Economy

Higher interest rates since June last year have reduced economic imbalances and revived confidence, the IMF said on Saturday, adding that improved market sentiment had prompted foreign and domestic investors to shift into lira-denominated assets.The central bank has hiked its main policy rate to 50% from 8.5% to battle high inflation. The government raised taxes and some fees to boost income, while implementing fiscal measures to balance risks in the economy. More

The ministry said at a press conference that it would “significantly” increase government debt issuance to provide subsidies to low-income households, support the property market, and replenish state banks’ capital as part of efforts to jumpstart economic growth.The much-anticipated briefing comes after the central bank and other regulators in late September announced the most aggressive monetary stimulus measures since COVID-19, including steps to revive the ailing property market such as mortgage rate cuts. Reuters reported last month that China plans to issue special sovereign bonds worth about 2 trillion yuan ($283.02 billion) this year as part of fresh fiscal stimulus. Below are the key measures announced by Finance Minister Lan Foan, at a news conference, where he was joined by Vice Finance Ministers Liao Min, Wang Dongwei, and Guo Tingting.LOCAL DEBT RESOLUTION China will increase support for local governments to address hidden debt risks, enhancing their capacity to support the economy. The government has allocated 1.2 trillion yuan ($169.81 billion) in local bond quotas this year to help resolve existing hidden debts and settle government arrears to firms.China plans a large-scale debt swap program, alongside continued use of bond quotas for debt resolution, described as the “biggest” policy measure in recent years. Detailed policies will be announced after the necessary legal procedures are completed.BANK RECAPITALISATION China will expand the use of local government bond proceeds to support the property market and recapitalise large state-owned banks. Special treasury bonds will be issued to bolster the core Tier-1 capital of major state-owned commercial banks, improving their ability to withstand risks and provide credit to the real economy.PROPERTY MARKET SUPPORTLocal governments will be allowed to use special bonds to purchase unused land, enhancing their ability to manage land supply and alleviating liquidity and debt pressures on both local governments and property developers. China will also support the purchase of existing commercial housing for use as affordable housing and continue funding affordable housing projects.The government is studying policies on value-added taxes that are linked to residential properties, and is looking at other tax policies to support the property market.SUPPORT FOR LOW-INCOME HOUSEHOLDS AND STUDENTSThe government will increase support for low-income individuals and students to boost consumption. The number of national scholarships for undergraduates will be doubled from 60,000 to 120,000 annually, with the value of each scholarship rising from 8,000 yuan to 10,000 yuan per student per year.Lan also noted that the central government has “relatively large room” to raise debt and increase the budget deficit, though he did not provide details. China has set this year’s budget deficit at 3% of GDP, down from a revised 3.8% last year. The issuance of 1 trillion yuan in special ultra-long treasury bonds this year is not included in the budget. Local governments will issue 3.9 trillion yuan in special bonds in 2024, compared to 3.8 trillion yuan last year.($1 = 7.0666 Chinese yuan renminbi) More

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The lenders, including China Construction Bank (OTC:CICHF) Corp and Bank of China, said in statements they would cut the rates to as low as 30 basis points below the benchmark Loan Prime Rate.The actions are in line with a central bank order late last month aimed at easing homeowners’ mortgage burden to boost the property market and weak domestic demand. More

LONDON (Reuters) – Britain’s new Labour government may need to increase taxes by 20 billion pounds ($26 billion) in its first budget on Oct. 30 to avoid real-terms cuts across public services, the Resolution Foundation said on Saturday. The think tank also said revising budget rules to use an alternative definition of public debt could allow finance minister Rachel Reeves to finance long-term investment while sticking to a pre-election pledge to bring down debt.”The budget should set a new course for the parliament with a long-term and large-scale capital investment programme, enabled by a new fiscal rule that takes account of the benefits, as well as the costs, of that investment,” James Smith, the Resolution Foundation’s research director, said.Labour should define debt in terms of public sector net worth, a broad measure that offsets the value of a wide range of public assets against past borrowing, creating room for an extra 50 billion pounds for investment, the think tank advised.”The short-term reaction to such an approach may be concern about tax rises and extra borrowing, but the long-term prize of restored public services, new infrastructure and stronger growth is what Britain needs,” Smith said.Official figures on Friday showed economic output expanded by 0.2% in August after stagnating for two consecutive months. But business and consumer confidence surveys have pointed to lower sentiment and concerns about potential tax hikes. The Institute for Fiscal Studies think tank earlier this week estimated Reeves would need to raise taxes by 25 billion pounds to end a squeeze on public services in the last budget of former Prime Minister Rishi Sunak’s Conservative government. Reeves said the Conservatives had left a 22 billion pound hole in the public finances and has warned that some taxes will have to rise.The Resolution Foundation said Reeves could increase tax revenues by 20 billion pounds – about 0.7% of gross domestic product – by scrapping exemptions from inheritance tax, raising capital gains tax and charging a social security levy on employers’ contributions to workers’ pensions.Labour has said it will not raise taxes on “working people” and has ruled out increases to the main rates of income tax, value-added tax, National Insurance and corporation tax, which provide around three quarters of current tax revenue.($1 = 0.7654 pounds) More

NEW YORK (Reuters) -U.S. consumers remain resilient with solid spending in the third quarter, two of the country’s biggest lenders said on Friday, although there are signs higher inflation has stretched some Americans on lower incomes. Strong earnings from JPMorgan Chase (NYSE:JPM) and Wells Fargo and upbeat comments from their top executives should further ease investor worries that elevated borrowing costs were weighing on consumers and pushing the economy to the cusp of a downturn, even as JPMorgan hiked provisions for soured loans.JPMorgan’s shares were up nearly 5% in afternoon trading, while Wells Fargo’s were up more than 6%.”Overall, we see the spending patterns as being sort of solid,” said Jeremy Barnum, chief financial officer of JPMorgan, the country’s largest lender and a bellwether for the U.S. economy, adding spending had normalized from a post-pandemic bounce when Americans splurged on travel and eating out.Weakening job market data had sparked concerns that Federal Reserve interest rate hikes aimed at taming inflation may tip the United States into a recession or “hard landing.” But speaking to analysts, Barnum said spending patterns were “consistent with the narrative that consumers are on solid footing and consistent with a strong labor market and the current central case of a kind of ‘no-landing’ scenario economically.” Wells Fargo Chief Financial Officer Michael Santomassimo told reporters that spending on credit and debit cards, while down a little from earlier this year, was still “quite solid.” The bank reported debit card purchase volumes and transactions were up nearly 2% year-on-year, while credit card point-of-sale volumes were up 10%. At JPMorgan, year-on-year debit and credit card sales volumes were up 6%.The market will get a fuller picture when Bank of America and Citigroup, the country’s other two major consumer banks, report next week and retail sales data is released. Several investors said Friday’s earnings were so far a positive sign. “The read on the consumer from JPM and Wells is very healthy in my opinion. It seems like there’s more of a normalization in consumer spend than a decrease in spend, and that’s healthy for the broad economy,” said Dave Wagner, head of equities at Aptus Capital Advisors, which owns several bank stocks.Still, Santomassimo warned that the cumulative impact of higher inflation was stretching lower-income consumers and the bank was watching to see if that pattern spread to higher-income customers.  Consumer sentiment also slipped in October amid lingering frustration over high prices, a University of Michigan survey showed on Friday.”When you look at the overall average, it looks good, but I think it’s being skewed more by the higher-income, higher-net-worth consumer,” said Paul Nolte, senior wealth advisor and market strategist for Murphy & Sylvest in Elmhurst, Illinois.”For those around the lower end, it’s been a little bit tougher. We’re seeing delinquencies and car loans pick up. We’re seeing smaller deposits, more credit card balances,” he added. Both banks set aside cash to cover potential soured loans. JPMorgan set aside $3.11 billion, a jump on the $1.38 billion it put aside a year ago, predominantly driven by potential credit card loan losses. Wells Fargo, meanwhile, set aside $1.07 billion, down slightly from the $1.2 billion it provisioned this time last year, although it noted it had increased its allowance for credit card loans as balances had risen.More than decade-high credit card delinquencies had also stoked fears earlier this year that Americans were becoming overstretched, but that picture improved in the second quarter, the Federal Reserve Bank of Philadelphia said on Wednesday. Impaired borrowing between one month and longer horizons marked its biggest retreat in three years, although it would be premature to declare a turning point for credit performance, the Philadelphia Fed said. In a note on Thursday, analysts at Barclays said they expected to see “continued normalization of credit card loan losses, but at a slower pace than in previous months.” More

(Reuters) -JPMorgan Chase shares rose nearly 5% on Friday after profit beat expectations in the third quarter, fueled by gains in investment banking and rising interest payments.The prospect of further monetary easing by the Federal Reserve spurred an equities rally during the third quarter, prompting companies to issue debt and equity. Improving economic confidence underpinned earnings at JPMorgan, the largest U.S. lender, and rival Wells Fargo, which also surpassed profit estimates. JPMorgan’s stock, trading around $223, was on course for its biggest daily percentage gain in 1-1/2 years.JPMorgan’s investment-banking fees surged 31%, doubling guidance of 15% last month. Equities propelled trading revenue up 8%, exceeding an earlier 2% forecast.”These earnings are consistent with the soft-landing narrative” of modest U.S. economic growth, Chief Financial Officer Jeremy Barnum told reporters.”In light of the positive momentum throughout the year, we’re optimistic about our pipeline for mergers and acquisitions,” Barnum later told analysts.Net interest income – the difference between what the bank earns on loans and pays on deposits – grew 3% in the quarter. JPMorgan raised its annual NII forecast to $92.5 billion from $91 billion. The new estimate was higher than the $91.05 billion analysts polled by LSEG had forecast. The move surprised analysts who had expected third-quarter NII to decline after President Daniel Pinto warned last month that forecasts were too optimistic. After fielding several questions from analysts parsing the guidance, CEO Jamie Dimon said: “I don’t want to spend all the time on this call guessing what the NII number is going to be next year.”The results highlighted the benefits of JPMorgan’s diversified business, as growth in its commercial and investment bank offset declines in its consumer unit, said Peter Nerby, a senior vice president in the financial institutions group at Moody’s Ratings.The results underscore JPMorgan’s track record of generating capital to protect its bondholders from economic, geopolitical and regulatory uncertainty, Nerby said.Dimon reiterated his warning that escalating global conflicts could disrupt economic activity.”We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse,” Dimon said in a statement.Tensions in the Middle East have escalated this month, with Israel clashing with Iran and the Lebanese group Hezbollah, while it battles Hamas in Gaza.As the Nov. 5 presidential election nears, Dimon has been floated for senior positions on U.S. economic policy, such as Treasury secretary. He has been praised by former President Donald Trump and spoke to Vice President Kamala Harris last month.”I’ve always been an American patriot and my country is more important to me than my company,” Dimon, who has not publicly endorsed a presidential candidate, told analysts.When asked if he would consider a government role, Dimon said: “the chance of that is almost nil. And I probably am not going to do it. But I always reserve the right” to reconsider.Dimon, who has run the bank for 18 years, has emphasized that he and the rest of the board will “do the right thing” on succession when he eventually leaves, without specifying details. PROVISIONS JUMPBanks are building stockpiles of money to cover loans that may not be repaid. The provisions are rising to more typical levels as consumers deplete the savings they built up during the pandemic.JPMorgan set aside $3.11 billion in the quarter for likely credit losses, compared with $1.38 billion a year earlier, largely because it had expanded lending, Barnum said. Still, consumer finances and spending remain resilient in a strong job market, Barnum said, and late payments on loans are normalizing from historically low levels.Overall, profit fell 2% to $12.9 billion for the three months ended Sept. 30. Earnings per share of $4.37, however, exceeded expectations of $4.01, according to estimates compiled by LSEG.”Relative to the uncertainty going into the quarter JPM reported strong third-quarter results,” said Gerard Cassidy, an RBC Capital Markets analyst. He cited the bank’s better-than-expected non-interest income and NII.Dimon said the bank was awaiting new draft proposals, known as Basel III Endgame, which would increase capital requirements for large U.S. lenders.”We believe rules can be written that promote a strong financial system without causing undue consequences for the economy, and now is an excellent time to step back and review the extensive set of existing rules.”The Fed is watering down the contentious proposal after months of industry push back. The draft rules would raise big banks’ capital requirement by 9% instead of 19% under the original proposal.(Reporting Nupur Anand in New York and Niket Nishant in Bengaluru; Editing by Lananh Nguyen, Arun Koyyur and Rod Nickel) More

(Reuters) -The International Monetary Fund on Friday approved measures that will reduce its members’ borrowing costs by about $1.2 billion annually, the fund’s Managing Director Kristalina Georgieva said.”The approved measures will lower IMF borrowing costs for members by 36%, or about $1.2 billion annually,” Georgieva said in a statement. “The expected number of countries subject to surcharges in fiscal year 2026 will fall from 20 to 13.”This year, the IMF decided to review its policy on charges and surcharges for the first time since 2016, as higher interest rates globally have pushed borrowing costs higher.The fund charges regular interest, plus surcharges for loans above a certain threshold or duration, and commitment fees for precautionary arrangements.The IMF said the charge above the fund’s interest rate will be lowered, while the amount and duration thresholds will rise, as will the threshold for commitment fees.”While substantially lowered, charges and surcharges remain an essential part of the IMF’s cooperative lending and risk management framework, where all members contribute and all can benefit from support when needed,” Georgieva said.The changes will take effect on Nov. 1.The five countries paying the highest surcharges are Ukraine, Egypt, Argentina, Ecuador and Pakistan according to research from Boston University’s Global Development Policy Center.Argentina, currently the IMF’s largest debtor, will save over $3 billion with the changes, according to Finance Secretary Pablo Quirno.Friday’s announcement falls short of calls by academics, non-profit groups and other economists, who have argued for a full cancellation of IMF surcharges, which they say place extra burdens on borrowing countries at a time when they are in dire economic circumstances and counteract the impact of IMF lending. More