Aurelia Butler

“We do think that balance between making sure inflation is not entrenched for the remainder of 2023 and 2024 but at the same token first and foremost maintaining financial stability, will be met by the central banks both in Australia and in the U.S. in the coming months,” said Shaw at the Australian Financial Review Banking Summit in Sydney. “That’s why I think we are much closer to a pause and much closer to peak terminal rates.” More

LEXINGTON, Virginia (Reuters) -The shuffling of deposits from small to large banks could have a disproportionate impact on U.S. small businesses that depend heavily on community and regional financial institutions for credit, Federal Reserve Governor Philip Jefferson said on Monday.”We are focused on the macroeconomy but we are aware … that there are potential distributional aspects,” if depositors move cash away form smaller banks, Jefferson said.Recent banking sector stress has led to declining deposits at smaller institutions and “we are going to have to see how that plays out,” Jefferson said. “That could have a disproportionate impact on small businesses … We want community and regional banks to be strong.” Jefferson’s comments show how the recent failure of Silicon Valley Bank and Signature Bank (NASDAQ:SBNY) have complicated what had been a monetary policy debate tightly focused on inflation, and the need to raise interest rates higher to control it.The sudden stress in the banking sector has raised the possibility of a broader slowdown in credit as banks grow more cautious, particularly smaller institutions seen as possibly more vulnerable to the sort of run that took down SVB. Data last week from the Fed showed a record outflow of deposits from small and smaller regional U.S. banks in the week after Silicon Valley’s collapse, with deposits among banks outside the 25 largest dropping by nearly $120 billion in the week ended March 15.While a “credit crunch” could aid the Fed’s fight against inflation but leave less money in the pockets of businesses and households, too sharp or disorderly a contraction could lead to a recession.However Jefferson also said that inflation “is too high” and that he would like to see it return to the central bank’s 2% target “sooner as opposed to later.”He did not say whether he thinks further interest rate increases are appopriate or not, but said he hoped inflation could be brought under control “in a way that does not damage the economy any more than is necessary.” More

Shortages of fruit and vegetables helped push UK food inflation to a record high in March, according to the latest industry data, suggesting there was little sign of any let up on households struggling with the cost of living crisis. Annual food inflation reached 15 per cent, up from 14.5 per cent in February and the highest since records began in 2005, the British Retail Consortium said on Tuesday. The biggest price rises affected fresh foods, with inflation up 0.7 points to 17 per cent.Helen Dickinson, chief executive of the BRC, said “poor harvests in Europe and north Africa worsened availability” of fruit and vegetables and the weakness of sterling further pushed up the cost of imports.Prices of fruit and vegetables grown out of seasons in greenhouses in the UK and other northern European countries were also affected by high energy costs.Dickinson added that the rising cost of sugar had also fed through into higher prices for chocolate and other sweets as the Easter holidays approached. Food inflation hits the poorest households the hardest as grocery shopping accounts for a larger proportion of their spending. Mike Watkins, head of retailer and business Insight at NielsenIQ, which helps compile the data, said the inflationary pressures had forced customers to change their habits. Retailers had seen “more visits but less basket spend, as shoppers manage their weekly food bills by shopping little and more often and seeking out the lowest prices.” The BRC data suggests that price growth of food and non-alcoholic beverages has continued to accelerate this month. In February, official food inflation hit a 45-year high of 18.2 per cent, according to the Office for National Statistics data released last week. Overall, the official data showed inflation rose unexpectedly month-on-month in February to 10.4 per cent from 10.1 per cent. The Bank of England, which has a 2 per cent inflation target, subsequently raised rates by another quarter point to 4.25 per cent in an effort to curb pricing pressures.Susannah Streeter, head of money and markets, at Hargreaves Lansdown, a financial services company, said the cost of living crisis was “showing little sign of dying down.”The fast growth of food prices pushed BRC shop price inflation to a new record high of 8.9 per cent in March, up from 8.4 per cent the previous month. Non-food shop inflation rose a more modest 5.9 per cent, contained by discounts on home entertainment equipment and other electrical appliances. More

China has significantly expanded its bailout lending as its Belt and Road Initiative blows up following a series of debt write-offs, scandal-ridden projects and allegations of corruption.A study published on Tuesday shows China granted $104bn worth of rescue loans to developing countries between 2019 and the end of 2021. The figure for these years is almost as large as the country’s bailout lending over the previous two decades. The study by researchers at AidData, the World Bank, the Harvard Kennedy School and the Kiel Institute for the World Economy is the first known attempt to capture total Chinese rescue lending on a global basis.Between 2000 and the end of 2021, China undertook 128 bailout operations in 22 debtor countries worth a total of $240bn. China’s emergence as a highly influential “lender of last resort” presents critical challenges for the western-led institutions such as the IMF, which have sought to safeguard global financial stability since the end of the second world war.“The global financial architecture is becoming less coherent, less institutionalised and less transparent,” said Brad Parks, executive director of AidData at the College of William and Mary in the US. “Beijing has created a new global system for cross-border rescue lending, but it has done so in an opaque and uncoordinated way.”Rising global interest rates and the strong appreciation of the dollar have raised concerns about the ability of developing countries to repay their creditors. Several sovereigns have run into distress, with a lack of co-ordination among creditors blamed for prolonging some crises.Sri Lanka president Ranil Wickremesinghe called on China and other creditors last week to quickly reach a compromise on debt restructuring after the IMF approved a $3bn four-year lending programme for his nation.China has declined to participate in multilateral debt resolution programmes even though it is a member of the IMF. Ghana, Pakistan and other troubled debtors that owe large amounts to China are closely watching Sri Lanka’s example.“[China’s] strictly bilateral approach has made it more difficult to co-ordinate the activities of all major emergency lenders,” said Parks.Several of the 22 countries that China has made rescue loans to — including Argentina, Belarus, Ecuador, Egypt, Laos, Mongolia, Pakistan, Suriname, Sri Lanka, Turkey, Ukraine, and Venezuela — are also recipients of IMF support.However, there are big differences between IMF programmes and Chinese bailouts. One is that Chinese money is not cheap. “A typical rescue loan from the IMF carries a 2 per cent interest rate,” said the study. “The average interest rate attached to a Chinese rescue loan is 5 per cent.”Beijing also does not offer bailouts to all Belt and Road borrowers in distress. Big recipients of Belt and Road financing, which represent a significant balance sheet risk for Chinese banks, are more likely to receive emergency aid.“Beijing is ultimately trying to rescue its own banks. That’s why it has gotten into the risky business of international bailout lending,” said Carmen Reinhart, a Harvard Kennedy School professor and former chief economist at the World Bank Group.China’s lending is in two forms. The first is through a “swap line” facility, where yuan is disbursed by the People’s Bank of China, the central bank, in return for domestic currency. Around $170bn was disbursed in this way. The second is through direct balance of payments support, with $70bn pledged, mostly from state-owned Chinese banks.The Belt and Road Initiative is the world’s largest-ever transnational infrastructure programme. The American Enterprise Institute, a Washington-based think-tank, has put the value of China-led infrastructure projects and other transactions classified as “Belt and Road” at $838bn between 2013 and the end of 2021.The bailout bonanza reveals shortcomings in the design of a scheme described by Chinese leader Xi Jinping as “the project of the century”. One issue, said Christoph Trebesch of the Kiel Institute, was that Chinese lenders “really went into many countries that turned out to have particularly severe problems”.Other deficiencies derived from a dearth of feasibility studies and a general lack of transparency, according to the study.Several projects became cause célèbre for how not to undertake development lending. An infamous $1bn “road to nowhere” in Montenegro remains unfinished and dogged by corruption allegations, construction delays and environmental issues.“White elephants” such as Sri Lanka’s Hambantota port and Lotus Tower are seen as symptoms of the country’s debt crisis, while more than 7,000 cracks were found in an Ecuadorean dam built by Chinese contractors near an active volcano. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.Asian markets could rebound on Tuesday from their sluggish start to the week, after a deal to buy the assets of stricken U.S. bank Silicon Valley Bank (SVB) prompted a relief rally in financials and allayed fears of deeper systemic stress.Regional U.S. lender First Citizens BancShares said it will take on SVB’s assets of $110 billion, deposits of $56 billion and loans of $72 billion, and investors liked what they heard.The S&P 500 banking index jumped 3% – First Citizen shares leapt 54% – the MSCI global financials index rose 1.2% and euro zone banks rose 1.7%.Systemic banking crisis fears were further allayed by Fed Vice Chair for Supervision Michael Barr, who plans to tell lawmakers on Tuesday that regulators are committed to ensuring all U.S. bank deposits are safe, according to prepared remarks.Brent crude’s rise of over 4% was another indication that investors may be recovering their mojo in the final week of a torrid quarter. All good news, right?Yes, but there are reasons for caution, and not just because banking crises are rarely resolved in days or weeks. US 2-year yield & world bank stocks, https://fingfx.thomsonreuters.com/gfx/mkt/egvbyjeozpq/YieldsBanks.png The surge of more than 20 basis points in the two-year U.S. Treasury yield was down due to a poorly received auction as much as due to confidence that banks have turned a corner. The notes sold at a high yield of more than two basis points above where they had traded before the auction, and demand was the weakest since November 2021.Treasury’s sale of $43 billion five-year notes on Tuesday and $35 billion of seven-year notes on Wednesday will be worth monitoring.And crypto shares fell after the Commodity Futures Trading Commission said it had sued crypto exchange Binance and its CEO and founder Changpeng Zhao for operating an “illegal” exchange and a “sham” compliance program.Bitcoin fell 3.5%, the third time in a week it has lost 3% or more in a single day.There are no central bank policy decisions on Tuesday, but investors can expect a slew of headlines from central bank officials around the world to hit their screens.In Asia, Bank of Japan governor Haruhiko Kuroda gives a speech, and finance ministers and central bank governors of the ASEAN nations attend a three-day summit in Bali. European Central Bank and Bank of England chiefs Christine Lagarde and Andrew Bailey head a raft of European policymaker events.And the Fed’s Barr delivers his “Bank Oversight” testimony to lawmakers.Here are three key developments that could provide more direction to markets on Tuesday:- Australia retail sales (February)- ASEAN finance chiefs summit- Fed’s Barr speaks on banking sector oversight (By Jamie McGeever; Editing by Josie Kao) More

Good morning.Benjamin Netanyahu’s hard-right government bowed to public pressure on Monday, delaying bitterly contested plans to overhaul Israel’s judiciary. The backtrack comes after the largest protests in more than a decade erupted in Israel Sunday evening, plunging the country into its worst political crisis in years. Public dissent rippled throughout the economy, with ports, shopping mall chains, and the medical association announcing strikes.The massive unrest began after news surfaced that Netanyahu had sacked his defence minister Yoav Gallant, who had called for the judicial overhaul to be suspended. The overhaul would give Netanyahu’s government and its allies more control over the appointment of judges and limit the top court’s ability to strike down laws. Supporters say the changes are needed to rein in an activist leftwing judiciary, while critics see the overhaul as a fundamental threat to Israel’s checks and balances. The key battleground is over judicial reform, but many say it is a fight over the nature of Israel itself and choosing between a secular state versus a more conservative one. Here are some of the other events you should know about today: Boao Forum for Asia: The annual international Boao Forum kicks off in the Chinese island of Hainan today. The forum is modelled on the World Economic Forum in Davos and draws hundreds of foreign investors and leaders to China. Bank turmoil: US congressional committees will grill financial regulators today and Wednesday over their role in the collapse of Silicon Valley Bank and Signature Bank. Across the Atlantic, Bank of England governor Andrew Bailey will face questions from MPs on the Treasury Committee about the purchase by HSBC of Silicon Valley Bank UK.Corporate earnings: China’s electric vehicle maker BYD will publish annual results today. Investment bank Jefferies and US chipmaker Micron will publish quarterly results. What did you think of today’s FirstFT? Let us know at [email protected]. Thanks for reading.Five more top stories

In testimony released ahead of an expected grilling on SVB’s failure by US lawmakers on Tuesday, Michael Barr, the Fed’s vice-chair for supervision, criticised the bank’s ‘concentrated business model’ © Bloomberg

1. Top Fed official blasts SVB collapse as “textbook case of mismanagement,” saying the US central bank had been briefed on the troubles at Silicon Valley Bank in mid-February. Michael Barr, the Fed’s vice chair for supervision, proposed a tightening of banking rules and said US regulators were ready to intervene again if necessary.2. Saudi Aramco strengthens China ties with two refinery deals, increasing the state oil company’s contracts with Beijing by up to 690,000 b/d. The deals come as Russia eats into Saudi Arabia’s share of the largest oil import market. 3. Hungary approved Finland’s Nato membership on Monday in the latest sign of prime minister Viktor Orbán slowly turning away from Russia as the economic benefits of their relationships fades.4. Alibaba billionaire Jack Ma has made a rare public visit to mainland China after spending the majority of the past few years living outside the country. Ma spent less time in China following a government crackdown on the tech sector in 2020. The visit could be a sign that efforts by local government officials to extend an olive branch to Ma’s companies are paying off.Capital flight: While Jack Ma may be warming to China again, the recent disappearance of entrepreneur Bao Fan shows worries still remain about the state’s attitude towards the businesses, writes Henny Sender.5. Harita Nickel raises $660mn in Indonesia’s biggest IPO this year in a major test of international investor confidence as the country attempts to develop an electric vehicle supply chain. Indonesia is the second-biggest listing market in Asia and holds the world’s largest nickel reserves, a vital metal for the energy transition. The Big Read

A magazine cover of Mahsa Amini, whose death in police custody last year triggered demonstrations across more than 150 cities and towns in Iran © Atta Kenare/AFP/Getty Images

Outwardly, Iran’s Islamic regime is projecting confidence that it has navigated the country’s recent tumult. But beneath the surface, the anger that inspired nationwide protests is still bubbling away. The question is whether the ideological hardliners in power will allow the changes that analysts believe are their best hope of staving off more unrest.We’re also reading . . . Lessons for Deloitte: China told Deloitte to “learn a lesson” after issuing a record fine against the accounting firm as the country steps up scrutiny of auditors and tries to stamp out risks in its financial system.Iraq’s dollar shortage: Attempts to control Iraq’s currency crisis has cut dollar supply, worsened inflation, and exacerbated hardships for Iraqis who don’t trust the country’s currency nor institutions. The crisis underlines the fragility of Iraq’s oil dependent economy 20 years on from the US-led invasion. Opinion: The “shadow boxing” between China and Japan over Ukraine underlies a broader trend, writes Gideon Rachman. The merging of geopolitical rivalries in Asia and Europe has disturbing echoes of the 1930s. Chart of the day

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The pay transparency movement is gaining momentum in the US and upsetting the labour market as employees find out how much their colleagues are earning. For businesses, the laws could exacerbate an already tight labour market which has pushed up salaries.Take a break from the newsFrom a bean-to-bar chocolate factory to Taiwanese casual dining, Gregory Marchand, chef-owner of Frenchie, shares with FT Globetrotter his favourite places to eat and drink in Sentier, a bustling pocket of Paris’s 2nd arrondissement.Additional contributions by David Hindley and Tee Zhuo More