Aurelia Butler

BRASILIA (Reuters) – Brazil’s central bank on Wednesday raised interest rates by 150 basis points and signaled another such hike in February, waging one of the world’s most aggressive battles with inflation even as Latin America’s largest economy has tipped into recession.The bank’s rate-setting committee, known as Copom, decided unanimously to raise its benchmark interest rate to 9.25%, as forecast by all 31 economists in a Reuters poll. Policymakers have hiked the rate seven times this year, from 2.0% in January.That makes Brazil’s current tightening cycle the most aggressive among major economies, as the central bank confronts 12-month inflation in double digits and President Jair Bolsonaro’s vows to boost welfare spending in an election year.While acknowledging weaker-than-expected economic activity and uncertainty about the Omicron coronavirus variant, Copom put a harder edge on its policy statement, vowing to hike rates “significantly” into restrictive territory.”The Committee will persist in its strategy until (consolidating) the disinflation process and the expectation anchoring around its targets,” wrote Copom in the statement.Marco Caruso, chief economist at Banco Original, called it a “very tough” statement, suggesting “higher rates for longer.”Some economists have warned that looser fiscal policy has backfired on the government by forcing the central bank, whose formal autonomy was written into law this year, to hike rates sharply. Higher borrowing costs contributed to a slight economic contraction in the second and third quarters. A weaker currency, severe drought and higher fuel prices helped to push consumer prices 10.7% higher in the 12 months to mid-November. That is the hottest inflation among G20 countries except for Argentina, which has left interest rates unchanged in 2021, and Turkey, which has shocked markets by slashing rates after raising them early this year. More

The Australian Securities & Investments Commission (ASIC) said ANZ had failed to pay benefits under its ‘Breakfree’ package, which included fee waivers and interest rate discounts, to 580,447 customers between the mid-1990s to September 2021.Scrutiny of Australian lenders and financial institutions has ramped up significantly since a Royal Commission inquiry in 2018 found widespread shortcomings in the sector, forcing companies and regulators to take swift action. “This case is yet another example of a widespread system failure by a major bank impacting thousands of customers,” ASIC Deputy Chair Sarah Court said in a statement.”A constant theme of those investigations has been the failure of large financial services entities to honour agreements with customers and to ensure proper processes and systems are in place to prevent widespread compliance failures.”ANZ said in a separate statement that it would not contest the proceeding, and would join the ASIC in submitting a proposed penalty of A$25 million to the Court. ($1 = 1.3937 Australian dollars) More

Congo’s economy is expected to grow 5.4% this year and 6.4% in 2022, Kristalina Georgieva told a news conference in Kinshasa after meeting Congo President Felix Tshisekedi. That outpaces total Sub-Saharan African growth of 3.7% this year and 3.8% in 2022. Congo “benefits from higher commodity prices but above all benefits from the reforms that the president and the government have been pursuing,” Georgieva said. The country is Africa’s top producer of copper and the world’s leading miner of cobalt, used in the making of electric car batteries. But chronic corruption, mismanagement and conflict have stunted output and left the vast majority of the country in poverty. Tshisekedi, in power since 2019, has tried to turn the tide of spiralling inflation and depleted forex reserves under his predecessor Joseph Kabila. Reforms include greater independence of the central bank and more efficient revenue collection.Congo has published old mining contracts that were previously secret, massively increased its foreign reserves and replaced the board of both the Central Bank and the state mining company Gecamines.Georgieva said the world economy is recovering from the worst impacts of the coronavirus pandemic, but has lost a bit of momentum with the United States and China slowing down.The world economy is expected to grow 5.9% this year and 4.9% next, she said. More

Biden last month nominated Fed Chair Jerome Powell to a second four-year term as head of the U.S. central bank and picked Fed Governor Lael Brainard for the soon-to-be-vacant post of vice chair at the central bank. Nominees must be approved by Brown’s panel before being considered by the full Senate. Powell’s current term ends in early February.Bloomberg reported the expected timing of the hearings on Tuesday. A spokesperson for Brown confirmed it in an email the same day. The hearings could come at a key moment in monetary policy, as the Fed pivots from the extraordinary accommodative policies it put in place to battle the recession triggered by the coronavirus pandemic to a gradually tighter policy stance. The Fed will hold its next policy meeting next week. Powell and his fellow policymakers are expected to discuss accelerating the wind-down of the central bank’s bond-buying program, ending it by March or April. That would pave the way for interest rate hikes soon after to tamp down inflation that’s running at more than twice the Fed’s 2% goal.Neither Powell nor Brainard won unanimous approval the first time they went through the nomination processes for their current jobs, in 2012 and 2014 respectively, and neither is expected to do so this time.So far only Democratic Senator Elizabeth Warren, who sits on the Senate Banking Committee, and Republican Senator Tom Cotton have come out publicly against Powell’s renomination. A simple majority vote is required for both the committee and the full Senate to approve the nominations.Biden plans to put forward more nominees for open positions at the Fed by the end of this month, the White House said on Tuesday. More

Germany’s new coalition government has promised to pursue a values-based foreign policy highlighting democracy and human rights and putting less emphasis on the country’s commercial interests, the overriding priority of successive administrations under Angela Merkel. Yet the day before he assumed office as Merkel’s successor, Olaf Scholz showed what a tightrope act this is likely to entail. Scholz took a tough line on Russian threats to Ukraine, Berlin’s most pressing foreign policy issue. When it came to China, the more consequential diplomatic challenge, the new chancellor sounded much like the outgoing one. Asked whether Germany would follow the US diplomatic boycott of the Beijing winter Olympics, Scholz obfuscated, promising to deliberate carefully and spouting pieties about international co-operation. If this was an occasion to set a different tone to relations with the biggest export market for many Germany companies, Scholz did not take it.And yet, the coalition agreement that Scholz’s Social Democrats have struck with the Greens and Liberals, does set a very different tone. Previous German governments regarded China as a strategic partner. This one treats it as a “systemic rival”, twice using a phrase that Merkel never uttered. It explicitly refers to human rights violations in Xinjiang, democratic backsliding in Hong Kong and to Chinese threats to retake Taiwan. Philosophically, it brings Germany closer to the US. At the same time, the coalition promises to “Europeanise” its bilateral contacts with Beijing and to devise a comprehensive China strategy in line with the EU’s. This European approach is particularly welcome. Beijing is adept at dividing and weakening the EU, and Germany’s single-minded pursuit of its business interests has often assisted it. A crucial part of the EU’s strategy is putting in place defences against unfair competition and economic bullying by Beijing. Measures include trade countermeasures, a clampdown on foreign subsidies, reciprocal access to procurement, due diligence requirements to eliminate the use of forced labour, a carbon border adjustment mechanism and a forthcoming anti-coercion policy. The new coalition should endorse these instruments, provided they are proportionate, instead of dragging its feet as Germany has done in the past, partly to please Beijing. The market opening Berlin has extracted in return — for example under last year’s abortive EU-China investment agreement — has been inadequate. Corporate Germany, understandably, frets that a values-based foreign policy will leave it exposed to retaliatory measures or a consumer backlash. Beijing has made such threats before. Like the Chinese government, German business leaders are hoping that it will be Scholz — who won the election vowing to emulate Merkel’s cautious and deliberative style of leadership — who will call the shots on China, and not Annalena Baerbock, the green foreign minister who is more hawkish. A bad outcome would be an emollient chancellor combined with a provocative foreign minister. It would undermine the credibility of German diplomacy and the cohesion of the coalition. Berlin needs to find a way of speaking truth to Chinese power, with Europe in solidarity.German industry — and, it should be noted, its European suppliers — have benefited enormously from China, not just its fast growth but increasingly its innovation. Nobody in Europe thinks decoupling is a good idea. But Merkel’s persistent faith in Wandel durch Handel — change through trade — proved to be misplaced. China has changed in the wrong direction. The new German government must adapt its foreign policy accordingly. More