Economy

MUMBAI (Reuters) – The Reserve Bank of India (NS:BOI) may ease monetary conditions on Friday by reducing banks’ cash reserve ratios after economic growth slowed to a seven-quarter low, but inflationary pressures may make it reluctant to cut interest rates just yet, analysts said.The six-member monetary policy committee (MPC) is largely expected to hold the key policy rate steady at 6.5% for the eleventh straight meeting, but a few economists have forecast a 25 basis points (bps) cut following the recent growth numbers.GDP expanded 5.4% in the September quarter, the slowest pace in seven quarters and sharply below the polled estimate of 6.5%.”We maintain our out-of-consensus call for a 25 bps repo rate cut to 6.25%, due to weaker growth and a benign one-year forward inflation outlook,” economists at Nomura said in a note.”We do not see any policy tradeoffs from lowering rates at this juncture. We continue to expect 100 bps of cumulative cuts by mid-2025 to a terminal rate of 5.50%,” they added.If the central bank does cut rates, it would be the first time since May 2020.India’s benchmark 10-year bond yield has dropped 12 bps to 6.68% since the GDP data last week, while overnight indexed swap rates, the gauge for future interest rates, have seen a 20 bps decline, suggesting markets are expecting some policy easing.However, cutting rates to boost growth won’t be as easy an option. Annual retail inflation quickened to 6.21% in October, breaching the central bank’s tolerance band for the first time in more than a year.The RBI may infuse liquidity via a possible 50 bps cash reserve ratio (CRR) cut on Dec. 6, and bring out other instruments over the next few months, economists at HSBC said in a note.”It’s time to act, strategically,” they said.CRR is the proportion of deposits that banks must set aside as cash. Reducing it by 50 basis points would free up 1.1 trillion rupees ($12.98 billion) for fresh bank lending and push down market interest rates.A cut in CRR, currently at 4.5%, would be the first since March 2020. “If there is no action on rates or liquidity, we could see an immediate sell-off in bonds, with the benchmark bond yield rising to 6.75% levels and consolidating around that,” said Vikas Goel, managing director at PNB Gilts.($1 = 84.7240 Indian rupees) More

LONDON (Reuters) – One of Britain’s leading employers’ groups on Friday cut its estimate for economic growth next year due to measures in the new government’s first budget, striking a gloomier note than other recent forecasts.Growth in 2025 is now seen at 1.6%, the Confederation of British Industry (CBI) said, down from a projection of 1.9% made in June. The growth outlook for this year was trimmed to 0.9% from the June forecast of 1.0%.”Measures in the autumn budget will increase firms’ costs at a time when their profit margins have already been under pressure,” Louise Hellem, the CBI’s chief economist, said.”Many businesses have told us that these measures will likely push up prices and weigh on their hiring and investment plans going forward.” Finance minister Rachel Reeves announced in her Oct. 30 budget that employers will have to pay higher social security contributions for their workers from April, which is also when the minimum wage is due to rise by almost 7%.Many businesses have said the higher costs will threaten Prime Minister Keir Starmer’s plan to speed up the economy.The Bank of England said on Thursday that more than half of companies taking part in a survey planned to raise prices and cut jobs in response to the budget.On Thursday, Starmer said his government was doubling down on its growth ambitions.Another employers group, the British Chambers of Commerce, said on Wednesday that 2025 was likely to be difficult due to the increase in employment costs and potential tariffs on exports once Donald Trump becomes U.S. president.However, unlike the CBI, the BCC revised up its forecast for growth in 2025 to 1.3% from a previous estimate of 1.0%.The OECD also this week raised its forecasts for Britain’s economic growth in 2025 to 1.7% from 1.2% previously. The CBI said business investment would pick up in 2025 but slow slightly in 2026, reflecting the higher employment costs and the “crowding out” effect from higher public investment. Inflation would remain above the BoE’s target until at least 2027, pushed up in part by the higher labour costs which would also weigh on private sector employment and result in a greater share of employment growth coming from the self-employed. Wage growth was set to weaken and the BoE would cut its benchmark Bank Rate slowly to 3.5% by late 2026 from 4.75% now.Overall economic growth in 2026 was seen at 1.5%.The CBI’s forecasts assumed Britain avoids extra U.S. trade tariffs but the impact on growth and inflation would be marginal if the country was dragged into a trade war, it said. More

Rome’s government believes that signature can only take place on condition of adequate safeguards and compensation.European Commission President Ursula von der Leyen landed in Uruguay on Thursday seeking to finalize a long-delayed trade deal between the EU and the Mercosur bloc while France said the EU was taking a risk in finalising the deal. More

The Bank of Japan must scrutinise various data at its Dec. 18-19 rate review, dovish board member Toyoaki Nakamura said on Thursday, as the market remains split about the timing of Japan’s next interest rate hike between December and January.Base salary, or regular pay, rose 2.7% in October, marking the fastest increase since November 1992, labour ministry data showed, as more companies set higher salaries after major firms agreed to an average 5.1% raise at the spring wage talks. Overtime pay, a barometer of business strength, rebounded to 1.4% growth from a revised 0.9% decrease in the previous month.Combined, nominal wages, or a worker’s average total cash earnings, grew 2.6% to 293,401 yen ($1,955) in October.The inflation rate the ministry uses for wage calculation, which excludes owners’ equivalent rent, was also at 2.6%, its slowest in nine months.That led the inflation-adjusted real wages, a key indicator of consumers’ purchasing power, to stay unchanged in October from a year before, against a revised 0.4% drop in September and 0.8% decline in August.Opposition lawmakers had pressed the government and the BOJ to aim for positive real wage growth after the ruling bloc lost its lower house majority at the October general election.BOJ Governor Kazuo Ueda last week told the Nikkei newspaper in an interview that the timing of the next interest rate hike was “approaching” as the economy was moving in line with the central bank’s forecasts.Meanwhile, Jiji news agency reported on Wednesday that a cautious view toward an early hike was growing among BOJ policymakers, adding to uncertainty around the chance of a December hike.($1 = 150.1500 yen) More

WASHINGTON -Billionaire Elon Musk and former presidential candidate Vivek Ramaswamy met on Thursday with Republican lawmakers whose support they will need to win the sweeping spending cuts that President-elect Donald Trump has asked them to find.Trump has named two entrepreneurs to a task force that aims for a sweeping overhaul of the U.S. government, which spent $6.8 trillion in the most recent fiscal year. Musk has set a target of $2 trillion in savings, though he has not said whether that would come in a single year or over a longer period.The two chairs of the Department of Government Efficiency have called for firing thousands of federal workers, slashing regulations and eliminating programs whose authorization has expired, such as veterans’ healthcare.That could be easier said than done. Any changes to veterans’ benefits or other popular programs that serve millions of Americans would likely encounter fierce blowback, and efforts to thin the workforce could disrupt everything from law enforcement to air traffic control.”We want to help him in any way that we can. He’s got, obviously, a big mission. But we all think the effort they’re undertaking is long overdue,” Senator John Thune, who will lead the Republican majority next year, told reporters after meeting with Musk.Musk, who earlier rushed through the Capitol’s crowded corridors clutching the hand of a small child, offered few details on how he will try to accomplish his sweeping cost-cutting goals.”I think we just need to make sure we spend the public’s money well,” said Musk.The billionaire CEO of electric car maker Tesla (NASDAQ:TSLA) and SpaceX addressed only one specific policy specific, when asked about electric vehicle tax credits, responding: “I think we should get rid of all credits.” Musk’s companies benefit from federal contracts and tax breaks and also are subject to regulatory oversight, raising concerns that his involvement with the efficiency panel creates a conflict of interest.Ramaswamy met separately with a group of Senate Republicans including Thom Tillis, who said afterward they discussed actions the Trump administration could take on its own, rather than those that would require legislation. “Is this an administrative action that doesn’t require congressional approval? Rock on. Do it now or do it after Jan. 20,” he told reporters.As co-chairs of the efficiency task force, Musk and Ramaswamy, a former biotech executive, would likely have to work with Congress to secure significant reductions.REPUBLICAN TRIFECTARepublicans will control both chambers of Congress and the White House next year, but they may struggle to win significant reductions. While lawmakers sign off on roughly $1.7 trillion in defense and domestic programs each year, most federal spending consists of health, pension and other benefit programs that lie outside of the annual budget process. Lawmakers also have no control over interest payments, which are projected to top $1 trillion in this fiscal year.Republican lawmakers have said they are eager to cooperate. Representative Marjorie Taylor Greene, a hard-right firebrand, will chair a House of Representatives panel to work with Musk and Ramaswamy, and Senate lawmakers have also expressed openness to the idea. Republicans secured limited spending cuts in a 2023 showdown with Democratic President Joe Biden but have been unable to agree on further reductions since then.Trump has broken with former Republican orthodoxy by saying he will not cut benefits for the Social Security pension plan or the Medicare health plan for seniors, which together account for more than one-third of federal spending. Trump showed little interest in spending cuts during his first 2017-2021 term in office, when federal expenditures grew from $4 trillion to $6.2 trillion. Congress did not act on his proposal to eliminate more than a dozen small government agencies and failed to repeal Democratic President Barack Obama’s signature Affordable Care Act, a central goal of the party. More

The Australian Transaction (JO:TCPJ) Reports and Analysis Centre (AUSTRAC) said its findings showed cryptocurrency was increasingly being exploited for money laundering, scams and money mule activities.AUSTRAC’s taskforce will ensure digital currency exchanges that provide crypto ATM services have robust practices in place to minimise the risk of their machines being used to move money associated with scams or fraud, the government agency said.A crypto ATM allows users to buy and sell cryptocurrencies, like bitcoin and dogecoin, for cash.Currently, Australia has 1,200 operating crypto ATMs, while about 400 digital currency exchange providers are registered with AUSTRAC.The total value of the cryptocurrency market has almost doubled over the year so far. Bitcoin also hit a record high above $100,000 as the election of Donald Trump as U.S. president fuelled expectations his administration will usher in a friendly regulatory environment for cryptocurrencies.AUSTRAC CEO Brendan Thomas said the agency was seeing “too many” Australians falling victim to scams carried out through cryptocurrency.”Cryptocurrency and crypto ATMs are attractive avenues for criminals looking to launder money, as they are widely accessible and make near-instant and irreversible transfers,” he said, adding that crypto ATMS who were found flouting the anti-money laundering laws would be subject to financial penalties. More

The Bureau of Labor Statistics is expected to report Friday that nonfarm payrolls increased by 214,000 in November, a significant step up from the meager 12,000 gain in October.
This will be the last comprehensive look the Federal Reserve will get before its next policy meeting on Dec. 17-18.
Getting a clear picture for the Fed is essential now as policymakers look to recalibrate policy at a time when inflation rates are elevated but easing, and focus has increased on the labor market.

A pedestrian walks by a ‘hiring now’ sign in front of a U-Haul store on December 03, 2024 in San Rafael, California. 
Justin Sullivan | Getty Images

After a month in which hiring was essentially muted due to storms and strikes, the jobs report due out Friday could provide a clearer picture of where the labor market is headed.
The Bureau of Labor Statistics is expected to report Friday at 8:30 a.m. ET that nonfarm payrolls increased by 214,000 in November, a significant step up from the meager 12,000 gain in October. That month’s reading was the worst for job gains since December 2020.

One of the things that will make the report so pivotal is it will be the last comprehensive look the Federal Reserve will get before its next policy meeting on Dec. 17-18. Markets are betting heavily that the Fed will approve another quarter-percentage-point interest rate cut, but that could change depending on how the jobs count plays out.
“Well, it should be a pretty healthy number, because it should bounce back from [October] when we had [Hurricane] Milton and the [Boeing strike] holding down jobs,” said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research.
In fact, the October number could get pushed higher after BLS surveyors go back and recheck the month’s data. Revisions to the payrolls reports sometimes have been massive in the post-Covid period.
That could add to a messy couple of months with economic data and make the Fed’s job more challenging.
“I would expect it to be over 200,000, and the risk would probably be to the upside if we get a real rebound,” Jones said. “But I’m not sure that this jobs report will tell us much, either, because of all the weather effects up and down. Is it really going to give us a clear view of the future, or is it just going to be more muddy data to deal with?”

Important for the Fed

Getting a clear picture for the Fed is essential now as policymakers look to recalibrate policy at a time when annual inflation rates are elevated but easing, and focus has increased on the labor market.
Aside from the October report, the jobs picture has been showing a mostly slower trend since around April, with payroll gains averaging about 128,000 new jobs a month as the unemployment rate has drifted up to 4.1%. Fed policymakers want to take their benchmark short-term borrowing rate down to a more neutral level as they balance their focus between inflation and employment.
“This is absolutely going to be noisy, because a storm and strike disruption affects two months’ worth of data, the data for the month in which people aren’t working and the next month when they return to work,” said BNY economist Vincent Reinhart, a former Fed official who served 24 years at the central bank.
“The way the Fed sees it is that the slowing in nonfarm payrolls over the course of 2024 was basically settling to trend — trend being something a little above 100,000 jobs created a month — and that was not worrisome,” he added. “It was actually welcome, because, you know, trend is sustainable.”
Indeed, the most recent signals point to a job market leveling off but not worsening.

State of the labor market

Initial weekly unemployment insurance claims have held in a fairly steady range around 220,000, though continuing claims earlier in November had hit their highest level in about three years. Together, the numbers indicate that companies are not laying off workers en masse but also aren’t rehiring those who do lose their jobs.
A Fed economic report Wednesday — its “Beige Book” summary of current conditions — described hiring as “subdued as worker turnover remained low and few firms reported increasing their headcount.” The report said layoffs are “low” but employers indicated caution about the future pace of hiring, with more enthusiasm about entry-level workers and skilled trades.
Job openings increased in October while the hiring rate fell and those leaving their jobs voluntarily increased, according to BLS data this week.
The Fed will have to weigh all of those factors, plus worries about rising inflation, when it makes its rate decision and lays out its outlook for the future.
If the labor market can remain steady, then it shouldn’t put additional pressure on inflation, Reinhart said. “So the strategy is, try to get demand at trend, because if growth and demand are at trend, then you should preserve the current state of the labor market, and the labor market is roughly in balance,” he added.
In addition to the headline payrolls gain, the unemployment rate is expected to nudge up to 4.2% as the labor force sees re-entrants from October. Also, average hourly earnings are expected to rise 0.3% on the month and 3.9% from a year ago, both down slightly from the previous month. More