Aurelia Butler

WASHINGTON (Reuters) – The Biden administration’s goal of cutting deficits would help the Federal Reserve in its efforts to cut inflation, a top White House economic adviser said on Tuesday.”Enacting deficit reduction at this time would be complimentary to what the Fed is trying to accomplish,” said White House National Economic Council Director Brian Deese in a briefing with reporters. More

LONDON (Reuters) -Bangladesh asked the International Monetary Fund to start talks on a new loan under the creditor’s Resilience and Sustainability Trust (RST), which is designed to help countries ensure sustainable growth, said Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, in a Tuesday interview. Bangladesh’s $416 billion economy is the first in Asia to put such a request forward to the Washington-based lender as it seeks to ramp up its attention on how to mitigate the impact of climate change. “The RST comes also with an (upper credit tranche) program, so it’s a joint initiative. The amounts will have to be discussed subsequently,” Srinivasan told Reuters. This means that Bangladesh will need a regular IMF-supported program such as a stand-by agreement or an extended fund facility to be able to get this new type of financing.”This facility is aimed at addressing transformational changes in countries, notably climate change and pandemic preparedness,” he said. “One would hope that other countries would also take advantage of this instrument.”RST funds are capped at 150% of a country’s quota or, in Bangladesh’s case, the maximum of $1 billion.Bangladesh is seeking a $4.5 billion loan from the IMF, local newspaper The Daily Star reported on Tuesday. The IMF expects to begin lending from the RST in October. Low-income and vulnerable middle-income countries can apply to get the financing, which has channeled special drawing rights from countries with strong external positions, according to the fund’s website. The loans will have a 20-year maturity and a 10-1/2-year grace period.”We would hope that it is one among more to come down the road,” Srinivasan said. More

MADRID (Reuters) -The European Central Bank (ECB) could potentially issue a negative opinion toward a recently proposed tax on banks in Spain though details were still missing, Bank of Spain Governor Pablo Hernandez de Cos said on Tuesday.The Spanish government announced the creation of the tax earlier this month, saying the temporary tax on banks should bring in 3 billion euros in 2023-2024 that will be earmarked to help Spaniards cope with soaring inflation.The proposal is expected to be introduced in parliament this week.”In general in the case of other countries it is not easy to establish a tax that does not end up affecting credit, interest rates or the resilience of banks, and the opinion of the ECB ends up being negative,” De Cos told a financial event when asked about the tax in Spain. “We do not know the details. Once we know them the ECB will have to issue an opinion,” said de Cos, who is also a member of the ECB’s governing council.His remarks – which referred to similar taxes in countries such as Slovenia, Slovakia, Romania, Bulgaria, Poland, Hungary, Slovenia – were in line with similar remarks made last week by ECB Vice-President Luis de Guindos.De Guindos cautioned against any tax that risked damaging the solvency of the banking sector.De Cos also said on Tuesday that the central bank could probably revise sightly downwards Spain’s economic growth for 2022 and even more significantly for 2023.He said this would also apply to the eurozone’s economic growth outlook.The central banker added he did not see the Spanish economy entering a recession.On Tuesday, the Spanish government raised its inflation forecasts for 2022 and 2023 and lowered its economic growth target for 2023. More

LONDON (Reuters) – Ukraine aims to strike a deal for a $15-$20 billion programme with the International Monetary Fund before year-end to help shore up its war-torn economy, the country’s central bank governor Kyrylo Shevchenko told Reuters.Battered by Russia’s invasion launched on Feb. 24, Ukraine faces a 35%-45% economic contraction in 2022 and a monthly fiscal shortfall of $5 billion and is heavily reliant on foreign financing from its Western partners. Shevchenko, 49, speaking during his visit to London, also said he hoped to agree on a swap line with the Bank of England “within weeks”, though he did not specify the amount. Kyiv had already submitted its request to the IMF, the governor said, and was now in consultation with the fund over the new financing that he hoped would provide as much as $20 billion over two or three years in form of a Stand-By Arrangement (SBA) or an Extended Fund Facility (EFF). It was the first time Ukraine has put a number on the fresh financing it needs from the Washington-based lender. A $20 billion programme would be the second largest currently active loan from the IMF after Argentina. “The IMF has always acted as Ukraine’s partner during the war,” Shevchenko told Reuters. “My hope is to start the programme this year.”The central bank chief said a new program should provide measures that will help stabilize the economy. That could ensure a return to pre-war conditions, such as a flexible exchange rate, no limits on the currency market, decreasing non-performing loans in the banking sector and a balanced fiscal policy. The IMF’s latest loan to Ukraine was a $1.4 billion emergency financing support agreed in March – the equivalent of 50% of the country’s quota in the fund.Separately, Kyiv is now in talks with its international creditors over a freeze in debt payments to ease its liquidity crunch. Ukraine’s central bank has a $1 billion line with Poland’s central bank already. Some relief on foreign exchange revenue and liquidity would also come from the deal agreed last week between Moscow and Kyiv to allow safe passage for grain shipments in and out of Ukrainian ports, blockaded by Russia since its invasion.However, those revenues and shipments would only pick up in earnest next year, when under the central bank’s “conservative” estimates exports could hit 5 million tonnes per month and generate approximately $5 billion in 2023, Shevchenko said. Speaking about the central bank’s intervention in currency markets as well as its bond buying programme, Shevchenko said both would continue for now, though the latter would cease as soon as the war ended. “To provide monetary financing was the most painful decision in my life, but we did realize it was necessary during the war,” said Shevchenko. He added that operating in times of war had seen a whole new host of vocabulary spring up, with expressions such as “maturity of war” – a term to describe the time frame of a debt instrument used in the context of the conflict.”We see (this) as one of the biggest uncertainties,” he said. “Until the end of war, we and the Ministry of Finance should work together to overcome all these challenges, using the monetary finances and the internal debt market.”($1 = 0.9878 euros) (The story corrects to remove reference to ECB swap line in paragraph 11.) More

PARIS (Reuters) – Sales at LVMH, the world’s largest luxury group, rose by 19% in the three months to June, as robust growth in the U.S. and Europe helped it offset a new round of lockdowns in China.LVMH, which owns dozens of high end labels ranging from Tiffany to Moet & Chandon, said sales came to 18.73 billion euros ($18.95 billion) in the second quarter, beating analyst expectations for 17.13 billion euros in a Visible Alpha consensus cited by UBS. The growth pace in the second quarter was a tad slower than in the first three months of 2022, when group sales had climbed by 23%.Demand for fashion and leather goods from its star labels Louis Vuitton and Dior eased up slightly from high levels at the start of the year, rising by 19% in the quarter, as flows of travelling shoppers returning to Europe helped to mitigate disruptions to business in China.The wine and spirits division bounced back strongly from logistical and supply constraints earlier this year, growing 30%, while sales from selective retailing, which includes Sephora, rose 20%.LVMH has been tapping into strong, post-pandemic demand for its designer labels as socializing resumes and shoppers continue to spend savings from lockdowns, brushing off concerns about turbulent stock markets and rising prices.The company’s strong second quarter is setting the tone for rivals, with Gucci-owner Kering (EPA:PRTP) reporting its own first half results on July 27 and Hermes on July 29.($1 = 0.9882 euros) (editing by Silvia Aloisi) More

WASHINGTON (Reuters) – The International Monetary Fund cut global growth forecasts again on Tuesday, warning that downside risks from high inflation and the Ukraine war were materializing and could push the world economy to the brink of recession if left unchecked.Global real GDP growth will slow to 3.2% in 2022 from a forecast of 3.6% issued in April, the IMF said in an update of its World Economic Outlook. It added that world GDP actually contracted in the second quarter due to downturns in China and Russia.The Fund cut its 2023 growth forecast to 2.9% from the April estimate of 3.6%, citing the impact of tighter monetary policy.World growth had rebounded in 2021 to 6.1% after the COVID-19 pandemic crushed global output in 2020 with a 3.1% contraction. “The outlook has darkened significantly since April. The world may soon be teetering on the edge of a global recession, only two years after the last one,” IMF Chief Economist Pierre-Olivier Gourinchas said in a statement. RUSSIAN GAS EMBARGOThe Fund said its latest forecasts were “extraordinarily uncertain” and subject to downside risks from Russia’s war in Ukraine spiking energy and food prices higher. This would exacerbate inflation and embed longer-term inflationary expectations that would prompt further monetary policy tightening.Under a “plausible” alternative scenario that includes a complete cut-off of Russian gas supplies to Europe by year-end and a further 30% drop in Russian oil exports, the IMF said global growth would slow to 2.6% in 2022 and 2% in 2023, with growth virtually zero in Europe and the United States next year.Global growth has fallen below 2% only five times since 1970, the IMF said, including the 2020 COVID-19 recession.The IMF said it now expects the 2022 inflation rate in advanced economies to reach 6.6%, up from 5.7% in the April forecasts, adding that it would remain elevated for longer than previously anticipated. Inflation in emerging market and developing countries is now expected to reach 9.5% in 2022, up from 8.7% in April. “Inflation at current levels represents a clear risk for current and future macroeconomic stability and bringing it back to central bank targets should be the top priority for policymakers,” Gourinchas said.Monetary policy tightening will “bite” next year, slowing growth and pressuring emerging market countries, but delaying this process “will only exacerbate the hardship,” he said, adding that central banks “should stay the course until inflation is tamed.”U.S., CHINA DOWNGRADESFor the United States, the IMF confirmed its July 12 forecasts of 2.3% growth in 2022 and an anemic 1.0% for 2023, which it previously cut twice since April on slowing demand.The Fund deeply cut China’s 2022 GDP growth forecast to 3.3% from 4.4% in April, citing COVID-19 outbreaks and widespread lockdowns in major cities that have curtailed production and worsened global supply chain disruptions.The IMF also said the worsening crisis in China’s property sector was dragging down sales and investment in real estate. It said additional fiscal support from Beijing could improve the growth outlook, but a sustained slowdown in China driven by larger-scale virus outbreaks and lockdowns would have strong spillovers.The IMF cut its eurozone growth outlook for 2022 to 2.6% from 2.8% in April, reflecting inflationary spillovers from the war in Ukraine. But forecasts were cut more deeply for some countries with more exposure to the war, including Germany, which saw its 2022 growth outlook cut to 1.2% from 2.1% in April.Italy, meanwhile saw an upgrade in its 2022 growth outlook due to improved prospects for tourism and industrial activity. But the IMF said last week that Italy could suffer a deep recession under a Russian gas embargo.Russia’s economy is expected to contract by 6.0% in 2022 due to tightening Western financial and energy sanctions, and decline a further 3.5% in 2023, the IMF said. It estimated that Ukraine’s economy will shrink by some 45% due to the war, but the estimate comes with extreme uncertainty. For a table showing forecast highlights of the report, see: More