Aurelia Butler

Pressure is growing on the US Federal Reserve to accelerate the winding down of its stimulus programme at its meeting later this week in the face of surging inflation, which is now at the highest level in nearly four decades. Data released by Bureau of Labor Statistics on Friday revealed the consumer price index jumped 6.8 per cent in November from a year earlier — the fastest annual pace since 1982 and a significant pick-up from the 6.2 per cent rate in October.There was some relief from the month-on-month figures. Prices between October and November jumped 0.8 per cent, slightly down from the previous month-on-month increase of 0.9 per cent.Stripping out volatile items such as food and energy, core CPI climbed 0.5 per cent from October. That is roughly in line with the previous period, and pushed up the annual pace to 4.9 per cent. Last month, it registered 4.6 per cent.President Joe Biden, who is under pressure to intervene to slow rising prices, on Friday acknowledged that inflation had been a “real bump in the road”. Hawkishness is growing in the Democratic party ahead of midterm elections next year.“The Fed needs to start tapering immediately and then they need to raise interest rates. Both those things can be done by March,” Jake Auchincloss, a Democrat from Massachusetts and member of the House of Representatives financial services committee, which oversees monetary policy, told the Financial Times.Earlier this month Jay Powell, Fed chair, laid the groundwork for a more aggressive approach to tackling rising prices and scaling back its ultra-accommodative monetary policy when he said it was highly uncertain inflation would moderate next year. He also said it was time to drop the word “transitory” when talking about the inflation outlook.Economists now expect the Fed to double the tapering pace and cease expanding the size of its balance sheet in March, setting the stage for a series of interest rate increases in 2022.Thanks for reading FirstFT Americas. Here’s the rest of today’s news — GordonFive more stories in the news1. Deaths mount after ‘unprecedented’ US tornadoes President Joe Biden declared a major federal disaster in Kentucky after tornadoes hit the state, leaving at least 80 people dead. Rescue efforts continued after what the governor of Kentucky described as the “longest and deadliest” tornado event in US history.

An aerial image of the damage caused by a tornado in Mayfield, Kentucky where much of the destruction was centred © AFP via Getty Images

2. Ukraine blames Germany for ‘blocking’ Nato weapons supply Oleksii Reznikov, Ukraine’s new defence minister, has blamed Germany for blocking the supply of weaponry to Kyiv through Nato, in an interview with the Financial Times. G7 foreign ministers warned after meeting over the weekend of “massive consequences” for Russia if it invaded Ukraine.3. SenseTime postpones Hong Kong IPO The Chinese artificial intelligence company said it would postpone its $767m initial public offering in Hong Kong after being placed on a US investment blacklist. Meanwhile, Jimmy Lai, the Hong Kong media tycoon and founder of tabloid Apple Daily, has been sentenced to 13 months in prison.4. KKR co-chiefs could net $1bn each Joseph Bae and Scott Nuttall, the recently appointed co-chief executives of KKR, have been granted incentive stock awards that could be worth more than $1bn each if the private equity group’s stock continues to soar in the coming years.5. Host Chris Wallace leaves Fox News Chris Wallace is leaving Fox News to join CNN’s forthcoming streaming service, marking the departure of a respected journalist from the Rupert Murdoch-controlled network beloved by US conservatives. Earlier this month Wallace had Lunch with the FT at which he was asked about primetime Fox host Tucker Carlson. Coronavirus digestJapanese companies have confidence in the country’s economy, according to the latest quarterly survey by the Bank of Japan. But analysts warned the BoJ’s quarterly Tankan survey was conducted before most business leaders had factored in the new Omicron coronavirus variant.Boris Johnson warned of a “tidal wave” of Omicron cases in a national television address last night. The UK prime minister warned two vaccines were not enough protection against the new variant and urged all adults have a booster jab.The cost of flying cargo globally has reached record levels, with prices almost doubling on crucial air freight routes as companies attempt to meet surging demand in the run-up to Christmas.Nearly two-thirds of US companies are planning to require at least some of their workers to get vaccinated against Covid-19 regardless of whether they are legally bound to do so, according to a survey of thousands of employers. Do you agree with the US government’s vaccine mandate for companies. Vote in our poll.

The day aheadNew York mask mandate Governor Kathy Hochul announced the mandate last Friday as part of a “major action to address the winter surge” in Covid-19 cases and hospitalisations statewide, but businesses will have the option of either implementing a vaccine or mask requirement. The requirement comes into force today and will last until at least January 15.Joe Biden travels to Kentucky The US president is set to meet storm response officials in Kentucky after more than 30 tornadoes tore through six states in the country’s south and Midwest on Friday.US consumer inflation expectations After Friday’s CPI release today US consumer inflation expectations are revealed.Opec monthly report The oil-producing group is set to release its monthly oil market report. Sign up for our Energy Source newsletter, delivered on Tuesdays and Thursdays, for the latest. EU foreign ministers meet in Brussels After the G7 meeting at the weekend it is the turn of EU foreign ministers to discuss the threat of military action by Russia in Ukraine. What else we’re readingInside JPMorgan’s client poaching row A battle over who gets to manage baseball player Alex Rodriguez’s wealth has exposed a bitter turf war inside JPMorgan. In a blistering 48-page legal filing one financial adviser described the rivalry between wealth management businesses within the US bank as a “shark tank”.

Alex Rodriguez watches a game between the Philadelphia 76ers and Minnesota Timberwolves at Wells Fargo Center in November © Kyle Ross/USA TODAY Sports

US’s segregated banking sector Boasting the best analytical capabilities money can buy and trillions of dollars of liquidity, the bedrock commercial lenders of the world’s biggest economy still has a blind spot: communities of colour. This is the first part of a series looking at race and the financial system.2022’s bulls, bears and frogs Will next year be one of risk or reward? There will be good investment opportunities but they will be balanced against the danger of shocks from the pandemic, inflation and climate change. FT Money’s investment panel discuss 2022’s stock picking opportunities.Shoplifting wave forces US retailers to bulk up security A wave of brazen, flash mob-style shoplifting has amplified pressures on retailers already feeling the strain of supply chain problems and the pandemic-induced explosion in online shopping. Now the heads of 20 retailers, including CVS, Home Depot and Target, have written to Congressional leaders urging them to act.A blunder teaches much more than a triumph Failure is so obviously a better teacher than success that it is a cliché to mention it. Business books regularly advise that blame-free work cultures, where mistakes are acknowledged, help boost productivity and innovation, writes Pilita Clark.GivingFrom jams and jewellery to arts foundations and food activism, the second How To Spend It philanthropy issue examines all kinds of charitable action. Explore How to Give It 2021. More

If you’d asked us a month or two back what the world trading system needed, we’d totally have said a new and highly contagious variant of coronavirus and a big global row over manufacturing protectionism. Our Christmas wishes have been granted. First Omicron, and now a festering transatlantic argument over the Biden administration’s plans for local content requirements in electric vehicles, which other countries — including Canada and Mexico — have also warned against for some time. Depending on whether the US really goes for it, this has the potential to be as big or bigger than the steel/aluminium dispute, which has been temporarily fixed if not permanently resolved. On that latter subject, today’s Trade Secrets author has an opinion column up on ft.com, addressing the Biden administration’s claim that its trade policy in general and steel tariffs in particular can accurately be deemed “worker-centred”. Surprise! We’re sceptical. Filling the gaps in the sum of trade knowledgeWe’ve had a week or so of talking about bureaucrats on Trade Secrets, so it’s time to turn once more to the real world and the ever-popular issue of supply chains.Quick update on the latest: Omicron has threatened a renewal of the kind of disruption to trade in goods we saw with earlier waves of restrictions. Even among the optimists, among whom we’d count ourselves, there’s a sense that the return of normality will be pushed back further in 2022. But does that mean that minds are changing on whether to do major restructuring of supply chains and particularly onshore production? Not as far as we can tell. The ever-helpful Confederation of Swedish Enterprise has done one of its recent surveys of members and has shared with us the results. Some 75 per cent of importing companies say they are facing major problems with their supply chains, mainly shortages but also rising prices. But most companies aren’t changing their supply chains drastically. While some are holding bigger inventories and sourcing from more suppliers, fewer than a quarter of companies want to onshore production to Sweden, or even to Europe. So if not knee-jerk onshoring, what longer-term changes may be afoot? Well, one thing that might help is for companies to have a better idea of what the hell is going on. This year’s disruptions have revealed big holes in data on who is producing what, where and when, and how it is getting transported.Ryan Petersen, chief executive of the freight forwarding company Flexport, who has emerged as one of the most interesting business characters in the supply chain crisis, says that thinking in the industry has often been dominated by easy explanations. “I’m not convinced it’s reality until I see data,” he told us earlier this year. The crisis suddenly made data that his company had been sitting on potentially very valuable. “We have a mobile app with thousands of [truck] drivers around the United States doing container pick-ups from the ports. I’ve got an all-hands-on-deck team analysing this data. What is the wait time at every port? How long does the driver have to spend in traffic? How many loads a day are they doing? What’s the average delivery time per load in traffic? What’s the miles per hour of this? What’s the variability?”At sea, there are excellent data on the location of ships. Flexport has recently used some of this information to create the index charted below, which highlights the degree to which journeys along one of the world’s main trade arteries have been delayed (expect more on this topic tomorrow).However, Petersen says there’s less available on the movements of actual containers. Flexport is launching a third-party visibility platform to allow clients to track freight, which he reckons will help users minimise delays.Manufacturers are also trying to better understand the supply chain. We spoke to one of our favourite sages on these matters — John Neill, chief executive of Unipart, a UK logistics company with a strong presence in auto components. Neill was one of the people who convinced us early in the pandemic that, certainly as far as complex and high-value supply chains such as car parts were concerned, a lot of the talk about onshoring was heavily overdone. (He says it still is: “If you look at the UK auto industry, the chances of substantial onshoring for today’s internal combustion engines are extremely low.”)Like Petersen, Neill says the issue now is how to collect and analyse large and disparate sources of data rather than building supply chains by rules of thumb. “It’s much more effective to think about using machine learning than just spending tonnes of money reshoring, which doesn’t always work,” Neill told us.Unipart is building a machine learning product called Dragonfly. It took a suite of machine learning tools to make better forecasts and then surrounded it with industry-specific knowledge to help it create more agile supply chains. “You can start teaching the system to use data about container usage and locations, port congestion, vehicle movements, driver shortages and raw materials,” Neill said. “You then have far more information to manage and plan delivery lead times than before.” Dragonfly won’t tell you directly whether to onshore or not, but it will make for a more informed decision.This all sounds great, right? The onward march of knowledge. Big Data defeats Covid-19, promotes efficiency and saves the day. But there’s a problem. There was disturbing news last month that public access to information on the location of ships, which is widely used to assess the performance of supply chains, had dropped dramatically for vessels in Chinese waters. A new Chinese data protection law has restricted the information, saying it was being used to spy on its navy.China’s data localisation campaign is only going in one direction, and other countries are heading the same way. Of course, it’s self-destructive to reduce the efficiencies of your ports if you want to be woven into a web of global supply chains, but that’s a trade-off Beijing is evidently willing to make.This is just our first stab at looking at the issue of data and managing supply chains: we’d be delighted to hear everyone’s views on the subject. To repeat what we’ve said before, restructuring complex production systems spread across multiple countries is going to take time. At least there are more numbers to look at while doing it.Trade linksOn the occasion of China’s 20th anniversary of joining the World Trade Organization, Karl Falkenberg, chief EU negotiator during its accession talks, offers his views on its past and future membership.South Korea will apply to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership after its qualms dissipated about upsetting China.The UK appears to be capitulating again in its Brexit talks with the EU, which is fast becoming an annual event. And, in a win for Japanese farmers, the British government has taken the first step towards (Nikkei, $) abolishing import restrictions on foods imposed after the Fukushima nuclear accident 10 years ago.Supply chain woes continue for Toyota, which has partially suspended (Nikkei, $) operations at four plants in Japan due to delays in procuring parts from south-east Asia. Alan Beattie and Francesca Regalado More

(Reuters) – The U.S. Federal Reserve, stung by persistently high inflation and encouraged by lower-than-expected unemployment, is set on Wednesday to chart a path of higher interest rates next year as policymakers show their hands on just how soon and how much they think borrowing costs will need to increase to keep the economy on an even keel.Fed Chair Jerome Powell has already flagged the rate-setting committee will likely announce at its policy meeting this week that it will accelerate the end of its bond-buying program, wrapping it up by March instead of June, in order to clear the way for the Fed to lift off interest rates from near zero, where they have been held since March 2020 when the coronavirus pandemic triggered a short but deep recession.The sharp turn in rhetoric as the central bank plots its course out of emergency era measures reflects the depth of unease over how the COVID-19 pandemic has juiced demand, played havoc with supply chains and led to broader and more persistent inflation that risks becoming embedded in business and consumer expectations.It will lead to policymakers’ bringing forward their projections for interest rate rises, in their so-called “dot plot,” as part of their forecasts, released quarterly, for economic growth, employment and inflation as well as the timing of interest rate rises.”The Fed needs to be a bit more aggressive with removing accommodation than they have been,” said Tim Duy, chief U.S. economist at SGH Macro Advisors, who expects officials to revise their median forecast to two rate hikes next year to rein in inflation levels, from a split at their last meeting on if they even needed one. Graphic: The Fed’s inflation outlook – https://graphics.reuters.com/USA-FED/INFLATION/gkvlgxyqnpb/chart.png Most analysts expect the Fed to stick to forecasting three rate hikes in 2023 and 2024, given officials still expect a rapid abatement of price pressures in the latter half of next year as the pandemic recedes from view.For now, U.S. consumer price increases remain eye-watering. They increased further in November, leading to the largest annual gain, at 6.8%, since 1982, Labor Department data showed on Friday, and well above the central bank’s 2% flexible average goal.The impact of the Omicron variant may also keep inflation pressures elevated by prolonging supply chain issues and exacerbating labor shortages while doing less damage to economic growth than previous waves.How soon the Fed actually starts liftoff is less certain. Economists polled by Reuters expect the Fed to raise interest rates in the third quarter of next year, but as with other analysts, also note the risk is a hike comes sooner.Inflation is not expected to peak until March next year, just when the Fed will likely have finished its bond taper, making it harder for officials to communicate a more patient course.Investors currently see a greater-than 50% probability that the Fed will raise its benchmark overnight lending rate in May, according to CME Group’s (NASDAQ:CME) FedWatch tool.In addition to the dots, investors would be wise to scrutinize Powell, who has taken a more emboldened stance in shifting the Fed’s consensus, for his perception of the outlook next year. “If Powell is in the camp of two rate hikes next year, that’s a fairly strong indication that you’ll get rate liftoff in the middle of next year,” said Gregory Daco, chief U.S. economist at Oxford Economics. Graphic: A faster taper plan at the Fed? – https://graphics.reuters.com/USA-FED/akpezmwejvr/chart.png UNEMPLOYMENT RATE HELPS SEAL THE DEALWhat no longer appears to be hampering the Fed’s tightening of policy is the pace of job gains, with the central bank on track to meet its maximum employment goal by the middle of next year.The unemployment rate fell to 4.2% in November, far below the Fed’s estimate in September of 4.8% for year end. Officials will tweak their unemployment estimates downward for this year and next. Their economic growth forecasts, set to be revised down slightly this year, may remain mostly intact.What the Fed is aiming to do is keep their hiking path gradual after liftoff in order to not choke off the labor market recovery and encourage continued improvement in the labor force participation rate, economists at Morgan Stanley (NYSE:MS) wrote in a note to clients. A key gauge of the job market’s health watched closely by policymakers, the rate is 61.8%, still about 1.5 percentage points below where it was right before the pandemic and showing only modest signs of improvement.A gradual course of interest rate increases would allow the Fed to claim it is prioritizing price stability but not at the expense of the broad and inclusive employment goal it has championed.But as with any forecast, reality may once again blow the Fed off course, as both it and the world awaits news of the severity and contagiousness of the Omicron variant, which is already complicating hopes for a smoother path ahead next year and increasing financial market volatility.”The uncertainty to the outlook has increased,” said Daco. “That will be a feature of next year’s environment where you have less certainty as to what monetary policy will be and less certainty to what the economic outlook is going to be.” More

OTTAWA (Reuters) – The Bank of Canada is expected to renew its monetary policy framework on Monday, leaving its inflation target unchanged at 2% as concern about the cost of living rises and the COVID-19 outlook remains uncertain.The central bank and the finance ministry review the inflation target, which expires at year-end, every five years. It has been set at the 2% midpoint of a 1%-3% control range for the last 30 years.An announcement is due and 10 a.m. EST (1500 GMT) and the bank’s governor, Tiff Macklem, and Finance Minister Chrystia Freeland are speaking to reporters an hour later.Canada’s policy makers are shunning a major shift in monetary policy strategy similar to the one adopted by the U.S. Federal Reserve last year, a source told Reuters on Thursday, but the renewed framework will include new language on the importance of employment to the economy. Canada’s inflation rate matched an 18-year high of 4.7% in October, the seventh consecutive month above the bank’s 1%-3% control range. The central bank has taken a flexible approach, allowing jobs and the economy to rebound while supply-chain bottlenecks and rising energy prices pushed up overall costs.”Governor Macklem … was trying to tie what the bank was doing to labor market outcomes” since the early days of the pandemic, said Andrew Kelvin, chief Canada strategist at TD Securities, adding that introducing language on the importance of jobs will provide “more flexibility down the road.” The rapid spread of the new Omicron variant of the coronavirus is clouding the economic outlook. Canada said on Friday it has so far recorded 87 cases.The renewal of the monetary policy framework comes a day before the government is due to update its economic and fiscal forecasts in a fall economic statement. Prime Minister Justin Trudeau’s government will outline limited new spending in the document, a source told Reuters on Dec. 2, as inflation surges and some business groups and opposition politicians call for restraint.On Wednesday, Statistics Canada will release November consumer price figures, with an average of 11 analysts surveyed by Reuters forecasting inflation will accelerate to 4.8%. Macklem will then give his final speech of the year later on Wednesday, after the bank warned on Thursday s increasingly concerned the factors fueling inflation, such as supply chain disruptions, could last longer than expected that it is increasingly concerned the factors fueling inflation, such as supply-chain disruptions, could last longer than expected. More

The moves come after three central bank interest rate cuts in quick succession despite inflation topping 21% has triggered a more than 40% slump in the lira since September.”We believe that the risks to macroeconomic and financial stability and external financing could increase the likelihood of government intervention in the banking system,” Fitch said on its decision to put the banks’ ratings on a ‘negative outlook’ in a note dated Friday.It added that the negative outlooks on banks with ratings driven by state support reflect the sovereign’s outlook change, and “the risk of a further weakening of the authorities’ ability to provide support in case of need.” More

The China Evergrande Group saga moves into the next stage after ratings agency Fitch calls a default. Plus: Is SPAC-mania back from the dead? Here’s your week ahead in markets from Kevin Buckland https://www.reuters.com/journalists/kevin-buckland in Tokyo; Ira Iosebashvili in New York; Abhinav Ramnarayan https://www.reuters.com/journalists/abhinav-ramnarayan, Dhara Ranasinghe https://www.reuters.com/journalists/dhara-ranasinghe and Karin Strohecker https://www.reuters.com/journalists/karin-strohecker in London. 1/A TAPER LITTLE XMASHow much Federal Reserve hawkishness are markets willing to tolerate? We may get the answer on Wednesday when the Fed concludes its last meeting of 2021.Its largesse has helped the S&P 500 more than double from its March 2020 lows, but lately stocks have oscillated between Omicron woes and taper expectations, with Fed Chairman Jerome Powell flagging https://www.reuters.com/markets/us/powell-yellen-head-congress-inflation-variant-risks-rise-2021-11-30 policymakers would discuss a faster taper of bond purchases.Some have speculated that a degree of Fed hawkishness may already be baked into equities https://www.reuters.com/markets/europe/wall-st-hits-reset-after-market-froth-fed-fears-loom-2021-12-08, which have risen in recent days.Signs the Fed is growing more worried about inflation – even after suggesting it was time to retire “transitory https://www.reuters.com/article/usa-fed-instant/feds-powell-floats-dropping-transitory-label-for-inflation-idUSKBN2IF1S0” from its description of U.S. price rises – could roil markets. So could suggestions of a more aggressive rate hike path in the “dot plot” projection of rates. 2/READY FOR MORE?Across the pond, the Bank of England and European Central Bank unveil policy decisions within 45 minutes of each other on Thursday. Both are potentially market-moving https://www.reuters.com/markets/europe/global-markets-cenbanks-analysis-graphic-pix-2021-12-06.Uncertainty fuelled by the Omicron COVID-19 variant has dented expectations for a near-term BoE rate hike https://www.reuters.com/markets/europe/boe-rate-hike-plan-up-air-again-due-omicron-risks-2021-12-07, but markets are not entirely ruling out a 15 bps move either. The ECB should confirm its 1.85 trillion euro PEPP pandemic stimulus scheme will end in March. Its hawks and doves now go to battle over how much support to leave in place once PEPP ends -Omicron and sticky inflation complicate the debate https://www.reuters.com/markets/rates-bonds/euro-zone-inflation-hump-near-its-peak-will-decline-next-year-lagarde-2021-12-03.Meanwhile the Bank of Japan concludes a two-day meeting on Friday. A decision to phase out some pandemic-stimulus programmes when they expire in March could be made https://www.reuters.com/world/asia-pacific/boj-has-no-need-modify-ultra-easy-policy-says-deputy-gov-amamiya-2021-12-08. Then again, they may be extended due to Omicron. 3/D FOR DEFAULTEmbattled developer China Evergrande Group seems to have reached the end of the line. A missed $82.5 million coupon payment is set to be the domino https://www.reuters.com/markets/rates-bonds/whats-next-china-evergrande-after-missing-coupon-payments-2021-12-07 that triggers cross-defaults worth around $19 billion on Evergrande international debt, along with the more worrisome risk of contagion for the broader economy and markets from its $300 billion in total liabilities.A Fitch downgrade https://www.reuters.com/business/chinas-kaisa-kicks-off-12-bln-debt-restructuring-after-missing-pay-date-source-2021-12-09 to “restricted default” knocked commodities including crude on renewed worries about China’s economy. Authorities assure that the fallout is manageable, but they have a lot on their plates right now.The central bank cut bank reserve ratios https://www.reuters.com/markets/rates-bonds/china-central-bank-cut-reserve-requirement-ratio-second-time-this-year-2021-12-06 to stimulate growth and then raised FX reserve requirements https://www.reuters.com/markets/currencies/china-raises-banks-fx-reserve-requirements-2nd-time-this-year-2021-12-09 to stem a yuan rally. The government also faces a growing diplomatic boycott of https://www.reuters.com/lifestyle/sports/no-plans-uk-ministers-attend-china-winter-olympics-pm-johnson-2021-12-08 the Beijing winter Olympics, potentially drawing battle lines with the West.4/SPAC-TACULAR REBOUNDSpecial purpose acquisition companies (SPACs) have made a comeback thanks to a flurry of deals, some poor trading and Donald Trump. Choppy markets saw the SPACs boom grind to a halt in recent months, but now it’s all go again after Omicron-driven expectations for more central bank largesse pushed volumes for blank-cheque vehicles above $144 billion for the year so far.A number of SPACs listed in New York https://www.reuters.com/markets/us/grove-collaborative-go-public-via-15-bln-deal-with-branson-backed-spac-2021-12-08, Amsterdam https://www.reuters.com/markets/deals/amsterdams-odyssey-buys-benevolentai-europes-biggest-spac-deal-2021-12-06 and London https://www.reuters.com/markets/europe/arnault-backed-group-launches-second-spac-listing-2021-12-07 while “de-SPACs” have seen news website Buzzfeed, British pharma firm BenevolentAI and bitcoin miner Griid Infrastructure agreeing mergers. Donald Trump’s social media venture https://www.reuters.com/markets/us/exclusive-trumps-social-media-venture-seeks-1-billion-raise-sources-2021-12-01 is raising $1 billion to augment its October SPAC merger.There have been reminders of risks with EV maker Lucid subpoenaed https://www.reuters.com/technology/electric-car-maker-lucid-receives-subpoena-us-sec-2021-12-06 by the SEC and Singapore ride-hailing firm Grab tumbling https://www.reuters.com/markets/us/singapore-ride-hailing-firm-grabs-nasdaq-debut-set-tone-regional-listings-2021-12-01 20% on its debut. For now, SPAC-mania continues. 5/WILL TURKEY TRIM AGAIN?Thursday is another day of reckoning for Turkey’s central bank. Policymakers must decide whether to follow President Tayyip Erdogan’s lead https://www.reuters.com/markets/rates-bonds/turkeys-lira-weakens-2-erdogan-endorses-low-rates-anew-2021-12-08 and double down to cut rates in the face of more than 21% inflation or whether a weak lira – down 36% this quarter https://www.reuters.com/world/middle-east/erdogan-says-he-hopes-turkish-lira-will-steady-soon-2021-12-04 – has stymied the push lower. The week will also confirm Turkey as an outlier among hawkish emerging central banks struggling with rising inflation and the prospect of the Fed kicking off its tapering and hiking cycle. Hungary https://www.reuters.com/markets/europe/hungary-central-bank-seen-raising-base-rate-again-next-week-2021-12-08 is expected to hike 30 bps on Tuesday, Russia https://www.reuters.com/markets/europe/russian-annual-inflation-rises-84-highest-level-since-early-2016-2021-12-08 could follow with a 50 bps hike on Friday. Across Latin America, a region that has seen sizeable rate hikes over the past year, expectations are high that Chile on Tuesday, Mexico on Thursday https://www.reuters.com/markets/stocks/mexico-inflation-quickens-faster-than-expected-20-year-high-2021-12-09 and Colombia on Friday will all raise benchmark rates. More

LONDON/NEW YORK (Reuters) – Bankers and regulators will be at their screens on New Year’s Eve to see if what was once dubbed the world’s most important number slips quietly into the history books.The London Interbank Offered Rate, or Libor, is finally being switched off, ending its role pricing derivatives and loans ranging from mortgages and student loans to business funding and credit cards, which totalled $265 trillion globally as of the start of 2021. The rate is being scrapped a decade after banks were caught trying to rig it in what will be the biggest shake-up to markets since the introduction of the euro in 1999. Its discontinuation on Dec. 31 for new business is being compared by bankers to ‘Y2K’, the computer coding that was forecast to sow chaos in IT systems worldwide in the early hours of the new millennium on Jan. 1, 2000. Banks have spent around $10 billion preparing for Libor’s demise, according to an estimate by consultancy Oliver Wyman. Y2K in the end saw few major incidents but regulators are taking no chances with Libor, with banks busy testing their systems.”I am going to be at my desk during the Christmas and New Year holidays and I know there will be other people who are there just in case,” Edwin Schooling Latter, director of markets at Britain’s Financial Conduct Authority (FCA), told Reuters.Many derivatives markets based on Libor have already moved to a new benchmark without major disruption. Watchdogs, however, have warned there may be glitches in some loan markets, especially if the borrowers missed warnings of the switch, and the impact of the change may not be felt fully until later in January.”If you have a contract that refers to one of those rates, it’s not going to be there when you go and look at the screen in January,” said Schooling Latter, who oversees how Libor is compiled from quotes submitted by banks from a market that has by now largely dried up.Libor began life in a corner of London’s syndicated loan market in 1969 to help price an $80 million syndicated loan for the Shah of Iran. Its demise was prompted by regulators after banks from across the world were fined billions of dollars for attempting to manipulate the benchmark interest rate to make a profit.It is being replaced by rates set by central banks including the U.S. Federal Reserve, the Bank of England and the European Central Bank.The U.S. Fed says its Sofr rate for replacing Libor is based on about $1 trillion in daily transactions, making it far harder to rig.The complexity of ending Libor is similar to Y2K, said Thomas Wipf, chair of the Alternative Reference Rates Committee (ARRC) convened by the Federal Reserve to end the use of Libor in the United States.”I think that the need for lots of pre-planning and a lot of preparation are really consistent, and we look forward to the fact that if we’ve over-prepared a little bit, that would be a good thing,” said Wipf, who is also vice chairman of institutional securities at Morgan Stanley (NYSE:MS).Libor has 35 permutations across five currencies from the United States to Europe and Japan, making its demise a huge global undertaking for regulators, banks and companies since the FCA fired the starting gun in 2017.Twenty-four of the 35 permutations disappear completely on Dec. 31, the rest continuing temporarily for outstanding contracts only, not for new business.Customers who ignore letters from their bank asking to change the interest rate used for a loan could end up in a legal twilight zone if they don’t reply. Getting enough holders of a bond to agree on switching to an alternative rate in time may also be difficult in some cases.”The really interesting part will be the month of January of 2022, watching what comes out of the London change,” said John Oliver, U.S. Libor transition leader at consultants PwC.”It’s not going to happen that first day, but the first month’s payments are going to be where things get very interesting,” Oliver said. LSEG Libor Graphic https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrzjeevm/LSEG%20Libor%20Graphic.PNG OFF TO THE RACESAbout 80% of the $265 trillion of outstanding Libor-linked contracts at the start of 2021 were derivatives and swaps that pass through clearing houses, the rest mainly in loans to companies, mortgages and bonds.Next weekend London Stock Exchange Group (LON:LSEG)’s clearing arm LCH will “convert” 200,000 sterling Libor swaps worth a notional $20 trillion to the Bank of England’s Sonia rate. This follows conversion of yen, Swiss franc and euro Libor over-the-counter swaps – derivatives directly negotiated between two parties – worth about $6 trillion earlier this month.”There was no disruption to the over-the-counter swaps market with those conversions, and all sterling swaps will reference Sonia by Dec. 20,” said Susi de Verdelon, head of LCH’s SwapClear. Osttra Graphic on Dollar Libor Transition https://fingfx.thomsonreuters.com/gfx/mkt/zdvxoxangpx/Osttra%20Graphic%20on%20US%20Dollar%20Libor%20Transition.PNG Worry over market disruption eased considerably after the Fed said five dollar Libor rates would continue for 18 months until June 2023 for existing but not new contracts.The FCA has also said six sterling and yen Libor rates will continue in ‘synthetic’ form – Sonia combined with a fixed spread – for a year.These two measures, which help laggards catch up, along with contracts baking in “fallback” alternative rates, mean that few expect any widespread disruption, though Asia is behind Europe and the United States in switching.”We have seen a lot more activity in the past two to three months, companies are starting to get a lot more focused on it now,” said Avinash Thakur, head of debt origination for Asia Pacific at Barclays (LON:BARC) bank.”The Western nations are the countries which have started off earlier in this process and Asian companies don’t feel it’s as urgent an issue for them, they are less worried about the issue,” Thakur said.Dollar-denominated Libor accounts for half to two-thirds of outstanding contracts.”The story is now already shifting to next year with the continued remediation of dollar Libor contracts and the adoption of new contracts of alternative rates,” said Mark Cankett, a partner at Deloitte. “Everybody in the market will want to avoid a cliff-edge at the end of June 2023.”Banks are pushing hard for the U.S. Congress to approve a bill that would automatically switch ‘tough’ legacy contracts to an alternative rate and avoid legal limbo when dollar Libor ends in June 2023.”We’re sort of coming into the home stretch, we believe that the tools are available for market participants to get this transition done and we’re hopeful that the legislative path in the U.S. will help solve the tough legacy,” Wipf said.Others urged U.S. market participants not to wait until mid 2023 but to get a move on by learning from the more advanced switch in Europe.”People should not solely rely on legislation. Come January 1, I think we’re off to the races,” said Tal Reback, responsible for Libor transition at KKR Credit and member of the Fed’s ARRC. More

The ADB said the loan would allow the government to purchase 40 million additional COVID-19 vaccine doses for eligible children and booster shots for adults.The Philippines is aiming to fully vaccinate at least 54 million people, or nearly half of its 110 million population, before the year ends.To reach that target, it plans to hold a second three-day mass vaccination campaign from Dec. 15. It has so far fully immunised 39.2 million as of Dec. 7.New daily cases in the Philippines have stayed below 1,000 since Nov. 24, a sharp decline from the more than 20,000 peak in late September that strained the fragile health system in the Southeast Asian archipelago.The Philippines’ improving COVID-19 situation has allowed it to gradually reopen the economy and tentatively resume in-person classes. More