Economy

(Reuters) – U.S. President Joe Biden said a supplemental aid package for people affected by Hurricane Helene “can’t wait” until after the Nov. 5 election.”People need help now,” Biden said. Congress is not scheduled to return to session until after the Nov. 5 election. More

NEW YORK (Reuters) – U.S. Federal Reserve losses crossed the $200 billion point this week, according to data released on Thursday by the central bank. The Fed reported that as of Wednesday, the level of its so-called earnings remittance to the Treasury Department stood at negative $201.2 billion. The number represents a paper loss that central bank officials have noted does not impair their ability to conduct monetary policy. The negative number is captured in an accounting measure the Fed calls a deferred asset. The Fed must cover this shortfall before it can begin returning excess earnings to the Treasury. Fed losses flow from the high-interest rate monetary policy path it had been pursuing to bring down inflation. The Fed pays banks and money funds to park cash at the central bank to keep short-term interest rates at the desired levels. The Fed tilted into loss two years ago and faced record red ink in 2023, as the money it has had to pay out to manage rates has outstripped the money it makes from the interest earned from bonds it holds. The Fed funds itself through services it provides to the banking system and via the interest on bonds it owns. It returns any profits to the Treasury Department as required by law, and for many years, the central bank has handed back substantial sums: St. Louis Fed research said that between 2011 and 2021 the Fed returned nearly $1 trillion to the Treasury. The loss-making situation is tied to an aggressive cycle of rate rises done between March 2022 and July 2023 that saw the central bank’s interest rate target fly up from near zero levels to between 5.25% and 5.5%. The Fed said in March that its paper loss last year totaled $114.3 billion. It paid out $176.8 billion to banks and $104.3 billion via its reverse repo facility, while earning $163.8 billion via interest on bonds on its balance sheet. With the Fed’s recent half percentage point rate cut and the prospect of more easing, it will likely see a slower pace of losses growing forward, as it will face a smaller level of interest expenses to maintain its rate target. Before the Fed can return cash to Treasury, however, it will have to effectively pay back the deferred asset, which could take years. Thus far, the Fed has not faced any political heat for its financial situation, although that surprises some, including former central bankers. More

NEW YORK (Reuters) -Traders gauging how to play further downside in the U.S. dollar are looking to the relative strength of economies around the world, as interest rate shifts from global central banks shake up currency markets. The U.S. dollar index fell 4.8% against a basket of currencies in the third quarter, its worst quarterly performance in nearly two years. Pressure on the U.S. currency increased after the Fed delivered a jumbo-sized 50 basis point cut last month, its first reduction since 2020.How much further the dollar falls and which currencies will benefit may largely be a question of yields. For years, U.S. yields have stood above most developed economies, bolstering the dollar’s allure against its peers. That picture is shifting, with the Fed and most other central banks cutting interest rates to safeguard economic growth. Many traders betting against the buck are doing so through currencies whose yield gap with the dollar is expected to narrow.Net bets on a weaker dollar have grown to $14.1 billion in futures markets, the highest level in about a year, Commodity Futures Trading Commission data showed. The path lower for the dollar, however, is likely to be a bumpy one. The comparatively strong U.S. economy could limit how much the Fed cuts rates, complicating the outlook for further dollar declines. Meanwhile, the U.S. presidential election and geopolitical worries threaten to inject further volatility into currency markets in coming weeks. “It’s not just necessarily ‘sell the dollar and buy everything,'” said Jack McIntyre, portfolio manager at Brandywine Global. “You have to be a little more selective.”While the dollar index is little changed for the year, it is down about 5% from its April high, with the currency notching drops against several developed market peers as U.S. yields fell in anticipation of monetary policy easing by the Fed.Some of the risks to the weaker dollar view became more apparent in recent days. The dollar rose sharply against the British pound on Thursday after the Bank of England said it could move more aggressively to cut interest rates if inflation pressures continued to weaken.A day before, data showed euro zone inflation dipped below 2% for the first time since mid-2021 in September, reinforcing the case for the European Central Bank to cut rates this month, a potential source of weakness for the euro. The dollar’s role as a safe haven has also been on display as Middle East tensions have escalated in recent days. From the U.S. side, Friday’s labor market data could help shape views on how much the Fed might cut rates for the rest of the year.Though futures markets show an additional 68 basis points of cuts priced in, a strong number could bolster the case for more moderate policy easing. However, “if we are entering a soft patch for the U.S. economy, the market is going to discount more cuts into the curve and that will weaken the dollar,” said Christian Dery, head of macro strategy at Capital Fund Management. Nevertheless, investors believe more downside remains for the dollar in some corners of the market.Paresh Upadhyaya, director of fixed-income and currency strategy at Amundi US, said he is looking for “idiosyncratic stories like widening interest rate differentials caused by a divergence in monetary policy.”His plays on a weaker dollar include positions in the Norwegian krone and Australian dollar. Norway’s central bank recently held its policy interest rate at a 16-year high, signaling any cuts must wait until early 2025. Australia’s central bank held rates steady last week and said interest rate cuts were unlikely in the near term.Upadhyaya also added to a position in the Brazilian real. Unlike many of its peers, Brazil’s central bank hiked rates last month as it looks to tackle a challenging inflation outlook. The Brazilian real is down about 10% against the dollar this year. The Japanese yen could also find further support from diverging central bank policy, investors said. The Bank of Japan tightened rates to 0.25% in July in a landmark shift away from a decade-long stimulus program aimed at firing up economic growth.Though the Bank of Japan has signaled it is in no rush to raise rates further, the narrowing gap between rates in Japan and the U.S. has already fueled a 10% rally in the yen from its 2024 lows against the dollar. Net bullish bets on the currency against the dollar stand at $5.8 billion, CFTC data showed.”With global central banks also starting to cut rates, the biggest gainer versus the USD will be in the likes of the (yen),” said Natsumi Matsuba, head of FX trading and portfolio management at Russell Investments. An analysis of currency valuations based on metrics such as purchasing power parity and real effective exchange rates released by BofA Global Research last month showed that the yen and Norwegian krone are among the developed world’s most undervalued currencies. The dollar and Swiss franc are the two most overvalued, the study found. Whatever their positioning, however, investors must also contend with potential volatility surrounding the U.S. presidential election, slated for Nov. 5. Uncertainty in the weeks before the vote could send safety-seeking investors to the dollar. Many investors also believe a win by Republican candidate Donald Trump could buoy the dollar. “The wild card in any forecast right now for our currency is the U.S. election,” said Brandywine’s McIntyre, who remains bearish on the U.S. dollar, but less so than before the currency’s recent slide. “That’s why it’s hard to be super convicted.” More

WHY IT’S IMPORTANTBarnier, who took office earlier this month, already finds himself facing a growing budget crisis as tax income is weaker than expected and spending higher than planned.France’s credibility with financial markets, where its borrowing costs have surged, and its European Union partners is on the line.BY THE NUMBERSBarnier said the increase in corporate tax will only apply to companies with turnover of more than 1 billion euros ($1.10 billion) a year.He also said he will propose a temporary income tax increase for households earning more than 500,000 euros ($551,450) a year. He said it could raise about 2 billion euros.Barnier also confirmed he wants to push back the planned increase of pensions in line with inflation by six months to July 1, instead of Jan. 1 next year.KEY QUOTES “I’m taking the risk to be unpopular, but I want to be responsible.””What weighs on my mind, my fear, is a financial crisis, like what happened in Italy a few years ago, like what happened in Britain.”CONTEXT The new government lacks a parliamentary majority, and getting the budget adopted will be difficult. Even parties that are in the government do not agree on whether tax increases are an option.The previous government had planned to cut the fiscal shortfall to 3% of GDP by 2027, but Barnier had to push back this target by two years.WHAT’S NEXTBarnier needs to finalise the 2025 draft budget in days and hand it over to lawmakers by mid-October at the very latest.($1 = 0.9067 euros) More

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(Reuters) – Wall Street was poised to open slightly lower on Thursday after a moderate rise in jobless claims sparked worries about the health of the labor market, while cautious investors kept an eye on the Middle East for any escalation in hostilities.A Labor Department report showed the number of Americans filing new applications for unemployment benefits was 225,000 for the week ended Sept. 28, compared with an estimate of 220,000, according to economists Reuters polled. Odds that the U.S. central bank will trim rates by 25 basis points at its November meeting now stand at 64.5%, up from 50.7% a week ago, according to the CME Group’s (NASDAQ:CME) FedWatch Tool.Focus now turns to Friday’s nonfarm payrolls data for the month of September.Rate-sensitive heavyweights took a hit, with Tesla (NASDAQ:TSLA) dropping 1.57%, Apple (NASDAQ:AAPL) edging down 0.61% and Alphabet (NASDAQ:GOOGL) slipping 0.57% in premarket trading. Yields on Treasury bonds inched higher after the data was released. [US/]Investors have been wary for the last two sessions as they contemplated the scale of Israel and the United States’ response to Iran’s recent attack on Israel. The CBOE volatility index, Wall Street’s fear gauge, hovered at more than three-week highs at 19.74.”We’ll see some cautiousness due to two factors: the war headlines that continue to impact the equities market and of course, tomorrow’s unemployment data,” said Peter Cardillo, chief market economist, Spartan Capital Securities.”It’s safe to say that we’ll probably have a mixed market session today as investors’ cautiousness rises ahead of tomorrow’s key macro data of the month.”Dow E-minis were down 119 points, or 0.28%, S&P 500 E-minis were down 10 points, or 0.17% and Nasdaq 100 E-minis were down 58.75 points, or 0.29%.The Institute for Supply Management’s survey on service sector activity, which makes up the majority of the U.S. economy is due at 10 a.m. ET. U.S. stocks have rallied for much of the year, with the benchmark S&P 500 confirming a bull rally and logging gains in eight of the previous nine months on expectations of lower borrowing costs. Tech stocks have led the charge on the prospect of their earnings getting a boost from artificial intelligence integration.Investors will also assess comments from Fed policymakers Raphael Bostic and Neel Kashkari later in the day. Richmond Fed President Thomas Barkin said on Wednesday that sticky inflation could limit the magnitude of further interest rate cuts next year.Meanwhile, a workers’ strike on the East and Gulf coasts entered its third day. Morgan Stanley economists said a prolonged stoppage could raise consumer prices, with food prices likely to react first.Among premarket movers, oil stocks such as Occidental Petroleum (NYSE:OXY) and Exxon Mobil (NYSE:XOM) edged up 0.30% and 0.39%, respectively, although crude prices rose more than 1%. [O/R]Levi Strauss (NYSE:LEVI) slid 11.6% after the company said it was considering a sale of its underperforming Dockers brand and forecast fourth-quarter revenue below expectations.Constellation Brands (NYSE:STZ) dropped 1.9% after posting second-quarter results. More

ORLANDO, Florida (Reuters) – In today’s digital and services-dominated economy, one might be forgiven for buying into the narrative that oil no longer has any real bearing on inflation.     That would be a mistake. Inflation is starting to undershoot some central banks’ targets, in large part because the year-on-year change in the oil price is deeply negative. This is sending a clear message: oil still matters – a lot.    There’s barely any corner of the economy that oil doesn’t reach. It heats homes and businesses, powers factories and every means of transport, and is a key input in the production of chemicals, plastics, materials and all manner of goods.    True, its direct and indirect contribution to price pressure has been diluted compared to the energy-intensive economy of decades gone by, but oil is still one of the most accurate inflation weather vanes around. And, despite recent geopolitical ructions, it’s still clearly pointing in one direction.    HEAD FAKE    If investors get their oil price forecast wrong, chances are their view of inflation – and, by extension, central bank policy and the broader macro landscape – will also be blurred at best, and blinded at worst.    This is happening now. The past year featured many head fakes, misleading signals and wrong calls in financial markets, but perhaps the most consequential has been the collective miss on the direction of oil.   In a Reuters poll of economists and analysts conducted a year ago, the average 2024 price of Brent and West Texas Intermediate futures was forecast to be around $86 a barrel and $83/bbl, respectively.     Brent rose above $90/bbl in April and WTI got close to that level, but oil prices have fallen sharply since then and last month dipped below $70/bbl. The year-on-year change in WTI has been negative every day since July 22 and approached -30% as recently as last week.    The effects of this on overall inflation are huge. Annual inflation in the euro zone is now 1.8%, below the European Central Bank’s 2% target for the first time in more than three years. Consequently, ECB interest rate cut expectations have intensified considerably, even though central banks are theoretically supposed to ignore energy price fluctuations.    These dynamics are also easing price pressures in the United States, where energy inflation accounts for around 7% of the consumer price index and a much higher share of the producer price index.      FED UNDERSHOOT?    Are current energy dynamics signaling that the Federal Reserve could cut rates more quickly than many expect? It’s possible. Analysts at Goldman Sachs estimate that the energy price contribution to annual U.S. CPI will increase one-tenth of a percentage point to -0.35 percentage points by April next year, pushing headline CPI as low as 1.9%, below the Fed’s 2% goal.    Using the current oil price futures curve as a guide, headline CPI inflation in April could slow to 1.8%.    Energy costs impact more than just headline inflation. Even if oil prices hold steady, core inflation will still be as much as 0.15 percentage points lower by the end of next year, and will drop a further 0.15 percentage points if oil falls another $20/bbl, Goldman’s analysts reckon.    On the surface, the above figures may sound like small numbers, but in central banking every basis point matters. And these shifts can still move the needle on inflation and thus accelerate the Fed’s easing cycle. Some measures of annualized monthly inflation rates are already at or below the Fed’s 2% target, and Fed Governor Christopher Waller recently warned that core inflation could soon follow suit.    “Consumer energy prices are dragging down headline inflation. With oil prices down another 7% in September … this drag should intensify in the September CPIs,” JP Morgan economists wrote late last month.Now, a geopolitical or economic shock could obviously disrupt this narrative. But, for now, it’s reasonable to assume that weak oil price dynamics could send central banks back to their pre-pandemic playbooks sooner than anyone thought.(The opinions expressed here are those of the author, a columnist for Reuters.) (By Jamie McGeever; Editing by Kirsten Donovan) More

Below is a condensed timeline of key events:* February 2022 – Credit ratings agency Moody’s (NYSE:MCO) downgrades Ghana’s rating, saying it had a “very high credit risk”. Fitch had cut its Ghana credit rating to B- from B the previous month.* March 2022 – Ghana’s central bank hikes interest rates by a record 250 basis points to 17% in a bid to stem rocketing inflation and a weakening currency.* May 2022 – Ghana’s then-Finance Minister Ken Ofori-Atta says it will manage its debt without help from the International Monetary Fund (IMF).* July 1, 2022 – Ghana’s government changes its mind and asks the IMF for a loan, amid street protests against growing economic hardship.* July 20, 2022 – Parliament approves a $750 million loan from the African Export Import Bank as it scrambles to avoid default.* August 2022 – The central bank delivers another record interest rate hike, as inflation continues to climb.* Dec. 5, 2022 – The government launches a domestic debt exchange in a bid to deal with spiralling debt payments.* Dec. 12, 2022 – Ghana and the IMF reach a “staff-level agreement” on a $3 billion rescue package, with debt restructuring one of the conditions.* Dec. 20, 2022 – The government says it will default on most external debt.* Dec. 22, 2022 – Local pension funds are exempted from the domestic debt exchange after unions threaten a general strike.* January 2023 – Ghana requests a debt restructuring under the G20’s Common Framework process, set up in response to the COVID-19 pandemic.* February 2023 – The finance ministry says the domestic debt exchange closed with about 85% of “eligible” bondholders on board, after five deadline extensions.* March 2023 – The government and a group of holders of about $13 billion in international bonds start debt restructuring talks via their respective advisers.* May 2023 – Ghana’s official creditors form a committee co-chaired by China and France and commit to restructuring their loans to the country. These “financing assurances” pave the way for the IMF board to approve the $3 billion rescue loan, five days later.* June 2023 – The government sends a restructuring proposal to official creditors, as it aims to cut $10.5 billion in interest payments over the following three years.* October 2023 – Ghana and the IMF reach a staff-level agreement on the first review of the $3 billion loan programme, with a second $600 million payout contingent on agreeing a debt rework plan with official creditors. The finance ministry proposes a 30-40% haircut to bondholders; bond prices sink in response.* January 2024 – Ghana reaches a deal-in-principle to restructure $5.4 billion of debt to its official creditors. The IMF approves the next loan tranche disbursement a week later.The government tells overseas bondholders that it wants a simple debt restructuring, rather than using any “state-contingent debt instruments”, which link payouts to variables such as economic growth or commodity prices.* February 2024 – Ghana’s president replaces Ken Ofori-Atta as finance minister with his deputy Mohammed Amin Adam, who pledges to keep the IMF programme on track.* March 2024 – Ghana and the international bondholder group kick off formal talks.* April 2024 – Ghana and bondholders fail to strike a deal, with the government saying the proposals put forward were not extensive enough to cut its debt to a level the IMF would judge as sustainable.* May 2024 – Ghana’s government confirms that a draft memorandum of understanding has been received from its bilateral creditors. Once signed, the MoU will formalise the $5.4 billion agreement reached in January with the likes of France and China.* June 2024 – Ghana and its international bondholders reach an agreement in principle on restructuring of its dollar bonds.* September 2024 – Ghana launches its consent solicitation and bonds exchange offer to investors.* October 2024 – The government says more than 90% of investors voted to approve the restructuring of the bonds following the offer. More