Economy

DUBAI (Reuters) – Ten of the world’s top development banks pledged to step up their climate efforts at the COP28 summit, yet failed to say anything about halting financing for fossil fuel projects, a document seen by Reuters showed.In a statement to be announced at the event in Dubai, the group, including the World Bank and regional peers, said the window of opportunity to secure a liveable planet was “rapidly closing”.Calls to overhaul the way the banks are run in response to the climate crisis have picked up amid record extreme weather events, and while the group disbursed a record $61 billion in finance in 2022, it remains just a fraction of what is needed.With global emissions rising and despite United Nations Secretary-General Antonio Guterres telling world leaders on Friday that ending fossil fuel use was the only way to save the planet, the statement made no direct mention of the issue.To date, the European Investment Bank is the only one of the signatories to sign the so-called ‘Glasgow Declaration’ and committed to stop lending to fossil fuel projects, with burning of the energy sources responsible for the bulk of human-induced greenhouse gas emissions.Going forward, the banks said they plan to agree a common approach to tracking and reporting climate impact, and would scale up the use of analytics to help countries identify priorities and investment opportunities.A new, joint Long-term Strategies Program, hosted by the World Bank, would coordinate support to help countries and sub-national entities develop plans around issues including decarbonisation and climate resilience.The group also pledged to help countries set up platforms to encourage a “collectively reinforcing combination” of support including around policy reform, finance and technical assistance.To attract more private capital, the group said it would look at activities including removing “distorting” subsidies and developing pipelines of green projects.The banks planned to scale up finance to help countries adapt to the impacts of climate change, including through boosting support for disaster risk management, disaster preparedness and capacity building.They also planned to “strengthen collaboration” across nature, water, health and gender”Reflecting the urgency and scale of the issues to be addressed, we are boosting our joint action on climate and development, strengthening our collaboration to scale up finance and enhance results measurement, strengthen country-level collaboration, and increase co-financing and private sector engagement,” the statement said. More

The comment comes as the economy struggles for momentum after being hobbled by lengthy pandemic-busting measures, while market watchers fear severe debt woe among major property developers could spill over to other sectors.”It is expected that next year China will continue to implement positive fiscal policy, monetary policies that are in line with positive fiscal policy, with a relatively large policy space to lower the reserve requirement ratio,” Sheng Songcheng, a former statistics and analysis director of the People’s Bank of China, said in comments reported by Shanghai Securities News.With interest rates and loan prime rates at low levels, there is more space to cut banks’ reserve requirement ratio (RRR) than to cut interest rates, Sheng said.The central bank lowered the RRR in September for the second time this year to boost liquidity and support economic recovery. Analysts expect another cut by year-end. The weighted average RRR for financial institutions was around 7.4% after the cut.China is prudent in cutting interest rates as its monetary policy needs to consider internal and external balance, Sheng said.”It is expected that the interest rate differential between China and the U.S. will enter a period of stabilisation, so the renminbi (yuan) is likely to maintain a mild appreciation trend, but the appreciation is limited.” More

The National Financial Regulatory Administration (NFRA) will collaborate with the General Administration of Financial Supervision to tighten supervision of the financial industry other than the securities market, director Li Yunze said in an interview with state media Xinhua. NFRA, the watchdog overseeing all aspects of China’s $57 trillion financial sector, along with other departments will focus on dealing with “key people” and “key behaviours” that are causing major financial risks and undermining market order, including illegal third-party intermediaries, he said.Li said the NFRA will also take advantage of current favourable opportunities to increase the promotion of risk disposal. It will promote small and midsize banking institutions to optimise their structure, improve quality and increase efficiency, Li said. He added that they will encourage insurance companies to return to their original function of protection, and guide asset management, non-banking and other institutions to adhere to their positioning.“At present, the operation of China’s financial sector is generally stable and the overall risk resistance is strong,” he said. “We are fully confident and have the conditions and ability to increase vitality through reform, solve problems through development and properly respond to the challenges of various types of financial risks by increasing the volume of inventory.” More

Central bankers stand accused of reacting too slowly to signs that the inflation crisis is dissipating, less than two years after they were criticised for being late in responding to the most brutal surge in prices for a generation.Some policymakers are already warning that by waiting too long to cut borrowing costs, central banks could harm weakening economies — the eurozone has stagnated all year — or hobble heavily indebted governments such as Italy.The European Central Bank was thrust into the forefront of this debate this week after eurozone inflation fell to 2.4 per cent, its lowest level since July 2021, taking price growth tantalisingly close to the bank’s 2 per cent target. Similar debates are brewing in the US and UK, even if headline inflation rates there have not yet fallen as low. “The question is which of the big central banks are at risk of making a policy mistake here, and to me, it is most likely the ECB, because inflation will fall back quickly,” said Innes McFee, chief global economist at Oxford Economics. “They have every incentive to talk tough, but the action is going to have to change.” Investors reacted to this week’s third consecutive month of below-forecast eurozone inflation data by bringing forward their bets on how soon the ECB will start cutting interest rates; many economists now expect this in the first half of next year. Dirk Schumacher, a former ECB economist working for French bank Natixis, said eurozone inflation was on track to hit 2 per cent by next spring. But policymakers’ fear of underestimating inflation again meant “it will take a bit longer to reach a sufficient consensus in the governing council for cutting”. He predicted the ECB would cut rates in June and then proceed at a quarter-point cut at every meeting next year.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Italy’s new central bank governor Fabio Panetta, who joined from the ECB last month, hinted this week that rates might need to be cut soon “to avoid unnecessary damage to economic activity and risks to financial stability”. Sovereign bond markets rallied after comments by Banque de France governor François Villeroy de Galhau, with investors adding to their bets on a rate cut by the ECB in the first few months of next year. “The question of a cut may arise when the time comes during 2024, but not now: when a remedy is effective, you have to be patient enough on its duration,” he said.But other rate-setters are pushing back. Germany’s central bank boss Joachim Nagel said this week’s “encouraging” fall in inflation was not enough to rule out the potential that borrowing costs might need to go even higher. He also warned it was “far too early to even think about a possible reduction in key interest rates”.That argument received support from the OECD this week, as chief economist Clare Lombardelli argued the ECB and Bank of England would not be in a position to ease borrowing costs until 2025 given persistent underlying inflation from wage pressures.Central bankers are also well aware that a backdrop of slowing demand, rising unemployment and continued pain for mortgage holders will fuel political pressure for rates to be eased.That is particularly the case given the UK is heading into a likely election year. Huw Pill, BoE chief economist, told the Financial Times last month that falling headline prices could give a false impression that the inflation threat had passed.The challenge for policymakers, he said, was ensuring there was enough “persistence” in keeping monetary policy tight at a time when there would be “lots of pressure in the face of weaker employment and activity growth and declining headline inflation, to declare victory and move on”.Fed chair Jay Powell: ‘We are prepared to tighten policy further if it becomes appropriate to do so’ More

What would another Trump administration look like? As horrible as many find the prospect, it’s a topic that executives are beginning to have to grapple with. For reasons that range from inflation to the conflict in Gaza to Biden’s age, the current administration’s deft handling of a recession, a pandemic and war in Ukraine isn’t being reflected in polls. Many of them put Donald Trump back in the White House in 2024.Despite any number of criminal charges against the former president, it seems a foregone conclusion that Trump will be the Republican nominee. Still, major donors like the Koch-backed Americans for Prosperity Action are piling into Nikki Haley’s campaign, which shows how worried the business community is about the possibility of Trump, round 2.For starters, executives fear which Trump they will get should he be re-elected next November. Will it be laissez-faire Trump, or America First Trump? Back in 2016, Trump talked tough about Made in America and helping working people, but most of his politics (aside from tariffs on China) were basically business as usual. He rolled back regulation and lowered taxes on big corporations. Much of the money went to stock buybacks not Main Street investment.That buoyed short-term stock prices, which were also helped along by low interest rates. But it’s unlikely we would see the same phenomenon in a second Trump administration. His tenure marked the apex of financialised growth, which is now largely tapped out. As the Fed’s End of an Era paper from June 2023 laid out, about 50 per cent of real corporate profit growth between 1984 and 2020 came from the secular fall in interest rates, and corporate tax rates being cut. That’s what has propelled so much growth in equities in recent years.Today, the S&P is by some measures more overvalued than it was when the housing bubble burst, according to a recent Currency Research Associates report. In this environment, it’s difficult to see equities rising even if the Fed were to begin cutting rates in the face of a recession. It’s much more likely they’d fall, despite any new Trump tax cuts.And that is the more benign scenario. A more likely possibility is that we’d get a harder-edged, even more insular, xenophobic and paranoid version of Trump this time around. For starters, few of the more moderate business types that served with him the first time around would be willing to come into a second administration given the spectre of the January 6 Capitol riots and Trump’s ongoing election-loss denial.The business community already has concerns about the former president’s propensity for fiscal profligacy at a time when rising US deficit levels are worrying investors. Add to that the prospects of a 10 per cent across the board tariff on imports, which Trump has floated as a potential second-term policy, and CEOs get even more worried. This goes to what has been one of the biggest problems with Trump’s trade and economic strategies from the beginning — a tendency to blame China and employ tariffs as a standalone solution to the big, complex problem of slower secular growth and growing inequality in the US. Not that Trump seems to think in such nuanced terms.The fact is that America’s economic and political problems are only partly about the failings of globalisation and the neoliberal trading system in particular. They are also about a lack of investment at home, in basic infrastructure, skills and education, as well as core research and development. Biden has, of course, addressed many of these issues with more fiscal stimulus than we’ve seen since the Eisenhower era. At the same time his administration has attempted to do the challenging but necessary work of coming up with a new, more sustainable and inclusive economic model at home and abroad.That’s smart industrial policy, and it’s something Trump appears to have neither the propensity or the ability to do. I was struck during the pandemic, for example, that despite all the tough talk from people like the Trump former economic adviser Peter Navarro about the US not being able to make, say, basic personal protective equipment, nobody in the White House had any idea about what the country could or should make.The Biden administration, by contrast, came up with a major supply chain report in its first 100 days, and has begun to rebuild the US semiconductor industry and grapple with how to ensure a just and secure green transition.This administration’s plans aren’t perfect. But Biden gets that you can’t just bash China — you have to create a paradigm shift at home if America is to regain its political and economic mojo.US exceptionalism has always been based on immigration, as writer David Leonhardt lays out in his new book Ours Was the Shining Future: The Story of the American dream. It is immigration that has ensured higher trend growth than in other developed countries, and in recent years, helped dampen inflation. Trump, of course, wants to build a wall — in every sense. Business should think hard about what that would mean, for them and for the country, and do everything it can to ensure it doesn’t [email protected] More

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Investing.com – Rate cut bets took a big leap forward this week, with a March cut now more likely than not as the deflationary winds are expected to continue to blow through the economy, forcing the Fed to pivot into easing mode to ensure the economic landing from the fastest pace of rate hikes in four decades is soft rather than unnecessarily bumpy.“We expect that the continued deceleration in inflation over the next few months will motivate the Fed to cut the funds rate 25 bps at the meeting on March 20,” Jefferies said in a note Friday, as the Fed will be wary of the risk a ‘higher for longer’ rate regime poses for a potential soft landing.The odds of a March cut jumped to 57.9% from 21.6% the prior week, according to Investing.com’s Fed Rate Monitor Tool.The need for speed on rate cuts will likely be driven by concerns that a real fed funds rate – adjusted for inflation and a more accurate gauge of how much it costs companies to borrow money – running too hot could bring down growth by more than expected, potentially tipping into recession.“The first cut will be motivated by an attempt to make sure that the real fed funds rate does not increase too much, and does not apply undue pressure on the economy,” Jefferies adds, forecasting that deeper rate cuts will follow to “prevent significant increases in the unemployment rate.”“We expect 50 bp rate cuts at the following 4 meetings, with the funds rate bottoming at 2.75-3.0% in September,” Jefferies said. That is well below the Fed’s projections for rates to end 2024 at 5.1%.But the recent wave of positive economic data including the upward revision on Q3 GDP to a 5.2% annualized pace has some struggling to determine how the economy is likely to fall into the kind of trouble that will demand a Fed rescue.Deutsche Bank, however, believes the full impact of the rate cuts delivered so far, the fastest in more than four decades, is yet to leave big dent in the economy.“With the lagged impact of rate hikes taking effect, we can already see clear signs of data softening,” {{0|Deutsche Bank said, pointing to the October monthly jobs report that showed an uptick in the unemployment rate to highest level since January 2022, a pick-up in credit card delinquencies, and a rise in high yield defaults.Others agree, and expect that strength in consumer spending, which has continued to confound economists, and underpin economic growth, will likely wane in the weeks ahead.The turning point in the labor market, which has supported consumer spending, will likely come the end of this year or early 2024, Jefferies estimates, as businesses eventually begin to cut jobs to alleviate costs and lessen margin pressures.“Businesses will struggle to pass on further price increases to an increasingly strained consumer, and margins will fall as inflation slows, leading to layoffs eventually,” Jefferies in a Thursday note.This newfound optimism among the pivoteers stood firm even as Fed Chairman Jerome Powell on Friday attempted to curb the growing enthusiasm on rate cuts, warning that it would be” premature” to bet when policy might ease.Powell’s remarks, however, weren’t the telling blow to the pivoteers’ hopes for sooner rather than later rate cuts during a week in which inflation not only continued to cool, but his colleague Fed governor Christopher Waller entertained the idea of rate cuts.The pushback from Powell was also watered down by further signs the Fed is keeping a more watchful eye on the risk of doing too much – a risk that has seemingly forced them into their current careful approach and encouraged them to keep rates on hold since July.“Having come so far so quickly, the FOMC is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced,” Powell said in remarks on Friday.While the Fed isn’t quite ready to break out into a full victory dance on inflation, members are now nonchalantly tapping their feet to the tune of cooling inflation as they head off into the ‘quiet period’ ahead of the December 12-13 meeting. More

The group, including Britain, France and the United States, said the agreement was critical to meeting nations’ climate commitments.The United States and 21 other countries pledged on Saturday at the United Nations climate summit in Dubai to triple nuclear energy capacity by 2050, saying the revival of nuclear power was critical for cutting carbon emissions to near zero in the coming decades.Proponents of nuclear energy, which supplies 18 percent of electricity in the United States, say it is a clean, safe and reliable complement to wind and solar energy. But a significant hurdle is funding.Last month, a developer of small nuclear reactors in Idaho said it was canceling a project that had been expected to be part of a new wave of power plants. The cost of building the reactors had risen to $9.3 billion from $5.3 billion because of increasing interest rates and inflation.Britain, Canada, France, Ghana, South Korea, Sweden and the United Arab Emirates were among the 22 countries that signed the declaration to triple capacity from 2020 levels.Tripling nuclear energy capacity by 2050, which would also help Europe reduce its dependence on Russia oil and gas, would require significant investment. In advanced economies, which have nearly 70 percent of global nuclear capacity, investments has stalled as construction costs have soared, projects have run over budget and faced delays. On top of cost, another hurdle to expanding nuclear capacity is that plants are slower to build than many other forms of power.Addressing the issue of financing, John Kerry, President Biden’s climate envoy, said that there were “trillions of dollars” available that could be used for investment in nuclear. “We are not making the argument to anybody that this is absolutely going to be the sweeping alternative to every other energy source — no, that’s not what brings us here,” he said. But, he added, the science has shown that “you can’t get to net-zero 2050 without some nuclear.”Nuclear power does not emit carbon, and an International Energy Agency report last year that said nuclear was crucial to helping to reduce carbon emissions in line with the Paris Agreement goals outlined in 2015. President Emmanuel Macron of France said nuclear energy, including small modular reactors, was an “indispensable solution” to efforts to curb climate change. France, Europe’s biggest producer of nuclear power, gets about 70 percent of its own electricity from nuclear stations.Mr. Macron and other leaders, including Prime Minister Ulf Kristersson of Sweden, called on the World Bank and international financial institutions to help finance nuclear projects. Mr. Kristersson said that governments must “assume a role in sharing the financial risks to strengthen the conditions and provide additional incentives for investments in nuclear energy.”While world leaders on Saturday called nuclear the most effective alternative to fossil fuels, some climate activists said nuclear energy was not a panacea.David Tong, a researcher at Oil Change International, said the pledge was divorced from the reality of nuclear energy — that it was too costly and too slow. “It’s a self-serving political pledge that doesn’t reflect the role that nuclear is likely to play in the energy transition, which is menial,” he said. “There is very small growth in nuclear — certainly nothing like tripling.” He said he rejected the stance that there was no pathway to limit global warming to 1.5 degrees Celsius above preindustrial levels, a goal set in the Paris Agreement to avoid the worst effects of global warming, without nuclear. Masayoshi Iyoda, an activist from Japan with 350.org, an international climate action campaign, cited the nuclear disaster at Fukushima in 2011 and said that nuclear power was a dangerous distraction from decarbonization goals. “It is simply too costly, too risky, too undemocratic, and too time-consuming,” he said in a statement.“We already have cheaper, safer, democratic, and faster solutions to the climate crisis, and they are renewable energy and energy efficiency,” Mr. Iyoda said.All but four of the 31 reactors that have begun construction since 2017 were designed by Russia or China, with China poised to become the leading nuclear power producer by 2030, the International Energy Agency said. This year, Germany shut its last three nuclear plants.Nuclear capacity rose in the 1980s, particularly in Europe and North America, but dropped sharply over the subsequent years after accidents at Three Mile Island in Pennsylvania in 1979 and Chernobyl in 1986. New technology and tighter regulations have been put in place since then. Americans are conflicted about nuclear power, but a growing number favor expansion compared with a few years ago, according to a Pew Research Center study published in August. More