Aurelia Butler

Today’s top storiesNato and US officials said China’s proposed peace plan for Ukraine was tainted by the country’s support for Russia.US core monthly personal consumption expenditure — the Federal Reserve’s preferred measure of inflation — came in at a higher than expected 0.6 per cent in January, with the year-on-year figure at 5.4 per cent, much higher than the anticipated 4.8 per cent, fuelling expectations of more interest rate rises. Economic growth for the fourth quarter was revised down yesterday from 2.9 per cent to 2.7 per cent. Minutes of the last Federal Reserve policy meeting showed it was still determined to bring inflation back to target. Recession fears returned to Germany after revised figures showed the economy shrank a more than expected 0.4 per cent in the fourth quarter.For up-to-the-minute news updates, visit our live blogGood evening.One story dominates global media today: the first anniversary of Russia’s all-out assault on Ukraine. As we catalogue across the FT site today, the war has not only brought devastation to the Ukrainian people but profound changes to the global economy.Let’s start with the energy crisis. The war brutally exposed Europe’s dependence on gas from Russia, while record oil and gas revenues helped Moscow initially weather the cost of its campaign, with a hit of just 2.1 per cent to Russian GDP in 2022. But as Europe successfully pivots to alternative sources such as seaborne liquefied natural gas and oil revenues are affected by a western embargo and a price cap, the impact on Russian government revenue — 40 per cent of which comes from energy — is likely to be substantial. The price of Brent crude meanwhile has fallen back to prewar levels.Falling prices and a mild winter have fuelled a new sense of optimism that the crisis is ending, but Fatih Birol, head of the International Energy Agency, added a note of caution in an interview with the FT yesterday: “Russia played the energy card and it did not win . . . But it would be too strong to say that Europe has won the energy battle already.”Western sanctions meanwhile continue to ratchet up, with a new raft of measures today timed to coincide with the anniversary. The US and the UK are targeting hundreds of groups and individuals including Russian banks and defence companies, while the EU and Japan are looking at ways of further damaging Moscow’s war economy.But how effective are the sanctions? Western allies are investigating sanctions dodging and in particular the surge of exports to Russia’s neighbours. An FT investigation found that Yevgeny Prigozhin, leader of the Wagner mercenary group that has played a key role in the invasion, managed to generate more than a quarter of a billion dollars from his natural resources empire despite being sanctioned way before the war. He was even able to get round UK money-laundering checks by submitting a utility bill in the name of his 81-year-old mother.Meanwhile, as today’s Moral Money newsletter (for premium subscribers) points out, many of the world’s biggest companies are still doing business in Russia, arguing fire sales would harm shareholder value. Tobacco group Philip Morris told the FT this week it would “rather keep” its operations in Russia than sell on tough Kremlin terms.Another key consequence of the war has been the damage to supply chains, and in particular on food supplies, causing global hunger to jump by almost a quarter last year, according to the UN. Food and fertiliser prices have come down from last year’s peaks but are still high.As our Behind the Money podcast explains, Ukraine’s role as one of the world’s major sources of grain, corn (a vital source of feed for livestock) and sunflower oil suddenly stopped with the invasion and Russia’s blockade of Ukraine’s ports. Although the UN and Turkey eventually brokered a deal to get grain moving again, poorer countries that rely on Ukrainian and Russian grain have been hit hard.As for Ukraine itself, the economic damage has been devastating, with GDP falling 30 per cent last year and many of its core industries badly affected. The war effort is costing it 35 per cent of GDP, threatening to turn the country into an inflationary disaster, heavily dependent on foreign aid. And despite repeated offers of support from the west, less than half the financial aid pledged has actually reached Kyiv, according to new analysis. The FT editorial board nonetheless detects grounds for hope after a year of war and praises the decision to make Ukraine an official candidate for EU membership.“Discussion is rightly starting about the postwar security guarantees Ukraine will need,” it says. “Thousands of its citizens have paid in blood to ensure independence and a ‘European future’ for their country. Ukraine deserves assurances that this is indeed the future that awaits.”Need to know: UK and Europe economyUK opposition leader Keir Starmer outlined five long-term missions for the Labour party if he wins the next election, including a pledge to make the country the fastest-growing G7 economy. Should he become prime minister, he will inherit a severely damaged public sector, according to a new report.The European Central Bank scrapped its dividend and said it made no profits in 2022 for the first time in 15 years. Analysts said the ECB risked losses in the coming years as it unwinds its quantitative easing policies.Turkey cut interest rates in an attempt to support the economy following the recent earthquakes, the latest in a series of big reductions ahead of its general election.Need to know: Global economyUS clean energy tsar John Podesta told the FT there would be “no apologies” for prioritising American jobs in the race for clean energy.The US nominated former Mastercard chief and Wall Street veteran Ajay Banga as World Bank president to oversee the institution’s upheaval and a new focus on global warming. The FT editorial board outlines the challenges ahead.South Africa and Nigeria, Africa’s two largest economies, were put on warning by the Financial Action Task Force, an anti-money laundering watchdog, over failures to fight illicit finance and organised crime.The US may be attempting a pivot towards clean energy but it first must overcome its obsession with big cars. Chief data reporter John Burn-Murdoch details how they result in high levels of air pollution and much higher road death rates than in other developed countries.Need to know: businessBASF, the world’s biggest chemicals group, is cutting 2,600 jobs and winding down several plants, blaming high energy costs in Europe.The latest signs of a rebound in travel demand came with British Airways owner International Airline Group returning to profit for the first time since the start of the pandemic and a similar announcement from Australian flag carrier Qantas. In China the revival means the rich are struggling to find private jets. London’s Heathrow airport said it had lost £684mn last year despite passenger numbers trebling.Job cuts at McKinsey and KPMG are the first concrete signs that the pandemic-fuelled boom in spending on consultants is over, thanks to soaring costs, the end of cheap money and a slump in deal activity. A hacking outfit known as the Nevada Group has tried to paralyse computer networks of almost 5,000 victims across the US and Europe in one of the most widespread ransomware attacks on record. Science round upGoogle said it had made a breakthrough in correcting for the errors that are inherent in quantum computers, a potentially significant step in overcoming the biggest technical barrier to a revolutionary new form of computing. Can robot learning be used to generate novel ideas in hard areas such as mathematics and science? Innovation editor John Thornhill is optimistic.The collision of two neutron stars in 2017 may offer us some insights into the age of the universe and unlock other astrophysical mysteries, writes science commentator Anjana Ahuja.The worst-ever outbreak of bird flu has led to the disease becoming endemic in some birds, with huge costs for the poultry industry. But how likely is a human bird flu pandemic? Read our new explainer.Some good newsYnys Enlli, an island off the coast of Wales, has become Europe’s first dark-sky sanctuary and one of the best places in the world to see the stars

Something for the weekendThe FT Weekend interactive crossword will be published here on Saturday, but in the meantime why not try today’s cryptic crossword? More

Africa’s two largest economies have been put on warning by the global anti-money laundering watchdog over shortfalls in combating illicit finance and organised crime.The Paris-based Financial Action Task Force said on Friday that it was placing South Africa and Nigeria on its “grey-list” of countries that needed to do more to improve their ability to fight financial crime, exposing them to greater scrutiny by investors and banks around the world.FATF actions can strongly affect how the financial probity of countries is perceived. The G7-created body can ultimately “blacklist” banking systems over serious deficiencies in stopping money laundering and terrorist financing.South Africa is only the second G20 economy after Turkey to have been added to the FATF grey-list. The United Arab Emirates, Albania and Yemen are also among those grey-listed. Only three countries — Iran, North Korea and Myanmar — are blacklisted.The watchlist does not technically call for greater due diligence of countries named, but in practice banks and investors can often subject affected transactions to more scrutiny — costs that the troubled economies of South Africa and Nigeria can ill-afford.South African banks have already said they have strengthened controls to mitigate the effects of the grey-listing. “Importantly, the costs of increased monitoring will be substantially lower than the long-term costs of allowing South Africa’s economy to be contaminated by the flows of proceeds of crime and corruption,” the South African Treasury said on Friday.President Cyril Ramaphosa’s government raced last year to pass laws in order to plug gaps identified by the FATF, but it has struggled to show real progress in investigating and prosecuting organised crime and corruption scandals tied to the governing African National Congress.Nigeria’s grey-listing comes just a day before it holds presidential and parliamentary elections, and after cash shortages linked to measures to prevent vote-buying have been hitting economic activity.South Africa has made “significant progress” to meet recommendations to improve laws and develop better policies, the task force said. Nigeria “has made progress”, it added.South Africa’s central bank said on Friday in response to the grey-listing that it had a “zero-tolerance approach when addressing the abuse of the financial system by money launderers or terrorist financiers”.“South Africa’s hard work resulted in most of the identified deficiencies being addressed within the 12-month observation period afforded to South Africa,” the reserve bank added.The FATF also suspended Russian as a member on the first anniversary of the invasion in Ukraine, a significant sanction by an agency whose reach extends beyond western financial systems.Russia’s actions “unacceptably run counter to the FATF core principles aiming to promote security, safety, and the integrity of the global financial system”, such as signs of involvement in arms trading and cyber crimes over the war, the watchdog said.Serhiy Marchenko, Ukrainie’s finance minister, called in the Financial Times this month for western nations to expel Russia from the task force in order to “significantly increase the cost of doing business with Russia and effectively choke Putin’s ability to finance his illegal war of aggression”. More

The country’s IPCA-15 consumer price index rose 0.76% in the month to mid-February, up from 0.55% in the previous month, while economists polled by Reuters had forecast a 0.72% increase.Annual inflation reached 5.63%, down from 5.87% a month earlier but also above the 5.6% forecast by economists, with interest rate cuts still seen as unlikely in the very short term.The latest data follows a clash between President Luiz Inacio Lula da Silva and central bank governor Roberto Campos Neto over high interest rates, when speculation of a potential government move to boost inflation targets emerged.Lula’s criticism of the central bank led to a deterioration of inflation expectations and a steepening of the yield curve. Brazil has an inflation target of 3.25% this year and 3% in 2024 and 2025, in all cases with a 1.5-point tolerance band.Campos Neto defended the central bank’s autonomy to pursue targets by hiking rates, currently at a six-year high of 13.75%, while Lula has said lending costs were far too high given the inflation trajectory, hindering economic growth.Andres Abadia, Pantheon Macroeconomics’ chief Latin America economist, said that under “normal circumstances” the recent fall in annual inflation would trigger a dovish shift by the central bank, but that noise stemming from Lula’s remarks was still a threat.”Unfortunately, uncertainties about the government’s commitment to low inflation, including the autonomy of the central bank, have raised red flags,” Abadia said in a note to clients.Brazil’s top economic policy council earlier this month decided to put off the discussion by announcing no new resolutions regarding its inflation targets, but it may still review the targets at any time.Some of the country’s top hedge fund managers have recently dubbed the inflation goals “unrealistic” and “too ambitious” to be met, calling for an upward change.Under current targets, Friday’s inflation data will not ease policymakers’ concerns about the strength of core inflation, Capital Economics’ chief emerging markets economist William Jackson said.Prices in eight of the nine groups surveyed rose in February, with education posting the largest impact. Only apparel costs fell in the period.”We continue to think that Copom will only turn to monetary easing towards the end of the year, delivering 100bp of cuts (to 12.75%),” Jackson said – a view shared by private economists polled by the central bank. More

The People’s Bank of China (PBOC) said it will focus on supporting domestic demand expansion and stabilising economic growth and prices while avoiding “flood-like” stimulus, according to the report.However, it said that the external environment remains “severe and complex”, adding that the basics of domestic economic recovery are “not solid”. The report also said the property sector requires time to transition while the pressure of balancing local government fiscal revenue and expenditure persists. China will closely watch the trend and changes in inflation and keep the prices of energy and food stable, said the report.The report has not changed substantially from the previous one, with markets anticipating a government reshuffle, especially of the economic team, and the announcement of economic targets and policies for 2023 during an annual parliamentary meeting kicking off on March 5.The world’s second-largest economy is stabilising and improving but still faces many challenges, Premier Li Keqiang said at a cabinet meeting on Wednesday, after the country’s economic growth slowed to one of the worst levels in half a decade due to stringent COVID-19 lockdowns and curbs in 2022.The PBOC will keep liquidity reasonably ample and maintain effective credit growth, according to the report. The central bank also pledged to start improving social expectations and boosting confidence, mainly focusing on stabilising economic growth, employment and prices.As the problematic property sector has showed a tentative recovery, the PBOC said it will satisfy reasonable financing demand in the sector but insist on not using real estate as a short-term means to stimulate the economy. Late on Friday, the PBOC and banking and insurance regulator issued a notice to encourage commercial banks to issue loans for the purchase of housing by rental housing groups.(This story has been refiled to fix a typo in the second bullet point) More