Aurelia Butler

According to Citi, “The pivot from inflation to jobs is complete,” signaling a shift in focus from inflation metrics to employment data in determining Federal Reserve policy.Citi’s projection suggests that a job growth of 125,000, combined with an unemployment rate of 4.3%, would be sufficiently soft to prompt the Federal Reserve to cut interest rates by 50 basis points.The note indicates that if the unemployment rate drops slightly to 4.2%, the Fed might opt for a smaller, 25 basis point cut, though this would not alter Citi’s outlook for a continued loosening in the labor market and a broader economic slowdown.The bank says that the volatility surrounding the labor market has become as pronounced as that seen with inflation data in recent years.Citi states that “relatively small differences in Friday’s jobs reading could materially affect Fed policy.”For instance, they believe that if the unemployment rate holds steady at 4.3% while payrolls are healthier at around 175,000, the Fed is still likely to implement a 50 basis point rate cut.Conversely, if payrolls fall below 125,000 with a 4.2% unemployment rate, a larger cut could be on the table.The bank adds that broader labor market trends indicate a steady weakening, with slowing hiring, declining hours worked, and rising unemployment.”We know from past cycles that once this cycle begins it has always progressed to a US recession,” says Citi. “The jobs report Friday as well as JOLTS on Wednesday will help us assess whether this progression continued.” More

LONDON (Reuters) – Moody’s (NYSE:MCO) Ratings upgraded its outlook on global reinsurers to positive from stable owing to reinsurers’ higher prices and more restrictive policies, along with healthy investment income, the ratings agency said in a statement on Tuesday. Reinsurers insure the insurers and have raised their rates and excluded some business in recent years in response to sharp losses from the COVID-19 pandemic, wars and natural catastrophes. Higher interest rates have also boosted reinsurers’ investment income.”We expect property reinsurance pricing to remain favourable,” said Brandan Holmes, senior credit officer at Moody’s.”Solid balance sheets will help reinsurers withstand potentially high catastrophe losses.”Reinsurance buyers expect property reinsurance price hikes to slow next year, however, following years of “significant” rate increases, according to a Moody’s annual survey of global property and casualty reinsurers.Reinsurers meet for their annual conference in Monte Carlo next week, to hammer out deals with insurers for the key Jan 1 renewal date.S&P Global said on Tuesday it retained its stable outlook for global reinsurers. The global reinsurance industry earned its cost of capital in 2023 for the first time in four years, and the ratings agency said it expected the industry to do so again in 2024 and 2025. More

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The taxes, in line with ambitious revenue targets adopted to clinch a staff-level deal on the 37-month IMF programme, face public backlash after they were introduced in the June budget.”One thing I want to be very clear (about) … This is not going to be taken back,” Finance Minister Muhammad Aurangzeb said in a televised speech that urged wholesalers, distributors and retailers to contribute to the economy.The comments follow a nationwide strike by retailers last week to demand withdrawal of the new tax scheme and high electricity rates, the latest of the last few months’ protests against the new tariffs, taxes and inflation.Although Muhammad Sharjeel Goplani, chairman of a group of traders, the All-City Tajir Ittehad Assocation, had threatened an indefinite strike if the demand was not met, no further action has been announced since.Pakistan was in the advanced stages of securing the IMF board’s approval, Aurangzeb said, after having said last month that it was expected in September.On Tuesday, Prime Minister Shehbaz Sharif said the government was working to adopt IMF conditions and complete a loan programme he hoped would be the South Asian nation’s last. The Fund’s board approval hinges on confirmation of financing assurances for Pakistan from development and bilateral partners.Media said the approval was delayed by a lack of additional financing and unpaid energy sector subsidies announced by the eastern province of Punjab and the federal government.In a statement, Punjab’s information minister, Azma Bukhari, said the federal government and the IMF had not contacted the province about an electricity subsidy and the Fund had not released any written statement. The IMF, the finance ministry and the power ministry did not immediately respond to a request for comment. Reining in unresolved debt across Pakistan’s power sector is a top concern of the IMF, which ended a $3-billion bailout in April that led to higher tariffs, hurting the poor and middle class, and cut household use for the first time in 16 years.Moody’s (NYSE:MCO), which upgraded Pakistan’s rating to Caa2 last week, citing increased certainty on external financing after the IMF staff-level pact, expects board approval within weeks. More

The government said in a statement it would increase the international visitor and conservation and tourism fees starting on Oct. 1 to NZ$100 ($62.20) from NZ$35 to “ensure visitors contribute to public services and high-quality experiences while visiting New Zealand.”Like many popular global tourism spots, New Zealand has struggled with the impact of tourists on the natural environment, with infrastructure stretched by the large numbers. The $35 fee was introduced in July 2019, but this was not sufficient to cover the costs associated with so many visitors.The government said the fee was competitive and it was confident New Zealand would continue to be seen as an attractive visitor destination.However, the country’s Tourism Industry Association believes the higher fees will discourage visitors, especially as the sector, once New Zealand’s biggest export earner, is still struggling to recover from strict border closures implemented during the COVID-19 pandemic.“New Zealand’s tourism recovery is falling behind the rest of the world, and this will further dent our global competitiveness,” said Rebecca Ingram, the association’s chief executive.Data from Stats NZ released earlier on Tuesday showed that travel export receipts for the year ended June 30 were at NZ$14.96 billion, down 5% from prior to the pandemic. Visitor numbers, according to the bureau, are roughly 80% of levels before the border closures.The New Zealand government has also recently increased the costs of visitor visas and there is a proposal to increase charges on regional airports. It is “a triple-whammy for our sector, which is trying to work hard for New Zealand’s economic recovery,” Billie Moore, NZ Airports chief executive, said.($1 = 1.6077 New Zealand dollars) More

(Reuters) – As recently as two and a half months ago, most U.S. central bankers didn’t see an interest rate cut in the cards at their Sept. 17-18 meeting. By the end of last month, when Federal Reserve Chair Jerome Powell said it was time to start lowering borrowing costs, nearly all of his colleagues thought so too. In large part, that was because a wide range of data moved in one direction. That pushed Fed policymakers to reassess the risks to their outlook, including whether their chief concern should be persistent inflation, labor market weakness, a deterioration in business or household financial conditions, a potential policy mistake, or some combination of those factors. “It’s not one thing that causes everyone to move. It’s different people focus on different data, different indicators, different risks, and then they all end up in the same place,” said Kristin Forbes, an economics professor at MIT’s Sloan School of Management and a former member of the Bank of England’s policy-setting committee. Speaking on the sidelines of the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming, last month, where Powell declared the time had come for U.S. rate cuts, Forbes said: “And that’s where a good (Fed) Chair can bring people together to get the outcome they want, but often by drawing on different motivations to get different people there.” At least a couple of Fed policymakers appear to still be on the fence, their support for policy easing contingent on further signs of a slowdown in inflation or weakness in the labor market. But for the vast majority of Fed policymakers, a first reduction in rates after a grueling inflation fight is all but a certainty this month. Incoming information, buttressed by their view of data already seen, will shape how big a move they favor at the meeting in two weeks: A typical quarter-percentage-point cut or an up-sized half-percentage-point move. Fed policymakers have not unfurled a “mission accomplished” banner to celebrate victory over what two years ago was the highest inflation rate in 40 years. But they do believe price pressures, after gaining steam earlier in 2024, are now cooling, with month-over-month inflation slowing over the past three months to an annualized rate below the Fed’s 2% target.”I am more confident that the trajectory is there,” Boston Fed President Susan Collins told Reuters last month in Jackson Hole.At the same time, Collins views the labor market as still healthy, and she continues to hear from people across New England about the toll inflation is taking. That combination, she said, means “a gradual, methodical approach” to rate cuts makes sense.Her view – a growing conviction in ebbing inflation, along with little alarm over slowing job gains – is shared by other colleagues, including Philadelphia Fed President Patrick Harker, who told Bloomberg Radio last month that he wants a “methodical” pace for rate cuts that would “start with 25” basis points. LABOR MARKET TIPPING POINTSan Francisco Fed President Mary Daly, a labor economist by training, is likewise comforted by receding price pressures but appears to see nothing but downside risks on employment. Last week, Daly said she hadn’t seen any deterioration yet in the labor market. Still, she warned only a month ago that “it’s extremely important” not to let the labor market tip into a downturn, and said more aggressive action would be warranted if that starts to happen.One metric Daly closely tracks is data that shows the cooling in the labor market so far is driven by slower hiring, not a pickup in layoffs. Richmond Fed President Thomas Barkin calls it a “low-hiring, low-firing mode.” “That doesn’t feel like something that’s going to persist,” he said in a Bloomberg podcast last month, “and so it’s going to move left or it’s going to move right.”Fed Governor Adriana Kugler, who is also a labor economist, told the Jackson Hole conference the tipping point may already have been reached, with the number of job openings per job seeker dropping to a level beyond which unemployment, now at 4.3%, could be expected to jump. It’s a point that Fed Governor Christopher Waller also tracks closely. He has not spoken publicly about monetary policy since before the central bank’s meeting in late July, but is scheduled to give an update on Friday after the U.S. Labor Department publishes its employment report for August.VOICES ON THE GROUNDAtlanta Fed President Raphael Bostic for months had said he thought the central bank would need to cut rates just once this year, and not until the fourth quarter. Like many of his colleagues, he has seen inflation come down faster than expected. In late August, Bostic told Yahoo! Finance that he now wants to cut rates sooner than he had earlier forecast to prevent “undue damage” in the job market. Another reason for his change of heart: What business leaders are telling him. “There were contacts in my district who were telling me that we should do something in July … in January, nobody was saying that,” Bostic said. And though it wasn’t a vast majority of contacts calling for relief before the Fed’s last meeting, Bostic said he plans to keep talking with contacts about how the outlook is playing out on the ground, not just in government data.The latest consumer confidence surveys show a deterioration in sentiment about jobs that historically tracks with rising unemployment.Chicago Fed President Austan Goolsbee offers yet another argument for cutting rates: the Fed’s targeted year-over-year inflation measure has dropped, to 2.5% in July from 3.3% a year earlier, even as the Fed has kept its policy rate steady in the 5.25%-5.50% range. The expanding gap between those rates means borrowing costs have gotten steadily more expensive in real terms – an appropriate squeeze if the economy is overheating, but an excessive choke if it is not, Goolsbee believes. That may be even more so if, as he said in late August, the job market is already cooling “by almost all measures.” More