Evelyn Reynolds

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    European Central Bank hints at June rate cut as it trims inflation forecast

    The European Central Bank has once more held its key interest rates.
    Staff projections now see economic growth of 0.6% in 2024, from a previous forecast of 0.8%.
    They presented a more positive picture on inflation, with the forecast for the year brought to an average 2.3% from 2.7%.

    The European Central Bank on Thursday lowered its annual inflation forecast, as its confirmed a widely expected hold of interest rates.
    ECB President Christine Lagarde, meanwhile, suggested market pricing for a June rate cut was coming into line with policymakers’ outlook.

    Staff projections for inflation in 2024 were updated to an average 2.3% from 2.7%. Looking ahead, staff see inflation hitting the ECB’s 2% target in 2025 and cooling further to 1.9% in 2026.
    They meanwhile updated their forecast for economic growth for 2024 to 0.6% from 0.8%, as the euro zone’s economic activity escapes its current stagnation. They then project gross domestic product expansion of 1.5% in 2025 and 1.6% in 2026, slightly weaker than the December outlook.
    “We are in the disinflationary process and we are making progress,” Lagarde said during a press conference on Thursday.
    “We are more confident as a result, but we are not sufficiently confident, and we need more evidence, more data, and we know this data will come in the next few months. We will know a little more in April and a lot more in June.”
    Policymakers have repeatedly signaled May as a key date, since wage settlements are set to be released that month.

    The ECB will be “laser-focused” on two areas of inflation that could surprise, namely wage growth and profit margins, Lagarde said. There could also be a downside surprise to the outlook if monetary policy dampens demand more than expected or the global economic environment worsens unexpectedly, she added.

    Expectations ‘converging’

    The announcement increased market bets on rate cuts taking place in the summer of this year.
    Market expectations had already shifted to a June cut in recent weeks. The ECB’s key rate is currently 4%, up from -0.5% in June 2022, following a run of 10 hikes.
    Lagarde said Thursday that market pricing “seems to be converging better” with the ECB’s own view. Policymakers were earlier this year spurred to firmly push back on market bets on cuts in March or April.
    Lagarde also said Thursday that the ECB would not need to wait for headline inflation to hit its 2% target before taking a decision.
    Euro zone inflation eased to 2.6% in February from 2.8% in January. However, the core figure which strips out energy, food, alcohol and tobacco proved stickier, at 3.1%.

    ‘Relatively dovish’

    Antonio Serpico, senior portfolio manager at Neuberger Berman, said that the most likely scenario involved rate cuts beginning in June of 25 basis points per meeting, for a total of 150 basis points or more in total.
    “The numbers were quite reassuring actually, we were not expecting any cut today,” he told CNBC’s Silvia Amaro.
    “Today’s decision looks to be relatively dovish,” he said, given that both growth and inflation forecasts moved lower.
    “That means that the ECB governing council is seeing growth as more sluggish and lower than what they saw it before… and also in terms of headline inflation and core inflation, the new projections are definitely weaker than the older ones.”
    The main variable will be the stickiness of core inflation, driven by a tight job market, he added.
    Core inflation projections were updated to 2.6% in 2024 from 2.7%, and to 2.1% in 2025 from 2.3%. More

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    Private payrolls rose by 140,000 in February, less than expected, ADP reports

    Private companies added 140,000 positions for the month, an increase from the upwardly revised 111,000 in January but a bit below the Dow Jones estimate for 150,000, ADP reported.
    Leisure and hospitality led with 41,000 new jobs, construction added 28,000 and trade, transportation and utilities contributed 24,000.
    ADP’s report precedes the Labor Department’s more closely watched nonfarm payrolls release, which happens Friday.

    People work at a restaurant at Chelsea Market in Manhattan on February 02, 2024 in New York City. 
    Spencer Platt | Getty Images

    Private sector job growth improved during February though growth was slightly less than expected, payrolls processing firm ADP reported Wednesday.
    Companies added 140,000 positions for the month, an increase from the upwardly revised 111,000 in January but a bit below the Dow Jones estimate for 150,000.

    Job gains came across multiple areas, led by leisure and hospitality with 41,000 and construction, which added 28,000 positions. Other industries showing solid gains included trade, transportation and utilities (24,000), finance (17,000) and the other services category (14,000).
    Of the total, 110,000 came from the services sector while goods producers added 30,000. Growth was concentrated among larger companies, as establishments with fewer than 50 employees contributed just 13,000 to the total.
    Along with the job growth, annual pay increased 5.1% for those staying in their jobs, which ADP said was the smallest increase since August 2021, a potential indication that inflation pressures are receding.
    The report comes with the labor market getting added attention for signals of whether U.S. economic growth will stall this year after gross domestic product posted a solid 2.5 percent annualized gain in 2023.
    “Job gains remain solid. Pay gains are trending lower but are still above inflation,” said ADP chief economist Nela Richardson. “In short, the labor market is dynamic, but doesn’t tip the scales in terms of a Fed rate decision this year.”

    ADP’s report precedes the Labor Department’s official nonfarm payrolls release, which happens Friday. In recent months, ADP has consistently undershot the closely watched report from the Bureau of Labor Statistics, which showed an increase of 353,000 in January, more than triple the ADP estimate.
    Economists surveyed by Dow Jones are expecting Friday’s report to show an increase of 198,000. More

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    Egypt hikes interest rates by 600 basis points, pound crumbles to record low

    Egypt’s pound hit a record low against the dollar on Wednesday after its central bank hiked interest rates by 600 points and devalued the currency.
    The country’s key interest rate now stands at 27.25%, the central bank said Wednesday.

    Yousef Gamal El-Din | CNBC

    Egypt’s pound hit a record low against the dollar on Wednesday after its central bank hiked interest rates by 600 points and devalued the currency.
    The steps were meant to facilitate an agreement with the International Monetary Fund, which is expected to confirm the extension of its current $3 billion financial support package for Egypt.

    The Egyptian pound was trading at roughly 50 to the dollar following the announcement, from 30.85 previously, according to LSEG data. The country’s key interest rate now stands at 27.25%, the central bank said Wednesday.
    The development “shows that policymakers are committed to the turn back toward economic orthodoxy. This is likely to pave the way for an IMF deal within hours,” James Swanston, a Middle East and North Africa economist at London-based Capital Economics, wrote in a research note.
    “This appears to be a positive step for Egypt on the path out of its current crisis,” he wrote.
    This is a breaking news story, and it is being updated. More

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    Brighter Economic Mood Isn’t Translating Into Support for Biden

    Voters feel slightly better about the economy as inflation recedes, but partisan divides remain deep, a Times/Siena poll found.Eight months before the election, Americans feel slightly better about the state of the economy as inflation recedes and the labor market remains stable, but President Biden doesn’t appear to be benefiting.Among registered voters nationwide, 26 percent believe the economy is good or excellent, according to polling in late February by The New York Times and Siena College. That share is up six percentage points since July. The movement occurred disproportionately among older Democrats, a constituency already likely to vote for Mr. Biden.And the share of voters saying they approve of the job Mr. Biden is doing in office has actually fallen, to 36 percent in the latest poll, from 39 percent in July.Inflation has pervaded economic sentiment since mid-2022, confronting voters daily with the price of everything from eggs to car insurance. Even as inflation has been falling since mid-2023 — and wage growth has lately outpaced the rate of price increases, at least on average — many Americans don’t yet see the problem as solved. Nearly two-thirds of registered voters in the Times/Siena poll rated the price of food and consumer goods as poor.Mr. Biden’s team has pointed to an array of indications that the economy has rebounded remarkably well since he assumed office, including an unemployment rate that has been under 4 percent for two years and a stock market that has set record after record.But in a persistent trend that has confounded pollsters and economists, those fundamentals largely haven’t been reflected in surveys. Forty percent of those surveyed said the economy was worse than it was a year earlier, compared with 23 percent who thought it was better — even though a narrow majority rated their personal financial situation as good or excellent.

    Source: New York Times/Siena College poll of 980 registered voters conducted Feb. 25 to 28, 2024By Christine Zhang

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    How would you rate each of the following aspects of the economy today?
    Source: New York Times/Siena College poll of 980 registered voters conducted Feb. 25 to 28, 2024By Christine ZhangWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Bank Runs Spooked Regulators. Now a Clampdown Is Coming.

    Federal Reserve officials and other bank regulators could roll out a new proposal this spring to ward off a repeat of 2023’s banking turmoil.One year after a series of bank runs threatened the financial system, government officials are preparing to unveil a regulatory response aimed at preventing future meltdowns.After months of floating fixes at conferences and in quiet conversations with bank executives, the Federal Reserve and other regulators could unveil new rules this spring. At least some policymakers hope to release their proposal before a regulation-focused conference in June, according to a person familiar with the plans.The interagency clampdown would come on top of another set of proposed and potentially costly regulations that have caused tension between big banks and their regulators. Taken together, the proposed rules could further rankle the industry.The goal of the new policies would be to prevent the kind of crushing problems and bank runs that toppled Silicon Valley Bank and a series of other regional lenders last spring. The expected tweaks focus on liquidity, or a bank’s ability to act quickly in tumult, in a direct response to issues that became obvious during the 2023 crisis.The banking industry has been unusually outspoken in criticizing the already-proposed rules known as “Basel III Endgame,” the American version of an international accord that would ultimately force large banks to hold more cash-like assets called capital. Bank lobbies have funded a major ad campaign arguing that it would hurt families, home buyers and small businesses by hitting lending.Last week, Jamie Dimon, the chief executive of JPMorgan Chase, the country’s largest bank, vented to clients at a private gathering in Miami Beach that, according to a recording heard by The New York Times, “nothing” regulators had done since last year had addressed the problems that led to the 2023 midsize bank failures. Mr. Dimon has complained that the Basel capital proposal was taking aim at larger institutions that were not central to last spring’s meltdown.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Turkish annual inflation soars to 67% in February

    Turkish annual consumer price inflation soared to 67.07% in February, the Turkish Statistical Institute said Monday, coming in above expectations.
    The combined sector of hotels, cafes and restaurants saw the greatest annual price inflation increase at 94.78%, followed by education at 91.84%.
    The strong figures are fueling concerns that Turkey’s central bank, which had indicated last month that its painful eight-month long rate hiking cycle was over, may have to return to tightening.

    The Maslak financial and business center in the Sariyer district of Istanbul.
    Ayhan Altun | Moment | Getty Images

    Turkish annual consumer price inflation soared to 67.07% in February, the Turkish Statistical Institute said Monday, coming in above expectations.
    Analysts polled by Reuters had anticipated annual inflation would climb to 65.7% last month.

    The combined sector of hotels, cafes and restaurants saw the greatest annual price inflation increase at 94.78%, followed by education at 91.84%, while the rate for health stood at 81.25% and transportation at 77.98%, according to the statistical institute.
    Food and non-alcoholic beverage consumer prices jumped 71.12% in February year-on-year and recorded a surprisingly large monthly rise of 8.25%.
    The monthly rate of change for the country’s inflation from January to February was 4.53%.
    The strong figures are fueling concerns that Turkey’s central bank, which had indicated last month that its painful eight-month long rate hiking cycle was over, may have to return to tightening.
    “The stronger-than-expected rise in Turkish inflation to 67.1% y/y in February adds to our concerns given that it comes on the back of a large increase in inflation in January and the strength of household spending growth in Q4,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a research note on Monday.

    “Core price pressures continue to run hot and if this continues, the possibility of a restart to the central bank’s tightening cycle will only increase in the coming months,” he said.
    Some analysts predicted an eventual fall in inflation down to around 35% by the end of this year. According to Capital Economics, the latest figures “highlight that inflation pressures in the economy remain very strong and suggest that the disinflation process has taken a setback at the start of this year.”
    Turkish Finance Minister Mehmet Simsek was cited by Reuters as saying that the country’s inflation would remain high in the first half of the year “due to base effects and the delayed impact of rate hikes,” but that the print would come down in the next 12 months.
    Persistently high inflation has been fueled by Turkey’s dramatically weakened currency, the lira, which is at a record low against the dollar. The lira was trading at 31.43 to the greenback around noon local time on Monday. The Turkish currency has lost 40% of its value against the dollar in the past year, and 82.6% in the last five years.
    “Obviously a disappointing set of inflation prints this morning,” Timothy Ash, emerging markets strategist at BlueBay Asset Management, wrote in a note. The Turkish central bank, he said, “has been trying to wind down the protected FX-linked deposit accounts and the need to rebuild FX reserves.”
    He added that this development has “continued to put downward pressure on the lira,” creating an inflation pass-through.
    Analysts note that Turkey’s policymakers wanted to avoid raising rates again, especially ahead of the country’s local elections on March 31. But relentlessly rising inflation may force them to hike again after the vote. Turkey’s key interest rate is currently at 45%, following a cumulative increase of 3,650 basis points since May 2023.
    “Hopefully favourable base period effects should begin to create a more virtuous cycle from mid year. The CBRT might though need to further hike policy rates after local elections,” Ash wrote. More

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    Brian Mulroney Divided and Reshaped Canada Through Free Trade With the U.S.

    The former prime minister, who died this week, brought dramatic changes, good and bad, to the country’s economy with the pact.Brian Mulroney first led the Progressive Conservatives to power while I was early in my career as a journalist. But his political life was never something that I covered in any great detail. His decision to negotiate a free trade agreement with the United States transformed Canada’s economic history and did, however, consume much of my work life for several years.Brian Mulroney’s move toward closer economic ties with the United States was polarizing among Canadians.Justin Tang/The Canadian Press, via Associated PressMr. Mulroney died on Thursday at 84 at a hospital in Florida after falling at his home there. Alan Cowell has written a sweeping obituary of Mr. Mulroney that documents his many significant achievements but also the allegations of financial misdoing and influence peddling that followed his time in office. Those allegations tarnished his reputation, even among former supporters, and contributed to the eventual demise of the federal Progressive Conservative Party.[Read: Brian Mulroney, Prime Minister Who Led Canada Into NAFTA, Dies at 84]I reported on the free trade negotiations mainly from Washington. In contrast with Canada, where it often seemed as though every molecule of political and public debate was consumed by the talks, the negotiations barely registered there.Nothing in my professional experience polarized Canadians as much as Mr. Mulroney’s move toward closer economic integration with the United States. Whatever the economic advantages of free trade, Canadian industry at the time largely consisted of often inefficient branch plants producing a limited range of products to escape import tariffs that were as high as 33 percent on manufactured goods. Workers in those factories, and the communities that depended on them, were rightly worried that shipments from their parent companies’ larger and more efficient U.S. plants would sweep away their jobs under free trade.(The auto industry was the exception. In 1965, Canada and the United States entered into a deal that allowed American cars to enter Canada tariff-free in exchange for continued production in Canada, most of which was then shipped to the United States.)We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    How 33-Year-Olds, the Peak Millennials, Are Shaping the U.S. Economy

    I have covered economics for 11 years now, and in that time, I have come to the realization that I am a statistic. Every time I make a major life choice, I promptly watch it become the thing that everyone is doing that year.I started college in 2009, in the era of all-time-high matriculation rates. When I moved to a big coastal city after graduation, so did a huge crowd of people: It was the age of millennial urbanization. When I lived in a walk-in closet so that I could pay off my student loans (“The yellow paint makes it cheerful!”, Craigslist promised), student debt had recently overtaken auto loans and credit cards as the biggest source of borrowing outside of housing in America.My partner and I bought a house in 2021, along with (seemingly and actually) a huge chunk of the rest of the country. We married in 2022, the year of many, many weddings. The list goes on.I am no simple crowd follower. What I am is 32, about to be 33 in a few weeks.And there are so many of us.If demographics are destiny, the demographic born in 1990 and 1991 was destined to compete for housing, jobs and other resources. Those two birth years, the people set to turn 33 and 34 in 2024, make up the peak of America’s population.As the biggest part of the biggest generation, this hyper-specific age group — call us what you will, but I like “peak millennials” — has moved through the economy like a person squeezing into a too-small sweater. At every life stage, it has stretched a system that was often too small to accommodate it, leaving it somewhat flabby and misshapen in its wake. My cohort has an outsized amount of economic power, but that has sometimes made life harder for us.Early 30-Somethings Are EverywhereIn 2022, America had 4.75 million 32-year-olds and 4.74 million 31-year-olds, the largest two ages by population.

    Source: U.S. Census BureauBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More