Aurelia Butler

BENGALURU (Reuters) – The Reserve Bank of Australia (RBA) is expected to raise interest rates in early 2023, and possibly sooner, according to a Reuters poll of economists, who brought forward their rate hike expectations for the second straight month.Against a backdrop of rising inflation in Australia and around the world, the RBA is now predicted to lift its cash rate from a record low 0.10% in the first quarter of 2023.That’s sooner than the second quarter of 2023 forecast in a poll taken almost a month ago, while in a survey taken only two months ago there was no consensus for any rate rise in 2023. A small majority, 16 of 25 economists, expected at least one rate hike by the end of the first quarter of 2023, compared with 11 of 25 economists in the previous poll.Economists in the Nov. 29-Dec. 2 poll expect a second rate hike in the second quarter of 2023 of 25 basis points to 0.50%. The cash rate is then projected to rise to 0.75% in the final quarter of 2023.All 34 economists expected the cash rate, to stay at 0.10% at the Dec. 7 meeting.Markets are much more aggressive, fully pricing in a first rate hike as early as July next year. [RBAWATCH]”We forecast a first RBA rate hike in Q4 of 2022 and think the risk around that is for an even-sooner move. I think the RBA’s inflation forecasts are too low and Governor Lowe will be forced to take a hawkish pivot over coming months,” said Andrew Ticehurst, senior economist at Nomura.In the statement following its November meeting, the RBA blamed higher energy prices and global supply chain disruptions for the surge in inflation and said it expected core inflation to pick up gradually. But a spike in core inflation prompted the central bank to abandon its projection of no rate hikes until 2024. The RBA’s latest forecasts show core inflation reaching 2.5% and wage growth at 3% over 2023, essential parameters to be met before it starts raising rates.However, those levels could be touched earlier, as wage growth picked up 2.2% in the year to September, a sharp rise from 1.7% in the June quarter.”The key thing for them is still wage growth. If wage growth doesn’t pick up then they can’t conclude that they will meet their inflation target sustainably over several years,” said Marcel Thieliant, senior Australia & New Zealand economist at Capital Economics.The RBA has stayed mostly quiet on soaring house price inflation, even as one of its closest peers, the Reserve Bank of New Zealand, has raised interest rates twice already this year taking aim at a blazing housing market.A recent Reuters survey showed house prices in Australia will rise a further 6% next year, making affordability even worse, especially for first-time buyers. More

LONDON (Reuters) – Britain’s government failed to guard properly against fraud in its 47 billion-pound ($63 billion) COVID emergency lending programme for small businesses, opening itself up to billions of pounds of losses, a watchdog warned on Friday.The Bounce Back Loan Scheme launched in May 2020 and did not conduct credit checks or fully verify the identity of small businesses applying for loans, the National Audit Office, which scrutinises public-sector spending, said.”Government prioritised getting Bounce Back Loans to small businesses quickly but failed to put adequate fraud prevention measures in place,” said Gareth Davies, the NAO’s comptroller and auditor general.”One impact of these decisions is apparent in the high levels of estimated fraud.”The government launched the scheme to stop the collapse of small businesses which had to cease trading due to tight lockdown restrictions at the start of the COVID-19 pandemic.Firms could borrow up to 50,000 pounds each via banks at a fixed interest rate of 2.5%, repayable over 10 years. Initially, lenders had to give a loan decision within 24 to 48 hours.In March, Britain’s business ministry, which ran the programme via the British Business Bank, a state lender, estimated that 37% of the loans would not be repaid, and that 11% came from fraudulent applications.A subsequent investigation by accountants PwC in October revised the fraud rate down to 7.5%, although the NAO said it had not had time to check this estimate itself.Other countries are also investigating the misuse of emergency loans issued during the pandemic.The U.S. Special Inspector General for Pandemic Recovery said in June that Washington’s loans programme had been plagued by “unprecedented levels of fraud”.Meg Hillier, the chair of a cross-party Public Accounts Committee in Britain’s parliament, said the government had done too little to reduce “colossal risks of fraud and error”. “It’s now focusing on recovering money from organised crime, yet many of the smaller-scale fraudsters will have slipped through its fingers,” she added.A business ministry spokesperson said loans and other support had helped millions of firms avoid laying off staff.”We are working closely with lenders and enforcement authorities to minimise fraud and ensure those that have committed fraud face consequences,” the spokesperson added.($1 = 0.7519 pounds) More

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen and Vice President Kamala Harris will announce significant new funding to boost lending to minority-owned businesses and low-income communities at a racial equity forum on Tuesday, a U.S. official said on Thursday.The administration of President Joe Biden plans to announce a “major milestone” in attempts to create a more equitable economy for Black, Latino, Asian, Native and other communities of color at the 2021 Freedman’s Bank Forum, a Treasury spokesperson said.The forum began in 2016 under then-Treasury Secretary Jack Lew when he renamed the Treasury Annex building across from main Treasury the “Freedman’s Bank Building.”Abraham Lincoln created the Freedman’s Savings and Trust Co in 1865 for newly emancipated Black Americans to safeguard their earnings, build financial security and generate family wealth. The bank helped some 100,000 Black people and institutions amass $57 million in savings and wealth, and paved the way for today’s minority depository institutions.But the racial wealth gap persists. U.S. data shows the typical white family has eight times the wealth of the typical Black family and five times that of the typical Latino family.On Tuesday, Treasury will map out its strategies to direct capital to depository community development financial institutions (CDFIs) and minority depository institutions (MDIs) to support loans, grants, and forbearance for minority-owned businesses and consumers in low-income communities.Harris and Yellen announced $1.25 billion in relief for 863 community development financial institutions at the White House in June, with more funding to follow on Tuesday.The funds are part of $12 billion earmarked for minority lending as part of a $900 billion COVID-19 relief package passed by Congress in December 2020 and led by then-Senator Harris.John Hope Bryant, founder of Operation Hope, a non-profit group that works to end poverty, welcomed Treasury’s efforts as “a step in the right direction,” but said far more work was needed to redress decades of inequality.Doing so would boost the overall U.S. economy, he said, citing a Citigroup (NYSE:C) study which estimates that discrimination against African Americans had reduced U.S. economic output by $16 trillion since 2000.The Treasury department also plans to highlight how its programs, including an expanded child tax credit and emergency rental assistance, have enabled a more equitable recovery, and will unveil other steps to address racial inequity, the spokesperson said. More