Aurelia Butler

WASHINGTON (Reuters) – The head of the International Monetary Fund said on Thursday it was “too early” to say if the world was facing a period of sustained inflation, but warned that failure to make economies more resilient to future shocks could lead to big problems.IMF Managing Director Kristalina Georgieva told reporters that global policymakers need to carefully calibrate their fiscal and monetary policies in 2022 to ensure that widespread withdrawal of COVID-19 support funds and rising interest rates did not undermine the recovery.The IMF last week cut its economic forecasts for the United States, China and the global economy, and said uncertainty about the pandemic, inflation, supply disruptions and U.S. monetary tightening posed further risks.Unlike the first year of the pandemic in 2020, when finance ministers and central bankers coordinated and synchronized their actions, circumstances varied widely now across the world, and that required more “specificity” in responses, she said.Georgieva said the COVID-19 pandemic remained the biggest risk facing the global economy, and it was imperative to step up efforts to increase vaccination rates in low-income countries, and meet a global target of vaccinating 70% of people in countries around the world by mid-2022.The IMF chief said inflation had lasted longer and risen higher than expected, due to supply chain disruptions, stronger-than-expected consumer demand for goods, and climate shocks on food prices.Asked if those circumstances, and the escalating crisis between Russia and the West over Ukraine, could usher in an era of sustained inflation, Georgieva said, “The short answer is, it is too early to say. What we can anticipate is a more shock-prone world.”She said efforts now to invest more in resilience of people, the economy and the environment would help create more opportunities for greater job growth and prosperity.Failure to make such investments would result in a bleaker outlook, which would result in “more unexpected events for which we are not prepared,” Georgieva said, adding that policymakers were also not well-prepared to deal with more than one crisis at a time. More

MADRID (Reuters) – Spain’s fragmented parliament approved the minority leftist government’s labour reform on Thursday by a margin of just one vote, which the main opposition party said had come from one of its members by mistake and vowed to try to annul the result.The decree that overturns a previous conservative administration’s pro-business reforms by granting more power to unions in bargaining contracts is a cornerstone of a raft of conditions for Spain receiving the next 12 billion euro disbursement of European pandemic recovery funds.The result of the vote was so close that House Speaker Meritxell Batet initially said the bill had been rejected, causing consternation among government members present, but quickly corrected herself.The Socialist-led government’s usual allies in the house for the past two years, such as the Catalan separatists ERC, voted against the legislation. Unprecedented support by the opposition centre-right Ciudadanos and the conservative Catalan pro-independence PdeCat allowed the bill to narrowly pass in a 175-174 vote.A lawmaker from the People’s Party voted remotely for the reform, which the party blamed on a computer error, claiming in a statement that the MP “voted no, but on the screen the vote appeared as yes”.His attempts to alert house officials about the error were allegedly ignored, which the party said infringed remote voting protocol that requires confirmation of the vote by telephone. It lodged a complaint with the governing body of Congress and promised legal action if the error was not acknowledged. The landmark reform is a long-standing electoral commitment of the Socialists and their coalition partners Unidas Podemos.”This is the most important law of the legislature,” Labour Minister Yolanda Diaz told parliament before the vote. She said the legislation would counter Spain’s chronic problem of unemployment, the European Union’s second-highest after Greece, and precarious work.Spain is the EU country with the highest use of temporary contracts, covering around a quarter of the workforce. The new regulation tightens conditions for their use, limiting them to short periods of time. Also, providers of outsourced staff will have to adapt workers’ terms to those of the company they are assigned to.Parliament is highly fragmented and polarised, making the administration reliant on a number of small regional parties to pass laws. Although positive for the reform and government’s immediate goals, support from Ciudadanos could drive a wedge between some of the leftist parties, particularly junior ruling coalition partner Podemos, and Catalonia’s ERC.Whether the vote will redefine or diminish support for the government still remains to be seen. One of the labour groups that stands to benefit the most from the new legislation are hotel housekeepers, known locally as Kellys, long a symbol of precarious work in the tourism-dependent country. Diaz said such workers’ annual income would increase by about 2,500 euros in some cases. (This story corrects paragraph 14 to remove erroneous reference to far-right) More

BOSTON (Reuters) -Hedge funds Citadel and Saba Capital Management sidestepped January’s stock market selloff to post gains as many other firms started the year off in the red, investors in the funds said on Thursday.Ken Griffin’s Citadel told investors that its multi-strategy flagship Wellington fund gained 4.71% last month. The firm’s global fixed income fund returned 4.91%. A spokesman declined to comment.Boaz Weinstein’s Saba performed even better. The fund, which often delivers big gains during times of market turmoil, returned roughly 7% in January, an investor said. A spokeswoman could not be reached for comment.Israel Englander’s Millennium Management also ended the month with gains, posting a 1.72% return, an investor said. A representative did not immediately respond to a request for comment. January marked a difficult start to the year with many hedge funds, especially ones that invested heavily in technology stocks, posting double digit losses for the month.Fears of interest rate hikes and geopolitical tensions between Russia and Ukraine weighed on trading, leaving the broader S&P 500 down 5.3% for the month, its worst monthly performance since dropping 12.5% in March 2020 at the start of the pandemic.Firms like Citadel and Millennium which have teams of traders that concentrate on different investments can sometimes weather these kind of declines better. But Steve Cohen’s Point72 Asset Management, which also employs teams of traders, ended January with a 1.26% loss, an investor said. A representative did not respond to a request for comment. More

The head of the IMF defended its outline deal with Argentina to restructure $44.5bn of debt from a record 2018 bailout, despite mounting criticism over the plan to rescue the country’s struggling economy.Kristalina Georgieva, managing director of the IMF, on Thursday applauded the initial framework of the agreement, whose details need to be finalised and approved by the fund’s board of directors.It also needs to be ratified by Argentina’s congress, where the opposition made big gains in midterm elections last year, and divisions within the government’s coalition have recently appeared after a crucial figure resigned in protest of the deal.“We are confident that this is a pragmatic programme,” Georgieva told reporters. “It will help Argentina to deal with the most significant structural problems.”The deal comes as the country grapples with a floundering economy beset by surging inflation, pressure on its exchange rate and dwindling dollar reserves. If the country’s congress agrees to ratify the latest IMF deal, it will be the 22nd in six decades. Announced last week, the agreement follows nearly 19 months of inconclusive talks, and sketches out a plan for Argentina to reduce its primary fiscal deficit gradually from 2.5 per cent of gross domestic product this year to 0.9 per cent in 2024. It also involves a proposal to raise real interest rates, which are currently strongly negative, to incentivise investment in local bond markets and to reduce distortions in the economy.No spending cuts were announced as part of the agreement in principle presented by Argentina’s finance ministry. Instead the state would play “a moderately expansionary role”, said finance minister and chief IMF negotiator, Martín Guzmán. Critics say the programme’s apparent reliance on growth, rather than reducing spending to improve public finances, raises concerns over whether it is sustainable.Under the current terms, Argentina has a grace period of at least 4.5 years before debt repayments begin.“We also recognise the limitations of what can be done over the next years,” said Georgieva on Thursday.“We had to calibrate the programme to be implementable,” she said. “Our main goal is to get Argentina out of this very dangerous path of high inflation.”Georgieva added that the IMF had learned its lesson from its previous $57bn bailout of Argentina in 2018, saying that one takeaway was the “importance of realistic expectations: don’t go only with your baseline because things may turn . . . worse”.The earlier arrangement was “too fragile” to succeed, an internal IMF report published in December concluded.The IMF also admitted it had accepted overly optimistic government projections and that the initial deal could have benefited from capital controls and a restructuring of private creditor debt.A total of $44bn of the agreed $57bn was disbursed by the time Mauricio Macri, the then pro-investment president, was voted out of office in December 2019. But the deal quickly veered off track and was cancelled by the incoming Peronist government of President Alberto Fernández in July 2020. The leftwing Peronists have always been heavily critical of the IMF’s decision to give Argentina such a large sum, with most of the repayments falling in 2022 and 2023. They also argued that the loan financed capital flight and was mainly done to help Macri’s failed re-election campaign.Fernández, who travelled to Moscow this week as part of a diplomatic tour, on Thursday said his government wanted to release Argentina from the “grip” of its relationship with the IMF and Washington. “I’m certain Argentina has to stop being so dependent on the fund and the United States and has to open up to other places, and that is where it seems to me that Russia has a very important place,” the president said during his lunch meeting with Vladimir Putin. More

(Reuters) – The Federal Reserve Bank of Boston and the Massachusetts Institute of Technology (MIT) unveiled on Thursday long-awaited technical research and open-source code that could be used as the groundwork for a potential central bank digital currency.The research does not suggest that the U.S. central bank will move toward launching a CBDC, a step it has said it would not take without clear support from the White House and Congress.”There has been no decision to move past this research phase, but if a CBDC was launched it would be something that would have to evolve over time,” Jim Cunha, an executive vice president at the Boston Fed, told reporters on Thursday.The first phase of the multi-year project, dubbed “Project Hamilton,” focused on developing software that is flexible and resilient. The work resulted in code that is capable of handling 1.7 million transactions per second. Researchers also found the “vast majority” of transactions settled in under two seconds. The team developed technology that can be adjusted as more policy questions regarding the structure and purpose of a CBDC are addressed. For example, the first version of the code did not include intermediaries or fees, but researchers said those roles and features could be added after policymakers and other parties make decisions on the best way for consumers to access their funds and conduct transactions. In a separate discussion paper released last month by the Fed’s Board of Governors, the central bank said a digital dollar would “best suit” U.S. needs if it were intermediated through the current financial system, but did not rule out other approaches.”Any system that might be used in the future, I think, is going to depend a lot on what policymakers decide,” said Neha Narula, director of MIT’s Digital Currency Initiative. Fed policymakers and lawmakers are divided on the need for a CBDC. Some say it could improve financial inclusion, while others worry the costs could outweigh the potential benefits. The paper looked at some of the tradeoffs that could appear with different structures. For instance, researchers found that using distributed ledger technology, which underpins most cryptoassets and verifies transactions without the use of intermediaries, has “downsides.” They said the approach could create bottlenecks and could lead to more privacy issues. In the next phase, the Boston Fed and MIT will explore alternative designs and look more closely at other issues such as security and programmability. They will also look at ways to balance privacy issues with concerns about compliance. The Fed wants to hear from the public about how a potential CBDC could be used or structured. Project Hamilton researchers released their software under an open-source license, adding that they want to receive feedback from other experts. And the Fed board is collecting comments on the issue via an online form. More