Economy

DAVOS (Reuters) – The Bank of Israel could reduce short-term interest rates one or two times in the second half of 2025 as long as inflation moves back below 3%, Governor Amir Yaron said on Wednesday.Yaron said that while inflation readings have been good in recent months, easing to a 3.2% rate in December – just above the government’s 1-3% annual target – price pressures were likely to accelerate during the first half of the year before coming back down later in 2025.”We think in the first half we will see inflation still coming up and then moderating towards the second half into our target, which in our baseline case probably implies that in the second half, we could see somewhere between a cut or two cuts of interest,” Yaron said in an interview with Reuters on the sidelines of the World Economic Forum’s annual meeting.The central bank sharply raised the benchmark rate in 2022 and 2023 to a high of 4.75% from 0.1% due to a spike in inflation.It cut the rate 25 basis points in January 2024 but the rate has stayed at 4.5% since, as policymakers have been concerned with the effects of Israel’s war in Gaza against Palestinian militant group Hamas that helped to push up inflation, weaken the shekel and raise Israel’s risk premium. The shekel has since reversed course and has appreciated 2.5% against the dollar so far this month, while ceasefires with Hamas and Hezbollah have brought Israel’s risk premium down sharply.”If we see inflation moderating faster and more significantly and the shekel strengthening in a more permanent way, then that may allow us to be a bit more agile and faster in that direction,” Yaron said of the prospects for cutting rates.GROWTH REBOUND EXPECTED IN 2025Yaron noted that war-related supply constraints that have helped to push up prices have started to alleviate but “in the short run, we think demand is going to move faster than the supply constraints will get alleviated”.Israel’s economic growth was near zero in 2024, but the central bank estimates growth of 4% in 2025.Yaron cautioned that should inflation remain “sticky” or geopolitical issues push Israel’s risk premium higher again, “we will have to maintain a more restrictive stance for a longer period”.He pointed to a rise in value added taxes and other government mandated increases at the start of 2025 that would add to inflation pressures.Loose fiscal policies in 2024, mainly $25 billion in extra spending to finance Israel’s military conflicts, have also concerned policymakers, especially a budget deficit last year of 6.9% of GDP.Yaron, though, largely praised the government for an austerity budget for 2025 – which still needs final parliamentary approval – of spending cuts and tax increases to rein in the deficit.He expects higher defence spending to boost the debt burden in 2025 but hopes for a decline in 2026.”Probably some more fiscal adjustment will be needed in the 2026 budget to assure that the trajectory of debt to GDP coming down continues onward,” Yaron said.After a series of credit rating cuts in 2024, the government, he added, understood the importance of maintaining market confidence although “the composition of the budget could have been pushed more into engines of growth”.  More

(Reuters) -U.S. stock index futures rose on Wednesday, led by those tied to the Nasdaq, as investors cheered streaming giant Netflix (NASDAQ:NFLX)’s strong quarterly performance and President Donald Trump’s multi-billion dollar support to bolster AI infrastructure.Netflix jumped 14.9% in premarket trading after reporting a record number of subscribers in the holiday quarter, enabling it to increase prices for most service plans.Other streaming companies such as Roku (NASDAQ:ROKU) and Walt Disney (NYSE:DIS) added 4.2% and 1.3%, respectively.”Stellar subscriber figures such as these would be hard to beat. Netflix is seen as a litmus test for the entire tech sector … the tech sector could be well placed to report strong earnings figures in the coming months,” said Kathleen Brooks, research director at XTB.At 06:58 a.m. ET, Dow E-minis were up 83 points, or 0.18%, S&P 500 E-minis were up 26.25 points, or 0.43% and Nasdaq 100 E-minis were up 177.75 points, or 0.82%.Among the top movers, Oracle (NYSE:ORCL) gained 8.7%, a day after Trump said the company would invest $500 billion in AI infrastructure with OpenAI and SoftBank (TYO:9984), even though there was no clarity on funding.Server makers Dell (NYSE:DELL) and Super Micro added 4.5% and 2.6%, respectively, while AI winners Microsoft (NASDAQ:MSFT) added 1% and Nvidia (NASDAQ:NVDA) rose 2.7%.”The news also boosted growth and productivity expectations more than they fueled the ballooning debt worries,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.Data pointing to a strong economy amid cooling inflation and Trump’s moderate approach to tariffs have helped risk-taking since last week, with the benchmark S&P 500 less than 1% away from all-time highs. Stocks have also benefited from easing Treasury yields.However, Trump has warned that tariffs on imports from China, Mexico, Canada and the European Union could be issued on Feb. 1, a reminder for markets that risks of a potential trade war and fresh inflation pressures prevailed.Traders expect the Federal Reserve to leave interest rates unchanged when it meets next week and expect it to deliver its first rate cut this year in July, according to data compiled by LSEG.Johnson & Johnson (NYSE:JNJ) edged up 0.2% after the drugmaker reported fourth-quarter sales and profit above Wall Street estimates, driven by strong sales of its cancer treatments.GE Vernova fell 2.1% after missing fourth-quarter revenue estimates. Halliburton (NYSE:HAL) gained 1.2% after beating estimates for fourth-quarter profit, helped by higher demand for oilfield services and equipment from international markets.United Airlines advanced 3.8% after forecasting a stronger-than-expected profit in the current quarter, betting on robust travel demand and improved pricing power. More

The recall affects certain 2025 Chevrolet Equinox EV all-wheel drive electric vehicles. The adaptive cruise control may fail to engage the brakes as expected, due to incorrect brake module software, increasing the risk of a crash, the U.S. auto safety regulator said. Dealers will update the software calibration in the brake system control module free of charge, the NHTSA said. More

The reported 0.5% quarter-on-quarter increase in consumer prices matched the forecasts of Capital Economics and the wider analyst consensus, although it was slightly above the RBNZ’s own prediction of a 0.4% rise. Consequently, headline inflation remained steady at 2.2%, defying the RBNZ’s anticipation of a minor decline.The modest uptick in inflation, relative to the RBNZ’s projections, was attributed entirely to the volatile tradables component, which saw prices increase by 0.3% quarter-on-quarter in Q4, surpassing the RBNZ’s expectation of a 0.2% decrease, analysts at Capital Economics pointed out.In contrast, non-tradable items exhibited their weakest quarter-on-quarter growth in four years at 0.7%, precisely matching the central bank’s forecast.More indicative of the easing inflationary pressures, core inflation metrics continued their downward trend. The trimmed mean inflation decreased from 2.7% in Q3 to 2.5% in Q4, and the weighted median inflation similarly dropped from 2.8% to 2.6%. The quarter-on-quarter figures also reflected this softening, with the trimmed mean CPI rising by 0.4% and the weighted median CPI by just 0.3%. This ongoing weakness suggests that underlying inflation could soon fall below the midpoint of the RBNZ’s target range of 1-3%.The latest inflation figures are in line with other economic data and surveys, which indicate that there is still considerable spare capacity in New Zealand’s economy.Capital Economics maintains that these conditions justify a substantial rate cut, predicting that the RBNZ will reduce rates by 50 basis points in its upcoming February meeting.Furthermore, if inflation continues to fall short of the bank’s expectations, Capital Economics believes there is a compelling argument for the RBNZ to implement aggressive policy easing. They stand by their projection that the RBNZ will ultimately lower rates to 2.25%, significantly below the 3.00% terminal rate forecasted by the consensus of analysts.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

DAVOS, Switzerland (Reuters) – Ships not linked to Israel could begin returning to the Red Sea in as little as two weeks, DP World’s deputy chief executive said, adding that could see freight prices “come crashing down”.Sea freight prices could drop “at least 20%, 25%” and that could happen over two to three months, Yuvraj Narayan told Reuters on the sidelines of the World Economic Forum meeting taking place in Davos, Switzerland.It is hard to predict a specific timeline, however, the deputy CEO and CFO of the Dubai-owned ports and logistics firm added.Yemen’s Houthis said on Sunday they will limit their attacks on commercial vessels to Israel-linked ships and will look into halting all attacks once the Gaza ceasefire is fully implemented. The Iran-backed Houthis have carried out more than 100 attacks on ships since November 2023. They have sunk two vessels, seized another and killed at least four seafarers.They have staged attacks across the southern Red Sea and the Gulf of Aden and still hold 25 crew members from the Galaxy Leader car carrier seized in November 2023.In response many of the world’s biggest shipping companies have diverted vessels away from the Red Sea, travelling around the southern tip of Africa instead.Narayan said that has tied up at least 30% more capacity than usual. He said freight rates are expected to come down once the shorter route via the Red Sea and Suez Canal picks up again. Dubai’s DP World, which manages ports in countries from Britain to Peru as well as operating warehousing and logistics parks.Asked about possible expansion, Narayan said DP World is looking at the east and west coasts of Africa.”I think there’s massive potential there because there’s nothing available …and the cost of moving cargo in Africa is so high that it just makes sense.”In Europe, the state-owned conglomerate is working on investment in London Gateway port despite a “challenging” economic environment in the UK due to lack of growth and legacy issues, he said. The $1.3 billion project was reportedly put on hold after two ministers criticised practices at DP World’s subsidiary P&O Ferries, but British business minister Jonathan Reynolds in October said the investment was going ahead after talks with the firm. With a general increase in the size of vessels “we have the greatest possible location right now,” Narayan said speaking of the project.”We’re going to do a complete build-up of London Gateway …that was always our strategy.” More

BEIJING (Reuters) – China will grant foreign financial institutions the same treatment as domestic ones in offering new types of financial services not yet available in the country in some free trade zones, the central bank said on Wednesday.The country will also facilitate the transfer of inbound and outbound funds related to foreign investments in these areas in regions such as Beijing and Shanghai, according to guidelines jointly published by five government agencies. (This story has been refiled to fix the spelling of ‘institutions’ in the headline) More

The strategists suggest that boosting domestic demand could potentially mitigate this ongoing issue. They note that initial public offering (IPO) activity in the UK has been less robust compared to other regions, such as continental Europe and the United States.The UK’s attractiveness as a listing destination appears to be diminishing, while the US is increasingly becoming the primary global capital market. The strategists express that this pattern is unlikely to change without some form of intervention.The strategists also observed a structural decline in UK valuations. This is primarily due to the dwindling ownership by pension funds and insurance companies. The absence of these traditionally stable investors has contributed to the current state of the UK capital markets. More

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