Economy

Norges Bank’s monetary policy committee in September raised the benchmark rate by 25 basis points (bps) to 4.25%, a 15-year high, and said it would “likely” hike one more time in December if the economy developed broadly as expected.All 29 economists polled in the Oct. 25-30 period predicted Norges Bank would announce on Thursday an unchanged rate, but many also acknowledged they were uncertain over what would happen next.For the December meeting, the final one of the year, 16 economists predicted a hike to a peak rate of 4.50%, while 12 of those polled expected no change from the current 4.25%. One economist forecast a rate of 4.75%.Norwegian consumer prices have fallen faster than expected in recent months, below the central bank’s forecasts as well as those of analysts, but they still exceed the official 2.0% inflation target.Headline inflation stood at 3.3% year-on-year in September, down from 4.8% year-on-year in August, as food and energy costs fell, and was well below Norges Bank’s forecast of 4.2%. Core inflation also declined more than predicted.On the other hand, the Norwegian crown currency has resumed a weakening trend against the euro and the dollar, causing concern this may again stoke inflation as imports become more expensive.October and November inflation, as well as gross domestic product for the third quarter, which will all be released ahead of the December rate decision, could eventually determine the next move, several analysts said.The central bank would likely spell out the uncertainty in its statement this week, brokers DNB Markets said.”We expect Norges Bank to stress that the policy decision in December will be data dependent and reiterate the guiding for a possible rate hike,” DNB wrote in a note to clients.The European Central Bank kept its policy on hold last week, as expected, maintaining the benchmark rate at a record 4.0% and hinted at a steady policy for the time being.The Bank of England will also announce its latest rate decision on Thursday, and is expected to stay on hold. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an on-site version of our Trade Secrets newsletter. Sign up here to get the newsletter sent straight to your inbox every MondayWelcome to Trade Secrets, brought to you today by the FT’s China correspondent, Edward White, standing in while Alan takes a break. This week’s newsletter looks at China’s latest attempt to exert leverage over its trading partners by cutting off exports of critical minerals, in this case graphite. Charted waters is on the return to normality in Turkey’s policymaking.Beijing shows it can hit hard in the tech trade warsWith any attempt to dissect Chinese policymaking these days it is necessary to start with a caveat. On most issues, most of the time, we do not know what the leadership in Beijing is thinking. For more on the black box of Chinese politics, I recommend this deep dive by Wu Guoguang, who worked as an adviser to former Chinese premier Zhao Ziyang, translated by one of the world’s leading sinologists, Geremie Barmé. Humility on this point is imperative.That caveat notwithstanding, we will try to unpack and explain Beijing’s probable intentions with the announcement on October 20 of new export controls on graphite, a key material used in electric vehicle batteries. For background, as the FT has reported previously, we do know that officials from several of China’s technology, trade and defence agencies have since late last year been meeting to advise the leadership on how to respond to the Biden administration’s snowballing restrictions on selling computer chips and chipmaking equipment and technology to Chinese companies. And in July we had an initial glimpse into Beijing’s propensity for retaliation. China unveiled restrictions on the exports of gallium and germanium, two key metals used in chipmaking, electric vehicles, telecoms products and weapons systems. For many industry insiders this appeared to be a nightmare scenario: Beijing had decided to leverage China’s startling dominance in the production of many raw materials critical to modern technology and infrastructure. But in practice the supply disruptions for gallium and germanium, haven’t yet eventuated. Exports of the products have continued — albeit with the added hassle of requiring new permits. This underscores what we reported at the time, that the new export rules were carefully designed as a deterrent, a warning to the US and its allies that China would, and could, retaliate. Yet the US-led barrage of export controls has continued. Among the most painful, from the Chinese point of view, was the US Department of Commerce announcement on October 17 to extend last year’s sweeping export controls to cutting-edge artificial intelligence chips. As our excellent China tech colleagues reported, this potentially leaves Chinese tech groups relying on outdated and stockpiled chips to power a crucial industry for future growth.With hindsight, it shouldn’t have been surprising that Beijing would soon hit back again. Yet China’s decision to target graphite sent shockwaves through companies and governments who found themselves exposed. Within hours, the trade minister in Seoul convened an urgent meeting with the country’s battery industry association and other material component suppliers. The alarm is warranted given China’s dominance over both the markets for processing natural and synthetic graphite. Diplomats are still probing Beijing for more information. The key immediate question lies in implementation. On this point the timing of Beijing’s graphite controls (three days after the AI curbs) might well be instructive. According to one Chinese official close to the retaliation plans, the graphite curb announcement reflected an urgency in Beijing to hit back, balanced by a concurrent effort to minimise disruptions and damage to China’s own commercial interests. Backing up this claim: industry does not appear to have been warned (markets were surprised), nor was accompanying guidance around export quotas or outright country bans announced. Unlike some US restrictions, there is no presumption of denial for permit issuance. So without a nod from Beijing for tougher enforcement, this all suggests that permits will be issued and supply disruptions, for now, will be negligible. Still, the signal from Beijing should not be lost: while for now China is showing restraint, it can hit back at any time, and it can hit back at the heart of the west’s green transition. This is a hefty weapon for Beijing, and time is on its side.Looking ahead, Beijing and Washington need to consider that by using their respective points of leverage — chips for the US, clean tech resources for China — both countries are increasingly driving the other side to sharpen their attention on their own weaknesses. Are they shooting themselves in the foot? Will it be easier for China to catch up on chips than it will for the US to replace the entire Chinese supply for the resources underpinning clean technology?In the meantime, what we do know is that the resounding impact from both the US and China actions is more uncertainty. There is no guarantee that Beijing won’t start delaying permit issuance in graphite, or expand its curbs to the other scores of key resources it controls. Nor is there a guarantee that Washington will keep issuing licences for South Korean and Japanese companies to sell advanced chips in China.Charted watersThe onward march to monetary policy normality in Turkey continues since Recep Tayyip Erdoğan was re-elected — a feat he managed by taking serious risks with the economy which are now being unwound. Interest rates last week were raised for the fifth time since July, with instability in the Middle East from the situation in Gaza adding to nerves over the Turkish lira.Trade linksThe EU and UK are pushing for advanced economies to end subsidies (including credit export guarantees) for fossil fuel projects abroad in talks at the OECD.The US has softened its support for the free movement of data during talks at the World Trade Organization, alarming the tech industry.Talks have broken down again between the EU and Australia over a bilateral preferential trade agreement, with Australian access to the EU agricultural market unsurprisingly remaining a point of contention.The South China Morning Post reports on developments in the EU’s investigation into subsidies to imports of Chinese electric vehicles. The Rhodium Group consultancy has a good backgrounder to the issue here.Zambia has reached a deal with creditors to write down part of its sovereign debt after a painful three-year restructuring negotiation.The FT opines on how to regulate artificial intelligence ahead of a summit on the subject to be held in the UK this week, with a useful briefing on the issue here.Trade Secrets is edited by Jonathan MoulesRecommended newsletters for youEurope Express — Your essential guide to what matters in Europe today. Sign up hereChris Giles on Central Banks — Your essential guide to money, interest rates, inflation and what central banks are thinking. Sign up here More

BEIJING (Reuters) – China’s economy tsar He Lifeng has been appointed director of a key ruling Communist Party economic body, matching his high-profile predecessor Liu He with a particularly powerful portfolio covering economic policy, the financial sector and trade ties with Washington.He, who had previously headed the state planning agency, became one of China’s four vice premiers in March when he replaced Liu He, who retired. He has now also replaced Liu as director of the office of the Central Finance and Economic Affairs Commission, a party body headed by President Xi Jinping. State media for the first time referred to He by his latest title in a readout of his meeting with a visiting French official on Sunday.Though regarded as a confidant of President Xi, He’s ascent has surprised some analysts, who had expected Premier Li Qiang, former Shanghai party secretary, to take a bigger role in economic affairs.Since taking over the economic portfolio, He has met with U.S. Treasury Secretary Janet Yellen and EU Trade Commissioner Valdis Dombrovskis, and last week accompanied Xi on his first known visit to China’s central bank.”He Lifeng is in the post to execute Xi’s ideas but not to question him, as Liu He could,” said an advisor who had sometimes sat in on briefings with both He and Liu, and spoke on condition of anonymity.The advisor also confirmed He does not speak English, unlike Liu, who studied economics at Harvard and was popular among U.S. officials because they could more easily converse with him. Analysts also expect He will be named head of a new and even higher ranking party economic watchdog, once Xi revives the Central Financial Work Commission, which was was disbanded in 2003, having been set up in 1998 to build a role for the party within the central bank and financial regulators. The world’s second-largest economy grew faster than expected in the third quarter, though it is suffering from a domestic property crisis, high youth unemployment, depressed private sector confidence, and a slowdown in global growth. Policymakers have unveiled a raft of measures in recent weeks, but their ability to spur growth is constrained by fears over debt risks and a fragile yuan.He could emerge as head of the resurrected Central Financial Work Commission, when state leaders, regulators and top bankers gather for a quinquennial, closed-door national financial work conference.That meeting, which could set medium-term priorities for the broad financial industry, will take place in Beijing this week, Bloomberg News reported. (This story has been refiled to change the characterization of role in paragraph 1) More

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On a bright September day on the harbor in Copenhagen, several hundred people gathered to welcome the official arrival of Laura Maersk.Laura was not a visiting European dignitary like many of those in attendance. She was a hulking containership, towering a hundred feet above the crowd, and the most visible evidence to date of an effort by the global shipping industry to mitigate its role in the planet’s warming.The ship, commissioned by the Danish shipping giant Maersk, was designed with a special engine that can burn two types of fuel — either the black, sticky oil that has powered ships for more than a century, or a greener type made from methanol. By switching to green methanol, this single ship will produce 100 fewer tons of greenhouse gas per day, an amount equivalent to the emissions of 8,000 cars.The effect of global shipping on the climate is hard to overstate. Cargo shipping is responsible for nearly 3 percent of global greenhouse gas emissions — producing roughly as much carbon each year as the aviation industry does.Figuring out how to limit those emissions has been tricky. Some ships are turning to an age-old strategy: harnessing the wind to move them. But ships still need a more constant source of energy that is powerful enough to propel them halfway around the world in a single go.Unlike cars and trucks, ships can’t plug in frequently enough to be powered by batteries and the electrical grid: They need a clean fuel that is portable.Ursula von der Leyen, center, the president of the E.U. Commission, stands with the captains of the Laura Maersk as well as company and government officials in Copenhagen in September.Betina Garcia for The New York TimesThe Laura Maersk is the first of its kind to set sail with a green methanol engine and represents a significant step in the industry’s efforts to address its contribution to climate change. The vessel is also a vivid illustration of just how far the global shipping sector has to go. While roughly 125 methanol-burning ships are now on order at global shipyards from Maersk and other companies, that is just a tiny portion of the more than 50,000 cargo ships that ply the oceans today, which deliver 90 percent of the world’s traded goods.The market for green methanol is also in its infancy, and there is no guarantee that the new fuel will be made in sufficient quantities — or at the right price — to power the vast fleet of cargo ships operating worldwide.Shipping is surprisingly efficient: Transporting a good by container ship halfway around the world produces far less climate-warming gas than trucking it across the United States.That’s true in part because of the scale of modern cargo vessels. The biggest container ships today are larger than aircraft carriers. Each one is able to carry more than 20,000 metal containers, which would stretch for 75 miles if placed in a row.That incredible efficiency has lowered the cost of transport and enabled the modern consumer lifestyle, allowing retailers like Amazon, Walmart, Ikea and Home Depot to offer a vast suite of products at a fraction of their historical cost.Yet that easy consumption has come at the price of a warmer and dirtier planet. In addition to affecting the atmosphere, ships burning fossil fuel also spew out pollutants that reduce the life expectancy of the large percentage of the world’s people who live near ports, said Teresa Bui, policy director for climate at Pacific Environment, an environmental organization.Cargo ships at the Port of Los Angeles in 2021 sometimes had to wait days to dock because of congestion, producing huge amounts of pollution.Coley Brown for The New York TimesThat pollution was particularly bad during the Covid-19 pandemic, when supply chain bottlenecks caused ships to pile up outside of the Port of Los Angeles, producing pollution equivalent to nearly 100,000 big rigs per day, she said.“They have been under regulated for decades,” Ms. Bui said of the shipping industry.Some shipping companies have tried to cut emissions in recent years and comply with new global pollution standards by fueling their vessels with liquefied natural gas. Yet environmental groups, and some shipping executives, say that adopting another fossil fuel that contributes to climate change has been a move in the wrong direction.Maersk and other shipping companies now see greener fuels such as methanol, ammonia and hydrogen as the most promising path for the industry. Maersk is trying to cut its carbon emissions to zero by 2040, and is pouring billion of dollars into cleaner fuels, along with other investors. But making the switch — even to methanol, the most commercially viable of those fuels today — is no easy feat.Switching to methanol requires building new ships, or retrofitting old ones, with different engines and fuel storage systems. Global ports must install new infrastructure to fuel the vessels when they dock.Perhaps most crucially, an entire industry still needs to spring up to produce green methanol, which is in demand from airlines and factory owners as well as from shipping carriers.Methanol, which is used to make chemicals and plastics as well as fuel, is typically produced using coal, oil or natural gas. Green methanol can be made in far more environmentally friendly ways by using renewable energy and carbon captured from the atmosphere or siphoned from landfills, cow and pig manure, or other bio waste.By using green methanol, the Laura Maersk could produce 100 fewer tons of greenhouse gas per day, equivalent to the emissions of 8,000 cars.Betina Garcia for The New York TimesCargo ships require fuel sources that are powerful enough to propel them halfway around the world in a single go.Betina Garcia for The New York TimesFlemming Sogaard Christensen, the chief engineer of the Laura Maersk, inside the engineering room. The ship’s engine can burn oil or a greener type of fuel made from methanol.Betina Garcia for The New York TimesBut the world today does not yet produce much green methanol. Maersk has committed to using only sustainably produced methanol, but if other shipping companies end up using methanol fuel made with coal or oil, that will be no better for the environment.Ahmed El-Hoshy, the chief executive of OCI Global, which makes methane from natural gas and greener sources like landfill gas, said companies today were producing “infinitesimally small volumes” of green methanol using renewable energy.“Companies haven’t done much in our industry yet quite frankly,” he said. “It’s all hype.”Fuel producers still need to master the technology to build these projects, he said. And in order to finance them they need buyers who are willing to commit to long-term contracts for green fuel, which can be three to five times as expensive as conventional fuel.Maersk has signed contracts with fuel providers including OCI and European Energy, which is building in Denmark what will be the world’s largest plant producing methanol with renewable electricity. The shipping company already has clients like Amazon and Volvo that are willing to pay more to have their goods transported with green fuels, in order to reduce their own carbon footprints.But many other companies are not yet willing to pay the necessary cost for greener technologies, Mr. El-Hoshy said.The missing piece, said Mr. El-Hoshy and others in the shipping and methanol industries, is regulation that would help level the playing field between companies trying to clean up their emissions and those still burning dirtier fuels.The European Union is ushering in rules that encourage ships to decarbonize, including new subsidies for green fuels and penalties for fossil fuel use. The United States is also spurring new investments in green fuel production and more modern ports through generous domestic spending programs.Maersk has clients like Amazon and Volvo that are willing to pay more to have their goods transported with green fuels, in order to reduce their own carbon footprints.Betina Garcia for The New York TimesBut proponents say the key to a green transition in the shipping sector are global rules that are pending through the International Maritime Organization, the United Nations body that regulates global shipping.The organization has long received heavy criticism for its lagging efforts on climate. This summer, it adopted a more ambitious target: eliminating the global shipping industry’s greenhouse gas emissions “by or around” 2050.To get there, nations have promised to agree on a legally binding way to regulate emissions by the end of 2025, which they would put into effect in 2027.Yet countries have yet to agree on what kind of regulation to use. They are debating whether to adopt a new standard for cleaner fuels, new taxes per ton of greenhouse gas emitted or some kind of mix of tools.Some developing countries, and nations that export low-value goods like farm products, say that strict regulation would raise shipping costs and be economically harmful.Proponents of the regulation — including Maersk — say it’s necessary to avoid penalizing those who are trying to clean up the business, and provide certainty about the industry’s direction.“There has to be an economic mechanism by which you level the playing field so that people are incentivized and not punished for using low-carbon fuels,” said John Butler, the chief executive of the World Shipping Council, which represents container carriers including Maersk.“Then you can invest with some confidence,” he added.A container ship traveling halfway around the world produce less climate-warming gas than a truck traveling across the United States.Betina Garcia for The New York TimesVincent Clerc, the chief executive of Maersk, said the company would continue to adopt new green technologies as they became available.Betina Garcia for The New York TimesStill, Maersk acknowledges that green methanol is unlikely to be the final solution. Experts say that the fuel’s reliance on finite sources of waste, like corn husks and cow manure, mean there will not be enough to power the entire global shipping fleet.In an interview, Vincent Clerc, the chief executive of Maersk, said that the entire maritime sector was unlikely to ever be powered predominantly by methanol. But Maersk had no regrets about moving some of its fleet from fossil fuels to methanol now, then adopting new technologies as they become available, he said.“This marks a real systemic change for this sector,” Mr. Clerc said, gesturing toward the vessel piled high with 20-foot containers in front of him.Eric Leveridge, the climate campaign manager for Pacific Environment, said his group was glad that Maersk and other shipping companies were moving toward more sustainable fuels. But the organization is still concerned that “it is more for optics and that the impact is potentially being exaggerated,” he said.“When it comes down to it, even if there is this investment, there’s still a lot of heavy fuel oil ships on the water,” he said. More

A major escalation of the war between Israel and Hamas — one that spilled over into a broader Middle East conflict — could send oil prices surging as much as 75 percent, the World Bank warned on Monday.The potential for a global energy shock in the wake of Hamas’s brutal attack on Israel has been a pressing question for economists and policymakers, who have spent the past year trying to combat inflation.Energy prices have remained largely contained since Hamas invaded Israel on Oct. 7. But economists and policymakers have been closely monitoring the trajectory of the war and studying previous conflicts in the region as they try to determine the potential scale of economic repercussions if the current conflict intensifies and broadens across the Middle East.The World Bank’s new study suggests that such a crisis could overlap with energy market disruptions already caused by Russia’s war in Ukraine, exacerbating the economic consequences.“The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s — Russia’s war with Ukraine,” Indermit Gill, the World Bank’s chief economist and senior vice president for development economics, said in a statement that accompanied the report. “If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades — not just from the war in Ukraine but also from the Middle East.”The World Bank projects that global oil prices, which are currently hovering around $85 per barrel, will average $90 per barrel this quarter. The organization had been projecting them to decline next year, but disruptions to oil supplies could drastically change those forecasts.The bank’s worst-case scenario is pegged to the 1973 Arab oil embargo that took place during the Arab-Israeli war. A disruption of that severity could remove as much as eight millions barrels of oil per day off the market and send prices as high as $157 per barrel.A less severe, but still disruptive, outcome would be if the war plays out as the 2003 war in Iraq, with oil supply being reduced by five million barrels per day and prices rising as much as 35 percent, to $121 a barrel.A more modest outcome would be if the conflict parallels the 2011 civil war in Libya, with two million barrels per day of oil lost from global markets and prices rising as much as 13 percent, to $102 per barrel.World Bank officials cautioned that the effects on inflation and the global economy would depend on the duration of the conflict and how long oil prices remained elevated. They said that if higher oil prices are sustained, however, that would lead to higher prices for food, industrial metals and gold.The United States and Europe have been trying to keep global oil prices from spiking in the wake of Russia’s invasion of Ukraine. Western nations introduced a price cap on Russia’s energy exports, a move aimed at limiting Moscow’s oil revenues while ensuring oil supply continued to flow.The Biden administration also tapped its Strategic Petroleum Reserve to ease oil price pressures. A senior administration official told The New York Times last week that President Biden could authorize a new round of releases from the nation’s Strategic Petroleum Reserve, an emergency stockpile of crude oil that is stored in underground salt caverns near the Gulf of Mexico.Biden administration officials have publicly downplayed their concerns about the economic impact of the conflict, saying it was too soon to predict the fallout. Treasury Secretary Janet L. Yellen noted at a Bloomberg News event last week that oil prices had so far been generally flat and that she had not yet seen signs that the war was having global economic consequences.“What could happen if the war expands?” Ms. Yellen said. “Of course there could be more meaningful consequences.” More

The ECB ended an unprecedented streak of 10 consecutive rate hikes last week and investors are now pricing in some chance of a cut as early as April, despite President Christine Lagarde’s insistence that this is premature.Slovak central bank governor Peter Kazimir and his Lithuanian peer Gediminas Simkus – two so-called hawks who favour tighter policy – sought to hammer home the message on Monday, even keeping further hikes on the table as an outside possibility.”I would be surprised if we would need to lower rates during the first half of the next year,” Simkus told reporters in Vilnius.Kazimir said bets on a rate cut in the first six months of the year were “entirely misplaced” and ECB policymakers would need to see the bank’s next macroeconomic projections in December and March.”Only then will we be able to say the tightening cycle is completed and move on to the subsequent – monitoring – phase,” Kazimir said.Inflation has been easing, with a state reading out of Germany on Monday confirming expectations for a substantial fall in October, and growth slowing amid signs of a credit crunch induced by surging interest rates.The ECB last week left the rate it pays on bank deposits unchanged at a record high of 4% while it waits for its recent hikes to work their way through the economy.”We will have to stay at the peak for the next few quarters,” Kazimir said. More