Economy

WELLINGTON (Reuters) – Inflation in New Zealand returned to the Reserve Bank of New Zealand’s target range of 1% to 3% in the third quarter, keeping the door open for the central bank to continue aggressively cutting rates.Statistics New Zealand said on Wednesday that annual inflation dropped to 2.2% in the third quarter, within that range for the first time since March 2021. It reached 3.3% in the second quarter, having peaked at 7.3% in June 2022.Kiwibank chief economist Jarrod Kerr said in a note that the central bank can declare victory in the war on inflation.”The light at the end of the tunnel is burning brighter. Cost pressures are easing,” he said. “Policy settings are still restrictive, but more interest rate cuts are coming.”The consumer price index rose 0.6% in the third quarter from the prior quarter. Economists polled by Reuters expected consumer prices to have risen 0.7% quarter-on-quarter and 2.2% year-on-year. The central bank had expected year-on-year inflation of 2.3%.The New Zealand dollar was little changed following the release of the data, which came in close to expectations.New Zealand’s central bank has cut the official cash rate by 75 basis points since August as it assessed that inflation had returned to its target band of 1% to 3% and was nearing the 2% mid-point.It is expected to continue to cut rates over the coming year to stimulate the economy, which is struggling in part due to high interest rates.ASB Bank senior economist Mark Smith said that while ASB sees the central bank cutting rates by 50 basis points at its final 2024 meeting in November, the “risks are tilted to more front loaded policy easing.”The central bank has yet to win the battle with non-tradeable inflation which, according to Statistics New Zealand, dropped to 4.9% in the third quarter from 5.4% in the prior quarter. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Mexican President Claudia Sheinbaum has said she hopes there will be few changes to North America’s free trade deal under the next US president, as she announced $20bn in investments at an event with American and Mexican business leaders on Tuesday.Sheinbaum said the US-Mexico-Canada trade agreement, known as the USMCA, had allowed the region to compete against the rest of the world, as she tried to lure wary US business leaders to invest more south of the border.“Our idea is to keep the deal with few changes,” she told a press conference in Mexico City. “Our narrative is . . . we complement each other, we don’t compete.”The USMCA, which underpins the region’s economy, will have its first review in 2026, and US presidential candidate Donald Trump has said he would open a full renegotiation and has threatened manufacturers who invest in Mexico with tariffs.The former US president said on Tuesday that “if I’m going to be president of this country, I’m going to put a 100, 200, 2,000 per cent tariff [on cars from Mexico]”, potentially threatening investments from US companies such as John Deere, which is expanding production in northern Mexico. Trump and other US politicians have also raised concerns over growing Chinese investment in Mexico, particularly in the car industry.The uncertainty comes as left-wing Sheinbaum implements a controversial domestic agenda first set out by her predecessor, Andrés Manuel López Obrador. It includes firing all the nation’s judges, prioritising state energy groups and eliminating some independent regulators.The plans and her coalition’s supermajority in congress have given investors further pause as they await the implementation of the new laws and the result of the US vote in November.“International investors are in wait-and-see mode,” said Nicholas Watson, Latin America managing director at consultancy Teneo. “The uncertainty could last weeks, depending on the outcome of the US election.”Outside the Palacio Nacional in Mexico City on Tuesday, judiciary workers on strike were blocking the entrances over Sheinbaum’s plan to hold elections for judges. They held up signs in English saying “Businessman . . . your investment is in danger, do not be fooled” and “judicial reform, the short path to dictatorship”.Legal experts have said the changes undermine judicial independence. Attendees of the meeting with business leaders said that the government spent a lot of time trying to explain the reform and Sheinbaum said that the economy ministry would set up working groups on the topic. “None of these reforms are a problem for investment in Mexico,” she told reporters.Tuesday’s meetings were part of an annual “CEO dialogue” between Mexico and the US, with mostly regional executives participating from companies such as Walmart, UPS and Union Pacific.Sheinbaum said she laid out her plans for public and private investments, and her presence — along with several senior cabinet members — was a good sign the relationship was a priority, and a shift from López Obrador, according to people at the meetings.“The tone, the plan, the openness towards us is drastically different in a good way,” one business leader said. “The private sector is obviously sceptical due to everything that has happened lately — and in the past six years . . . [its] still too early to tell.”Sheinbaum, who took office this month, has set ambitious renewables targets and said she would slash a bulging deficit. She also wants to review the country’s water concessions. But many of her proposals, such as a national energy plan, are yet to be fleshed out.“The government was quite professional,” another attendee said. “The worries are still there though.” More

In a speech in Sydney, Reserve Bank of Australia Assistant Governor Sarah Hunter said inflation expectations have not become de-anchored, with new research showing that households appear to have looked through the recent spike in inflation more than the central bank might have expected.The relationship between current wage expectations and inflation expectations is relatively weak, the RBA also noted.”So we’re not currently concerned that expectations could become de-anchored in the near term,” said Hunter at an Citi investment conference. “But we do think it’s important that we track how they’re evolving and that we understand how expectations are formed, so we can monitor whether there are any signs of this risk materialising in the future.”The RBA has kept rates steady since November, judging that the cash rate of 4.35% – up from a record-low 0.1% during the pandemic – is restrictive enough to bring inflation to its target band of 2%-3% while preserving employment gains.However, underlying inflation has remained sticky at 3.9%, one reason that policymakers do not expect inflation to slow to the midpoint of the target band in 2026. Swaps imply just a 40% probability that the RBA can cut in December. More

(Reuters) – A look at the day ahead in Asian markets. Three monetary policy decisions dominate Asian markets on Wednesday, with investor sentiment and risk appetite likely to be kept in check by a selloff on Wall Street and worries over tech and the global economy the day before.The central banks of Indonesia, Thailand and the Philippines all set interest rates on Wednesday, while the latest New Zealand inflation, South Korean unemployment and Japanese machinery orders are also on deck.Oil prices are on the slide again, partly reflecting soft demand, particularly from China. Crude futures slumped nearly 5% on Tuesday, pushing U.S. crude below $70 a barrel and bringing the year-on-year decline back to 20%. Tech worries pushed U.S. shares into the red, despite upbeat earnings from financial heavyweights Goldman Sachs, Citi and Bank of America. Nvidia (NASDAQ:NVDA) and ASML (AS:ASML) shares led the global tech slump, and attention later in the week turns to Taiwan Semiconductor Manufacturing Co, the contract manufacturer that produces Nvidia’s processors.It is expected to report a 40% leap in quarterly profit on Thursday, thanks to soaring demand.On Wednesday, meanwhile, Bank Indonesia is expected to leave interest rates unchanged despite inflation falling to its lowest level since 2021, with the exchange rate at the forefront of policymakers’ thinking.Inflation is down to 1.84% and has been within BI’s target of 1.5% to 3.5% all year, but the rupiah has fallen more than 3% from a September peak. The Bank of Thailand is also expected to stay on hold and leave its one-day repo rate at 2.50% for the rest of the year. Four out of 28 economists in a Reuters poll predicted a quarter-point cut.The Philippine central bank, on the other hand, is expected to cut its overnight borrowing rate by 25 basis points to 6.00%, and again in December as policymakers strive to support economic growth as inflation remains under control.The central bank kicked off its easing cycle in August, and since then inflation has dropped below the bank’s 2%-4% target.Meanwhile, investors continue to digest the details and steer from China at the weekend about its stimulus measures, and the recent slew of data. None of that has been particularly encouraging and Chinese markets are drifting lower, although equities are still up substantially from ‘pre-stimulus’ levels. Beijing on Tuesday announced that a press conference will be held on Thursday to discuss promoting the “steady and healthy” development of the property sector. If this announcement was aimed at reassuring investors, however, it has fallen flat. Shanghai’s blue chip index is down 13% from last Tuesday’s peak, but is still up 20% from the day before Beijing first unveiled its measures to support markets, the property sector and growth.Here are key developments that could provide more direction to markets on Wednesday:- Indonesia, Thailand, Philippines rate decisions- Bank of Japan’s Seiji Adachi speaks- New Zealand inflation (Q3) More

WASHINGTON (Reuters) -World Bank President Ajay Banga on Tuesday warned that a significant widening of the Israel-Gaza war could lead to major impacts on the global economy, calling the steep loss of civilian lives in the region “unconscionable.”Speaking in a Reuters NEXT Newsmaker interview, Banga said the war has had a relatively small impact on the global economy thus far, but a significant widening of the conflict would draw in other countries that are larger contributors to global growth, including commodity exporters.”First of all, I think this unbelievable loss of life – women, children, others, civilians, is just unconscionable on all sides,” Banga said. “The economic impact of this war, on the other hand, depends a great deal on how much this spreads.””If it spreads regionally, then it becomes a completely different issue because now you start going into places that are far larger contributors to the world economy, both in terms of dollars, but also in terms of minerals and metals and oil and the like,” he said.Some Western countries are pushing for a ceasefire between Israel and Lebanon, as well as in Gaza, though the United States, Israel’s strongest ally, has expressed its continued support and is sending it an anti-missile system and troops.Israel launched the offensive against Hamas after the militant group’s Oct. 7 attack on Israel, in which 1,200 people were killed and around 250 taken hostage to Gaza, by Israeli tallies. More than 42,000 Palestinians have been killed in the offensive so far, according to Gaza’s health authorities.Israeli strikes have also killed at least 2,350 people over the last year in Lebanon and left nearly 11,000 wounded, according to the Lebanese health ministry, and more than 1.2 million people have been displaced.Banga said war damage from Israeli strikes on Gaza is now probably in the $14-20 billion range, and destruction from Israel’s bombing of southern Lebanon will add to that regional total.Banga said the World Bank had provided $300 million, six times what was normally given, to the Palestinian Authority to help it manage the crisis on the ground, but that was small compared to the “large number” it would ultimately need.He said the multilateral development bank had also assembled a group of experts from Jordan, Israel, Palestine, Europe, the U.S. and Egypt to study what short- and longer-term actions it could take if a peace agreement could be reached.”We’re going to have to figure out how to have that publicly discussed and debated and then find the resources for it,” he said, adding that the effort would require private and public resources. More

MEXICO CITY (Reuters) -Mexican officials urged safety and stability in private investment in the country on Tuesday, following a bilateral summit with business leaders in which fears about constitutional reforms dominated the agenda. Companies such as Amazon (NASDAQ:AMZN), Mexico Pacific, Royal Caribbean (NYSE:RCL) and Woodside (OTC:WOPEY) Energy are set to make significant investments in the country in the next year, Economy Ministry Marcelo Ebrard said. Close to 250 executives attended the summit, held annually but of particular importance this year in the first weeks of President Claudia Sheinbaum’s administration. “The messages from President Sheinbaum were certainty, assuredness,” Ebrard said. “Investments in Mexico are safe. We’re going to work so trade in the region keeps growing.”Last month, Mexico’s Congress passed a sweeping judicial overhaul, which will put judges up for election by popular vote, arguing it will reduce corruption. But the reform has drawn concerns from top trading partners Canada and the U.S. and risks being challenged by both countries under the trilateral USMCA trade agreement, which is up for review in 2026.”None of these reforms are a problem for investment in Mexico,” Sheinbaum said.She added that legislation which will lay out how an energy reform will be implemented – known as a “secondary law” – will also establish a framework for investment in the sector.Sheinbaum is readying her national energy plan to present it next year.TOTAL INVESTMENTSEbrard said the total investments announced on Tuesday – many of which had already been previously confirmed by the companies themselves – topped $20 billion. That figure could come up to $30 billion if more planned investments materialized, he added.Mexico Pacific, which is building a liquefied natural gas (LNG) export plant in the western coastal state of Sonora, will invest around $15 billion in the country in 2025, Ebrard said.The firm had previously said the plant’s construction would cost that.Major passenger cruise line Royal Caribbean Group, meanwhile, is set to invest $1.5 billion in what Ebrard called a hub for “touristic development.”The firm said earlier this month it will develop an excursion site for day-time stops at the port of Mahahual, in southern Quintana Roo state. Local media had then pegged the investment at closer to $600 million.Ebrard added that Amazon would invest $6 billion over the next two years to boost its network and digital capacity in Mexico. The company had previously said it would invest $5 billion in Mexico over 15 years. Woodside Energy, meanwhile, is weighing an investment of around $10.4 billion in a tie-up with state oil producer Pemex, Ebrard said.Last year, Woodside forecast its share of the capital expenditure for the Trion deepwater oil project to be $4.8 billion, with Pemex covering the other $7.2 billion. More

ROME (Reuters) -Italy’s government plans to raise 3.5 billion euros ($3.81 billion) from domestic banks and insurers, Prime Minister Giorgia Meloni said on Tuesday after her cabinet approved budget plans for the next three years.The money raised would be earmarked for the national health service and the most vulnerable, Meloni wrote on the X social media platform.Officials previously said the levy on the financial sector would derive from a change in the taxation of stock options for managers and in the rules governing banks’ tax credits stemming from past losses, known as deferred tax assets.Italy’s largest bank and insurance companies include Intesa Sanpaolo (OTC:ISNPY), UniCredit, Banco BPM, Monte dei Paschi di Siena and Generali (BIT:GASI).The Treasury said in a statement that the budget for 2025 included measures worth 30 billion euros – primarily permanent cuts to income tax and social contributions for middle- and low-income earners.Rome has said it would widen next year’s deficit to 3.3% of gross domestic product from an estimated 2.9% based on current trends, borrowing an extra 9 billion euros to fund the package.The government did not provide full funding details for its 2025 budget on Tuesday, with the Treasury citing plans to rationalise state spending as well as the levy on banks and insurers.DEFICIT TO FALL, DEBT TO RISETalk of a bank levy had swirled for weeks and weighed on lenders’ shares in the absence of clarity from the government.Economy Minister Giancarlo Giorgetti last week said a contribution from banks “shouldn’t be considered blasphemous.”Italy last year shocked markets by imposing a 40% tax on banks’ windfall profits, only to backtrack by limiting the scope of the levy and giving lenders an opt-out clause which meant that in the end it raised zero for state coffers.The new bank levy will “not frighten the markets,” Foreign Minister Antonio Tajani wrote on X.For 2025, the government also plans to hike excise duties on diesel and eliminate some tax breaks for companies related to the main corporate tax IRES, according to officials.Italy is under an EU disciplinary procedure due to a budget deficit last year of 7.2% of GDP, far above the bloc’s 3% limit and the highest in the euro zone.Last month the government pledged to lower the deficit to 2.8% of GDP in 2026, hoping this would allow Italy to exit the procedure in 2027.On the other hand, Italy’s debt, already the second highest in the euro zone, is seen gradually climbing over the next two years, reaching 137.8% of GDP in 2026 compared with last year’s 134.8%.The EU’s recently revamped fiscal rules require a steady pace of deficit and debt reduction from 2025 over four to seven years.To secure EU approval for a less ambitious seven-year budget adjustment, Italy committed to reforms in several policy areas, including making the tax system more efficient.($1 = 0.9185 euro) More