Aurelia Butler

Fitch downgraded Turkey’s sovereign debt and issued a scathing verdict on president Recep Tayyip Erdogan’s plan to tackle soaring inflation.The international rating agency pushed the long-term debt rating deeper into junk territory, lowering it from BB- to B+ — putting G20 country on a par with Benin, Egypt, Turkmenistan, Rwanda and Kenya.Fitch issued a negative outlook for Turkey’s debt, meaning that it could face further downgrades, and said that the financial system had been made more vulnerable by frequent and intense episodes of financial stress that it said were driven by policymakers.It said that the centrepiece of Erdogan’s plan to stabilise the country’s crisis prone economy — a series of exchange rate linked savings schemes — would not “sustainably ease macroeconomic and financial stability risks”. The Turkish lira lost more than 40 per cent of its value against the dollar in 2021 after Erdogan ordered the country’s central bank to cut interest rates four times in the final months of the year, despite soaring inflation and a shift towards rate rises by global central banks. The Turkish president, who has consolidated his grip over the country’s institutions in recent years, rejects the economic orthodoxy that raising interest rates helps to restore price stability.He has argued that he is presiding over a “new economic model” that he says will address the country’s structural economic imbalances by capitalising on a weaker, more competitive lira to boost exports, investments and employment.Turkish officials say that a set of state-backed deposits schemes, which seek to lure Turks to save in lira by promising to protect them against exchange rate loses, will reverse a long-term trend of “dollarisation” and help to bring down inflation by stabilising the local currency. They argue that, in a country that is heavily reliant on imports, price instability is largely driven by lira weakness.Turkey’s finance minister has predicted that inflation will fall to single digits by May next year. But Fitch said that it forecast average inflation of 41 per cent in 2022 and 28 per cent in 2023 — a rate that it said was the second highest level of any country in its coverage.The rating agency said that the country’s expansionary policy mix — including real interest rates that currently stand at almost -35 per cent — “could entrench inflation at high levels, increase the exposure of public finances to exchange rate depreciation and inflation”. That could eventually hit domestic confidence and reignite pressures on the country’s already low foreign currency reserves, it said. Fitch said that the capacity of the new savings schemes to “sustainably improve confidence” was limited. It warned that, if the measures failed to curb domestic demand for foreign currency, authorities could be forced to resort either to burning through more of the country’s central bank reserves or further capital controls. “This policy response could in turn have a negative effect on domestic confidence,” it said.Turkey lost its investment grade status from Fitch in January 2017, and has been further downgraded three times since then. The latest downgrade will further raise the cost of international borrowing for the country, which is heavily reliant on foreign financing to fund its economy. More

WINDSOR, Ontario/WASHINGTON (Reuters) -Protesters opposing pandemic restrictions flouted a court order and emergency rules, continuing to occupy a vital Canada-U.S. trade corridor early on Saturday, hours after a judge granted an injunction to end the blockade that has crippled North America’s well-knitted auto industry.Prime Minister Justin Trudeau has promised President Joe Biden quick action to end the crisis, and on Friday a Canadian judge ordered an end to the four-day-long blockade of the Ambassador Bridge, North America’s busiest land border crossing.The order came into effect at 7 p.m. Eastern Time (0000 GMT), but five hours after the deadline, some 100 protesters were milling around the entrance to the bridge, waving Canadian flags.While the number of protesters and police dropped as the night progressed, demonstrators continued to block the bridge with trucks and pick-up vans, preventing any flow of traffic in either direction.Protesters sang the Canadian national anthem and midnight, and some shouted “Freedom!”Police, who started to gather in a parking lot a few blocks away from the protesters, began handing out pamphlets that outlined penalties under Ontario’s emergency order, which took effect at midnight.Trudeau earlier told reporters that no action was off the table.Companies have diverted cargo https://www.reuters.com/business/autos-transportation/ford-looking-air-move-auto-parts-alternative-canadian-border-blockade-2022-02-10 to stem losses amid production cuts by companies including Ford.Superior Court Justice Geoffrey Morawetz on Friday approved the request by auto industry associations and Windsor city authorities hoping to end the protests. Occupying access roads leading to the bridge https://www.reuters.com/world/americas/truckers-ambassador-bridge-perfect-spot-threaten-us-canada-trade-2022-02-11 on Friday, protesters voiced defiance and there was little sign of them backing down. “Canada is supposed to be a free country,” said Liz Vallee, a protester from Chatham, Ontario. “When that freedom is threatened, we must stand up.” Vallee said she and others would stay until all pandemic mandates are lifted. The “Freedom Convoy” protests, started by Canadian truckers opposing a vaccinate-or-quarantine mandate for cross-border drivers, are also occupying areas outside government buildings in the national capital Ottawa and have blocked two smaller U.S. crossings.The protests have inspired similar convoys and plans in France https://www.reuters.com/world/europe/french-freedom-convoys-head-towards-paris-police-checkpoints-2022-02-11, New Zealand, Australia and the United States, whose Department of Homeland Security is working to ensure that a “Freedom Convoy” event due in early March in Washington, D.C., “does not disrupt lawful trade.”East of Ottawa, people were expected to gather in Fredericton in the province of New Brunswick (NYSE:BC) for a weekend demonstration. Local police said officers were stationed at entrances to the city to ensure traffic can continue. Canada’s financial capital Toronto was also bracing for more weekend demonstrations.U.S. PRESSUREAdding to calls for action by U.S. officials and business leaders, Biden expressed concerns over auto plant closures and production slowdowns during a phone call with Trudeau, the White House said in a statement. “The two leaders agreed that the actions of the individuals who are obstructing travel and commerce between our two countries are having significant direct impacts on citizens’ lives and livelihoods,” the statement said. “The Prime Minister promised quick action in enforcing the law, and the President thanked him for the steps he and other Canadian authorities are taking to restore the open passage of bridges to the United States,” it added. Trudeau told reporters that he agreed with Biden that the blockades cannot continue. “Everything is on the table because this unlawful activity has to end and it will end,” Trudeau said.U.S.-Canada cross-border trade in vehicles and core parts totaled $51.5 billion in 2021, IHS Markit estimates.Biden’s administration had urged Canada to use federal powers to ease the Ambassador Bridge blockade, a step Trudeau’s government has not taken. Trudeau said on Friday his government was not seriously contemplating calling in the military over the protests.The leader of Ontario, where police have avoided using force to disperse protesters, sought to build pressure on Friday by threatening C$100,000 fines and up to a year in prison for non-compliance.Announcing the penalties as part of emergency measures, Ontario Premier Doug Ford said they were needed to “make crystal clear it is illegal and punishable to block and impede the movement of goods, people and services along critical infrastructure.”Windsor police issued a statement warning of arrests, but it was not clear if or when authorities would begin issuing fines or seeking jail sentences. ECONOMIC LOSSESWith car production cuts mounting, Ford, the second-largest U.S. automaker, said on Friday it had temporarily halted work at its assembly plant in Ohio. General Motors (NYSE:GM) and Toyota also announced new production cuts. The stock of Canadian autoparts maker Magna International (NYSE:MGA) fell 6.4% on Friday after it said it had seen an initial hit from the bridge’s closure.Beyond auto sector losses, the three U.S.-Canada crossings obstructed account for 33% of Canada’s trade with the United States, valued at $616 million per day, Export Development Canada said.The bridge’s shutdown could worsen the tight supply of new vehicles in the United States and contribute to the already fast-rising price of new vehicles, IHS Markit said in a Friday report. Even if the blockade ends, a return to normal will take several weeks as shortages cascade through the supply chain, IHS Markit said. Governor Gretchen Whitmer of Michigan, home to nearly a fifth of U.S. car production, told CNN: “The Canadian government has to do whatever it takes to safely and swiftly resolve this.” ($1 = 1.2737 Canadian dollars) More

In an interview on Friday with Reuters, Dennis Gingold, the founder of the fintech firm, said that Senator Pat Toomey’s account was “unfair” and that Raskin, nominated to be Fed vice chair of supervision, had acted ethically and correctly. A White House spokesman said Toomey was waging a “baseless smear campaign.”The Senate Banking panel, whose members are divided equally between Republicans and Democrats, is to vote on Tuesday on whether to advance Biden’s five Fed nominees for consideration by the full Senate. Members from both parties have indicated support for most of them, including for the renomination of Fed Chair Jerome Powell. Raskin, however, drew repeated Republican criticism mostly centered on her views on the financial stability risks posed by climate change. Toomey’s public release of his letters about her to Kansas City Fed President Esther George broadened the attack.Raskin, a former Fed governor, personally rang George in August 2017 about Reserve Trust’s master account application after it had been denied, Toomey wrote in the letters.”In the wake of Ms. Raskin’s call, the Kansas City Fed changed its mind and granted Reserve Trust a master account in 2018,” Toomey said. Gingold said he recollected Raskin’s short conversation with George as simply asking her to check that the bank’s staff had the proper information at hand to make its determination. Kansas City Fed earlier this week said its review of the Reserve Trust’s application “did not deviate” from its normal review process, and that it initially denied the request based on a determination that it was not eligible for the account.It later approved the firm’s request for a master account, it said, after the fintech company changed its business model and Colorado banking regulators reinterpreted state law so that the Reserve Trust met the definition of depository institution. In written responses to Toomey’s questions, Raskin said she did not remember any calls made to help Reserve Trust but that any communications “would have abided by all applicable ethics rules.” More

Data on Thursday showed U.S. consumer prices rose at their fastest pace since the early 1980s, fuelling market speculation for a hefty 50-basis-point hike from the Fed’s March 15-16 meeting.The current Fed fund effective target is 0-0.25%.As the Fed gets set to raise pandemic-era rates, here are the estimates from major global investment banks on how far and fast rates will rise:* Citi now expects 150 bps of tightening this year, starting with a 50 bps move in March, followed by four, quarter-point increases in May, June, September and December. * Credit Suisse (SIX:CSGN) now expects the Fed to hike a cumulative 175 bps this year, beginning with a 50 bps increase at the upcoming March meeting. * Societe Generale (OTC:SCGLY) now expects five rate hikes of 25 bps this year, starting in March. * Morgan Stanley (NYSE:MS) says 125 bps of policy tightening this year is “appropriate”, and will come in the form of four 25 bps rate hikes plus a 25 bps fed funds equivalent runoff of the Fed’s balance sheet. Rate hike timing highly data-dependent. * Goldman Sachs (NYSE:GS) said it is raising its forecast to include seven consecutive 25 bps rate hikes at each of the remaining Federal Open Market Committee (FOMC) meetings in 2022 from a previous expectation of five hikes. * BofA Global Research expects the Fed to hike rates by 25 bps at each of this year’s remaining seven meetings, unchanged from its previous outlook. However, it said there is a risk of a 50 bps hike in the Fed’s March policy meeting.* HSBC’s said it expects the Fed to roll out a 50 bps hike in March and four more quarter-point rate rises in 2022.* Deutsche Bank (DE:DBKGn) said it expects the Fed to call a 50 bps hike in March plus five more 25 bps hikes in 2022, with a hike at all but the November meeting.* J.P.Morgan said on Jan. 28 it expects five rate hikes in 2022, up from the four it estimated previously.* Barclays (LON:BARC) now expects the Fed to raise rates by 25 bps five times this year, up from three hikes forecast earlier. More