Aurelia Butler

BUDAPEST (Reuters) – Bank of England rate-setter Catherine Mann on Monday backed further increases in interest rates and warned that pausing, as some of her colleagues advocate, risked a confusing “policy boogie” if it turned out rates would need to rise again. After hiking interest rates to 4% last week, the BoE’s Monetary Policy Committee (MPC) signalled it was close to pausing a run of increases which began in December 2021.Mann, consistently the most hawkish member of the MPC, said the risk of under-tightening policy far outweighed the alternative. “We need to stay the course, and in my view the next step in Bank Rate is still more likely to be another hike than a cut or hold,” Mann said in a speech delivered to the Lamfalussy Lectures Conference in Budapest.Her comments coincided with research on Monday from consultancy Oxford Economics that showed Britain is among the countries most at risk from “monetary overkill” – tightening policy too far. On some metrics, Britain ranked top. Mann, who held chief economist titles at the OECD and Citi, criticised the idea of pausing the rate hike cycle at this juncture, a course of action that two of her MPC colleagues – Swathi Dhingra and Silvana Tenreyro – voted for last week.”In my view, a tighten-stop-tighten-loosen policy boogie looks too much like fine-tuning to be good monetary policy. It is both hard to communicate and to transmit through markets to the real economy,” Mann said.There were upside risks to the inflation outlook, Mann said.”From a risk-management point of view, monetary policy has to lean against these upside biases since wage and price inflation are still so high,” she said.At the other end of the MPC spectrum, Dhingra and Tenreyro say over-tightening risked sending Britain’s economy into an unnecessarily severe downturn, with the full force of the BoE’s rate hikes yet to feed through. The BoE’s own forecasts show inflation falling well below the 2% target in the coming years.On Friday BoE Chief Economist Huw Pill, regarded as a centrist figure on the MPC, said it was important not to raise borrowing costs too high. More

The FBS (Free Switzerland Movement) says cash is playing a shrinking role in many economies, as electronic payments become the default for transactions in increasingly digitised societies, making it easier for the state to monitor its citizens’ actions.It wants a clause added to Switzerland’s currency law, which governs how the central bank and government manage the money supply, stipulating that a “sufficient quantity” of banknotes or coins must always remain in circulation.There is no evidence of moves towards a cashless society by Swiss authorities.FBS said it had garnered over 111,000 signatures in support of the measure, above the 100,000 needed to trigger a popular vote. Under Switzerland’s system of direct democracy, the proposal would become law if approved by voters, though government and parliament would decide how that law was implemented.”It is clear that … getting rid of cash not only touches on issues of transparency, simplicity or security … but also carries a huge danger of totalitarian surveillance,” FBS president Richard Koller said on the group’s website.He also views Switzerland as a European standard-bearer for the defence of cash, as pushing through such guarantees in the European Union would entail the “almost impossible” process of securing approval from all 27 member states.Accelerated by the impact of COVID-19 lockdowns, the trend towards increased cashless payments was evident as far back as 2017, when an Ipsos study found more than a third of Europeans and Americans would happily go without cash and 20% pretty much did so already. More

Investing.com — The US’s shooting down of a Chinese surveillance balloon on the weekend triggers an angry response and generates a reality check for Chinese assets. The Eurozone’s retail sales in December were awful, but German factory orders picked up, bolstering hopes that the economy may be close to turning a corner. The US stocks are set to open lower, still under pressure from a jobs report on Friday that dented hopes for a quick ‘pivot’ to interest rate cuts by the Federal Reserve. There’s bid speculation in the air, with gold mining and storage, two unlikely candidates for attention. And oil prices continue to bump along at one-month lows on concerns about the global demand outlook. Here’s what you need to know in financial markets on Monday, 6th February.1. One less red balloon goes byChinese stocks weakened as the US’s decision to shoot down a Chinese surveillance balloon triggered a loud and angry response from Beijing. Benchmark indices lost between 0.8% and 2.0%, correcting after a bullish start to the year.The balloon’s flight over Montana, the state of several US strategic missile sites, had already caused a planned meeting between Secretary of State Antony Blinken and President Xi Jinping to be canceled.Coming less than a week after reports that the US is looking at tightening restrictions on Chinese telecoms giant Huawei, the incident has revived awareness of the risk to markets of a fresh deterioration in US-Chinese relations.2. German orders offer hope after weak end to the year in the EurozoneThere were mixed updates from the Eurozone, with retail sales falling more than expected in December and confirming the picture of a weak end to last year.More forward-looking data were more encouraging: German factory orders, a key indicator of future trends in Europe’s manufacturing heart, posted their strongest gain in a year, bolstering hopes that the alarming slowdown seen last year is bottoming out.The euro has softened markedly since the European Central Bank’s latest press conference last week when President Christine Lagarde’s guidance of further interest rate hikes was taken with more skepticism than usual. Lagarde is due to speak at 13:00 ET (18:00 GMT), while Bank of England Chief Economist Huw Pill may also draw some interest with a speech an hour earlier.3. Stocks set to open lower as retailers, games publishers prepare to update The US stock markets are set to open the week lower, with participants still revising their outlook for US interest rates after Friday’s stronger-than-expected labor market report. The blowout headline number of 517,000 nonfarm job gains arguably overstated the strength of the labor market but, nonetheless, dented hopes of an early ‘pivot’ to rate cuts by the Federal Reserve later this year.By 06:45 ET, Dow Jones futures were down 221 points or 0.7%, while S&P 500 futures were down 0.8%, and Nasdaq 100 futures were down 1.1%. The three main cash indices had fallen by between 0.4% and 1.6% on Friday, with tech stocks – whose value is especially sensitive to interest rate assumptions – underperforming sharply.Earnings have a consumer-flavored theme to start the week, with Tyson Foods (NYSE:TSN) and Loews (NYSE:L) getting the ball rolling early, followed by Activision Blizzard (NASDAQ:ATVI) and Take-Two Interactive (NASDAQ:TTWO) after the bell. Mall owner Simon Property (NYSE:SPG) is also due to update later.4. Newmont, storage companies breathe life into M&A marketM&A activity is threatening to push earnings out of the limelight at the start of trading, however.Newmont (NYSE:NEM), the world’s biggest gold miner, has offered $17 billion to buy Australian-based Newcrest, a deal that the latter’s institutional shareholders appear to find too low. Newmont stock fell 5.7% on the news.That deal comes at a time when bullion prices are riding high again, supported by hopes of a turn in the US interest rate cycle.Elsewhere, Public Storage (NYSE:PSA) made a hostile $11B bid for rival Life Storage (NYSE:LSI), after having an earlier bid rejected. Life Storage rose 13% in premarket.In smaller deals, Angry Birds developer Rovio (HE:ROVIO) said it will after all talk to Israeli-based Playtika (NASDAQ:PLTK) about a possible sale. Rovio stock rose 13% in Helsinki. Playtika ADRs were still to trade in premarket.5. Oil bumps along at one-month lows; Turkey closes pipeline down after earthquakeCrude oil prices were stuck around their lowest level in a month as bets on a strong rebound in Chinese demand were trimmed. Signs of a slowdown in US drilling activity – notably, the seventh fall in Baker Hughes’ rig count in nine weeks – appear not to have fully compensated for sharp rises in US inventories last week.New European and US sanctions on Russian exports of refined products come into force this week but aren’t expected to have any immediate impact on crude prices.By 06:45 ET, US crude prices were up 0.3% at $73.64 a barrel, while Brent crude was up 0.6% at $80.42 a barrel.Earlier, Turkish pipeline operator Botas said it had closed down the Baku-Tbilisi-Ceyhan pipeline as a precaution after a massive earthquake that killed hundreds in Turkey and Syria. No damage to the pipeline was discovered. More

BENGALURU (Reuters) – The Indian government will meet its deficit target for the coming fiscal year, according to a Reuters poll of economists who were split on whether New Delhi would undertake all the capital spending it is planning, the most ever.Since taking office in 2014, Prime Minister Narendra Modi’s government has broadly stuck to its borrowing targets but has come under sharp criticism for not creating enough jobs, especially for young people.Of 39 economists who responded, 34 said the government could achieve Finance Minister Nirmala Sitaraman’s fiscal deficit target for the 2023/24 fiscal year, 5.9% of gross domestic product (GDP). That would be down from an expected 6.4% in the current fiscal year, ending on March 31.The remaining five economists who stated the government would fail to meet that target said the fiscal deficit would be in the range of 6.0% to 6.2%.A key government objective is to bring the deficit down to 4.5% of GDP by 2025/26. Respondents were evenly split on whether it would succeed. GRAPHIC: Reuters Poll – India Fiscal Deficit- https://fingfx.thomsonreuters.com/gfx/polling/zdvxdnqjqvx/Reuters%20Poll%20-%20India%20Fiscal%20Deficit.pngThe government also announced on Feb. 1 planned record capital expenditure of 10 trillion Indian rupees ($120 billion) for the coming fiscal year, more than the 8.85 trillion expected in a Reuters poll before the budget.But only half of 38 respondents in the Feb. 1-3 poll said the government would meet that spending target. Among those who said it would not, some argued the economy would slow as a series of 2022 interest rate hikes take hold and curb the government’s spending power. “Are the budget numbers overly optimistic? On the margin, we think yes. We expect growth to slow materially in FY 2023/24…(which) means tax revenues are likely to disappoint,” said Sonal Varma, chief economist for India and Asia ex-Japan at Nomura.”The government can still meet its 5.9% deficit target, but it will have to cut back on its projected capex target.”Six economists, who answered a follow up question, expected capex to fall short of budget estimates by a median of 1.25 trillion rupees.GRAPHIC: Reuters Poll – India Capex- https://fingfx.thomsonreuters.com/gfx/polling/movaklwbqva/Reuters%20Poll%20-%20India%20Capex.pngOver the past three years, New Delhi has nearly doubled its capital spending. But it has failed to meet its budget capex target four times over the past nine years and looks like falling short of this fiscal year’s 7.5 trillion rupee target.This is supposed to have promoted employment, but there has been little sign of the lift in public capital spending promoting a matching increase from the private sector.When asked if the measures announced in the budget would significantly affect job creation next fiscal year, 26 of 37 respondents said the measure would, but much would depend on how they were implemented.The other 11 said the government was far from significantly affecting employment.Kunal Kundu, India economist at Societe Generale (OTC:SCGLY), said, “Job creation is unlikely to be of the scale needed.” “The stress in the labour market is very clear, because, despite a much lower labour force participation rate, we still have a pretty elevated unemployment rate,” Kundu said.The unemployment rate was 7.14% in January, according to the Centre for Monitoring Indian Economy, a think tank.($1 = 82.2060 Indian rupees) More