Aurelia Butler

(Reuters) -The Federal Reserve will probably have to raise interest rates to at least 5.4% in order to tame high inflation with January job gains showing policy actions so for have done little to dent the labor market, Minneapolis Fed President Neel Kashkari said on Tuesday.”I think it surprised all of us,” Kashkari said in an interview with broadcaster CNBC, referring to a blowout jobs report last Friday in which more than half a million employment gains were reported for January by the U.S. government. “It tells me that so far, we’re not seeing much of an imprint…on the labor market…it’s pretty muted so far, so I haven’t seen anything yet to lower my rate path.”Kashkari, one of the most aggressive policymakers at the U.S. central bank in his assessment of how high interest rates need to go, had said a month ago that he forecast the policy rate should pause at 5.4%.Fed Chair Jerome Powell is due to speak later on Tuesday at 1240 EST (1740 GMT), with investors anxious to hear if his assessment of the economy has changed.Last week the Fed increased its policy rate by a quarter-of-a-percentage-point to 4.5%-4.75% but Powell reiterated expectations at that point that the Fed was eyeing a pause in the 5%-to-5.25% range as sufficiently restrictive in its fight against inflation, which is running at more than twice the Fed’s 2% goal.January’s jobs report on Friday, however, upended investor expectations for an earlier pause after the economy added far more jobs than expected and the unemployment rate fell to 3.4%, the lowest reading since 1969.Kashkari pointed to other concerns that emanated from such a strong labor market, including a very robust services sector and wages still growing at a rate in excess of being consistent with the Fed’s inflation target, at a time when the Fed’s steepest rate hiking cycle in 40 years is supposed to be sapping demand from the economy.”It’s hard to imagine that you’re going to see very strong job growth while wage growth is moderating and that’s what I’m looking for…” Kashkari said. “We’ve seen no progress so far, virtually no progress in core services ex housing, and that’s very tied to the labor market.” On Monday, Atlanta Fed President Raphael Bostic said the central bank may need to lift borrowing costs higher than previously anticipated given the unexpectedly strong job gains and noted that while a half-a-percentage-point rate hike was not his base case, it could be considered.Kashkari also remained concerned about the possibility that loosening financial conditions could complicate the Fed’s task. “On the margin it does cause concern for me individually. I don’t think it’s a good thing that mortgage rates have come back down…it does make our jobs harder to bring the economy into balance.” More

Roksolana Pidlasa, the head of the parliamentary budget committee, said spending had been increased by 5.5 billion hryvnias ($150 million). The increase included funds to finance and modernise hospitals in the capital Kyiv and the western city of Lviv, and to rebuild bridges damaged in Russia’s war on Ukraine.The amended budget also plans for 1.28 billion hryvnias in additional support for small businesses in the processing industry and state guarantees for loans in the agriculture sector.Almost a year of war has ravaged Ukraine’s public finances, leading to double-digit inflation, higher unemployment, a sharp fall in exports and big losses in revenue and tax income.Ukraine’s budget deficit this year is expected to be about $38 billion. The government plans to cover the deficit with Western foreign aid.The finance ministry has said the budget received 35.8 billion hryvnias from tax revenues and 31.5 billion hryvnias from customs in January. The government also received 155.24 billion hryvnias in foreign aid last month.($1 = 36.5686 hryvnias) More

Last week, the U.S. Federal Reserve implemented its smallest rise of its tightening cycle so far and markets suspect a peak is nearing from the European Central Bank and the Bank of England. Overall, 10 big developed economies have raised rates by a combined 2,990 basis points in this cycle to date. Japan is the holdout dove. Here’s a look at where policymakers stand, from hawkish to dovish. The race to raise rates https://www.reuters.com/graphics/CANADA-CENBANK/zdpxdnajypx/chart.png 1) UNITED STATES The Fed last week raised its benchmark interest rate by 25 basis points (bps) to a range of 4.50% to 4.75%, its smallest hike so far in an 11-month tightening cycle. Fed Chair Jerome Powell said it would “not be appropriate” to cut rates in 2023 and warned inflation remained too high, pushing back against an exuberant market rally on hopes for eventual rate cuts. Friday’s strong U.S. jobs data has further dampened the rate-cut speculation. Fed keeps promise of more hikes https://www.reuters.com/graphics/USA-FED/zgpobkryyvd/chart.png 2) CANADA The Bank of Canada (BoC) on Jan. 18 lifted its key rate by 25 bps to 4.5%, the highest in 15 years. BoC Governor Tiff Macklem told Reuters he was purely focused on whether borrowing costs should be higher, quashing market bets that cuts could come as soon as October.Canada’s central bank has raised its policy rate at a record pace of 425 bps in 10 months. Inflation, which peaked at 8.1% and slowed to 6.3% in December, remains more than triple the BoC’s 2% target. Bank of Canada keeps on hiking https://www.reuters.com/graphics/CANADA-CENBANK/egpbymdakvq/chart.png 3) NEW ZEALAND The Reserve Bank of New Zealand (RBNZ) upped its pace of tightening in November, delivering a record 75-bps rate rise after five consecutive 50 bps rate increases. Minutes from the meeting showed the RBNZ also considered a larger 100-bps hike but opted for a smaller increase. The central bank raised its forecast for its peak interest rate to 5.5%, up from a previous forecast of 4.1%. New Zealand’s record rate hike https://www.reuters.com/graphics/NEWZEALAND-ECONOMY/lgpdknnlqvo/chart.png 4) BRITAIN The BoE, the first major central bank to turn hawkish back in December 2021, last week lifted its Bank Rate for the tenth time running, to 4%, the highest since 2008. The BoE dropped a former pledge to keep increasing rates “forcefully” and said inflation had probably peaked. BoE’s fight against inflation- https://www.reuters.com/graphics/BRITAIN-BOE/dwpkdeezmvm/chart.png 5) AUSTRALIA Australia’s central bank raised its key rate by a quarter point on Tuesday to 3.35%, its highest level in a decade. It was the ninth hike of the current cycle and RBA spelled out further rate hikes would be needed in coming meetings to bring inflation down from a 33-year high. Taming inflation-https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/mopaklyjnpa/chart.png 6) NORWAYNorway, which raised the curtain on the hawkish global trend by first raising rates in September 2021, kept its policy rate unchanged at 2.75% on Jan. 19. The Norges Bank also noted inflationary pressures were easing and previous hikes were slowing the economy. Hikes stalled- https://www.reuters.com/graphics/GLOBAL-CENTRALBANKS/jnvwyxxxxvw/chart.png  7) EURO ZONEThe ECB raised its key rate by 50 bps to 2.5% last week, its fifth successive hike and the highest level since November 2008.It said it intends to hike the rate by another 50 basis points in March to bring inflation down to its 2% medium-term target.While euro zone headline inflation eased for a third month in January, falling to 8.5% from 9.2% in December, core inflation held steady at 5.2%. ECB hikes again and signals more to come- https://www.reuters.com/graphics/GLOBAL-CENTRALBANKS/dwpkdeejmvm/chart.png 8) SWEDENSwedish inflation hit a 30-year high of 10.2% on the year in December, raising pressure on the Riksbank to keep lifting borrowing costs. Sweden’s central bank hiked its key rate by 75 bps to 2.5% in November and next meets on Feb. 8. Further hikes expected- https://www.reuters.com/graphics/GLOBAL-CENTRALBANKS/lgvdknnkepo/chart.png 9) SWITZERLANDThe Swiss National Bank (SNB) raised its policy rate by 50 bps to 1% in December, its third hike of 2022. Senior officials have signalled further increases could come this year. SNB Chairman Thomas Jordan said last month that it was too early to sound the all-clear on inflation, although inflation eased to 2.8% in December from a year earlier. Exit from negative rates- https://www.reuters.com/graphics/CEN-WRAP/znvnbkkjbvl/chart.png 10) JAPANThe Bank of Japan, the most dovish major global central bank, inched closer to ending its ultra-easy monetary policy in December with a hawkish tweak to its yield-curve control scheme that it uses to pin down borrowing rates. The BOJ resisted further policy changes in January. But as inflation rises, the International Monetary Fund has recommended the BOJ let government bond yields move more freely and consider raising short-term interest rates. Any such move may rock markets as Japanese investors sell overseas assets to invest back home. BOJ under fire BOJ under fire- https://www.reuters.com/graphics/JAPAN-ECONOMY/BOJ/zjpqjeoojvx/chart.png More