March 8, when SVB troubles became known, followed shortly after by the collapse of Signature Bank (OTC:SBNY) and spreading worries over regional lenders such as First Republic. S&P 500 financials are seen posting first quarter year-on-year earnings growth of 5.2%, putting it among just four sectors whose earnings are expected to climb. S&P 500 earnings are predicted to fall 5.0%, I/B/E/S data from Refinitiv showed. JPMorgan Chase (NYSE:JPM), Citigroup Inc (NYSE:C) and Wells Fargo (NYSE:WFC) report earnings on April 14, with Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and Bank Of America due the week after. GRAPHIC: U.S. bank deposits https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/jnpwylywzpw/Final%20U.S.%20bank%20deposits.png 2/ SWISS QUESTIONS In Switzerland, the other banking crisis hotspot, parliament holds a special three day session from Tuesday to debate government support and guarantees provided to secure UBS’ takeover of Credit Suisse Group. There are no expectations of the deal being scuppered but outlines of conditions attached might take shape. The government had to shell out close to 260 billion Swiss francs ($280 billion) of state funding and guarantees. The debate is expected to be a heated and emotional one for the Alpine nation which has taken much pride in its financial sector and where banking assets make up more than 500% of annual gross domestic product. Switzerland has instructed Credit Suisse to cancel or reduce all outstanding bonus payments for the top three levels of management and examine whether those already paid can be recovered. GRAPHIC: Tale of two banks https://www.reuters.com/graphics/CREDITSUISSE-CRISIS/xmvjkbxwwpr/chart.png 3/ UEDA’S TRILLION DOLLAR QUESTION     After a decade in charge of the Bank of Japan, overseeing unprecedented monetary easing aimed at shocking the country into an inflationary cycle, Haruhiko Kuroda passes the baton to Kazuo Ueda on Monday.    Winding down hefty stimulus may prove more challenging than putting it in place, which is why economists generally expect Ueda will take his time before making major changes. Still, investors will strain their ears for policy hints at his inauguration speech.    Inflation is running well above the 2% target and salaries have finally showed signs of catching up, so investors are asking the trillion dollar question of how long crisis-sized stimulus can remain. That’s the record amount it cost the BOJ to buy up bonds last year to keep yields in check as emboldened speculators attacked the market. GRAPHIC: Tokyo core inflation continues to cool https://www.reuters.com/graphics/JAPAN-ECONOMY/INFLATION/lgvdkxkjypo/chart.png 4/ SLIPPERY GROWTH VS STICKY INFLATIONOPEC+ producers sent oil prices spiralling higher on April 2 by announcing output cuts of around 1.16 million barrels per day until the end of 2023. This followed crude price drops in March as banking sector turmoil sparked recession fears. The big question is whether oil prices will keep rising, feeding higher inflation, or settle to balance the production cuts with a lacklustre global economy. China’s reopening has boosted its domestic economy but demand at its factories remains weak. The latest ISM survey of U.S. manufacturers indicated conditions were dire.Outside of gains for resources stocks, initial market reaction to OPEC’s move was muted, with investors waiting on U.S. inflation data on April 12 to see if price rises have slowed enough to quell central banks’ appetite for further aggressive rate rises. GRAPHIC: Fuel price effect on U.S. inflation https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/lgpdkxklrvo/chart.png 5/ SPRING MEETINGS Policymakers and investors head to Washington for the World Bank and International Monetary Fund Spring meetings starting on Monday. High inflation and financial stability are top concerns. The Fund will release its latest projections for global growth on Tuesday and a sovereign round table to address countries in debt distress is a key event on Wednesday. Cash-strapped economies such as Zambia, Sri Lanka and Ghana are still in talks to restructure their overseas debt with much focus on China, the largest bilateral creditor for emerging markets economies. It will be the first meeting for Ajay Banga, U.S. nominee to run the World Bank and sole contender for the job. Banga says he supports his predecessor’s proposal to expand the bank’s annual lending capacity by about $5 billion to help tackle climate change and other global challenges. GRAPHIC: Climate vulnerability by debt service and exports https://www.reuters.com/graphics/EMERGING-DEBT/CLIMATE/mopakynwzpa/chart.png ($1 = 0.9053 Swiss francs) More