Economy

(Reuters) -Peru’s consumer prices rose less than expected in January despite the impact of growing political tensions, but the 12-month rate ticked up as the Andean nation battles the highest inflation in a quarter of a century, with fresh rate hikes still on the table.Government data showed on Wednesday that consumer prices in the Lima metropolitan region, seen as the national benchmark, were up 0.23% in the first month of the year, well below the median forecast of 0.43% in a Reuters poll of economists.It was the lowest monthly increase since January of last year, slowing from the 0.79% rise seen in the previous month, although not enough to prevent annual inflation from hitting its highest since July.Data from statistics agency INEI showed that consumer prices rose 8.66% in the 12 months through January, remaining near a quarter-century peak reached last year, though below a projection made by Economy Minister Alex Contreras last month.Contreras said annual inflation would likely soar over 8.8% in January after protests and road blockades pushed up food prices. He did note that the move would be temporary due to stimulus measures the government was proposing for regions roiled by protests.Peru, the world’s No. 2 copper producer, has been embroiled in political turmoil since December, with anti-government protests blocking roads and clashes with security forces leading to the deaths of dozens of people.Economists at BBVA (BME:BBVA) Research said they expect year-on-year inflation to continue at high levels in the short term, even above 8%, as the persistent unrest affecting food supply, alongside lack of rains and high fertilizer costs, takes its toll on local prices.The latest monthly inflation increase was mainly due to higher food and non-alcoholic beverage costs, as well as rising hotel and restaurant prices, INEI said in a report. Decreasing transportation costs partially offset those rises.The fresh data also follows aggressive monetary tightening, as Peru’s central bank has raised its benchmark interest rate periodically since the second half of 2021 to combat inflation that surged well ahead of its 1%-to-3% target range.The latest 25 basis-point hike to 7.75% happened in January, when the central bank said a downward trend in inflation was projected from March, and a return to the range in the fourth quarter.BBVA economists, however, noted that inflation expectations for 2023 remain above 4%, saying in a report that “despite the weakness of economic activity, we do not rule out that the central bank finds it prudent to raise its interest rate a little more, to 8.0% in February”. More

(Reuters) – A look at the day ahead in markets from Stephen Culp, New York stock market reporter.Asian markets are set for an upbeat Thursday as U.S. stocks whipsawed to a higher close after the Federal Reserve delivered an expected 25 basis point interest rate hike and warned it still expects ‘ongoing increases’ as it battles inflation.All three major U.S. stock indexes reversed earlier losses to sail across the finish line in positive territory, under assurances from Fed Chairman Jerome Powell that he believes price growth can be tamed “without a significant economic decline.”In his remarks and Q&A session following the policy decision, Powell said “there’s more work to do,” before its goals are met, but acknowledged data shows inflation is beginning to cool.”The door is cracking open to end rate hikes, but they still have a chance for one more rate hike at the next meeting,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “Inflation data continues to show major improvements, which is exactly what the Fed needs to take their foot off the pedal.”The European Central Bank and the Bank of England are expected to hike their key interest rates by 50 basis points on Thursday.On the economic front, restrictive central bank policies appear to be dampening factory activity, with purchasing managers’ indexes around the world either in contraction or struggling to expand.Fourth-quarter earnings season is running on all cylinders, with 190 of the companies in the S&P 500 having reported already. Of those, 69% have delivered consensus-beating profits, according to Refinitiv.Shares of Meta Platforms Inc (NASDAQ:META) jumped more than 18% in extended trading after the social media bellwether forecast first-quarter revenue above Wall Street estimates, signaling a rebound in demand for digital ads after months of weak sales.Healthcare companies BristolMeyers-Squibb Co, Eli Lilly (NYSE:LLY) and Co and Merck & Co are due to report before trading commences on Wall Street on Thursday, with the heavy-hitting triple play of Apple Inc (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) Inc expected after the session ends.Elsewhere, the U.S. dollar lost ground against a basket of world currencies, while crude prices settled sharply lower due to a buildup of U.S. oil stocks.Here are some key developments that could provide more direction to markets on Thursday:- South Korea releases CPI inflation data (Jan)- Australia posts building approvals (Dec)- U.S. planned layoffs (Jan), weekly jobless claims land before the opening bell, factory orders (Dec) shortly after More

CREATION OF THE DEBT CEILINGCongress has always placed restrictions on federal debt as part of its U.S. Constitutional authority over tax and spending matters. Before World War One, Congress often handled debt sales directly, but that became impractical as federal borrowing increased in the years that followed. Congress opted in 1939 to impose an overall limit of $45 billion on government borrowing activity. Because spending has often outrun tax revenue, Congress has had to raise that limit 102 times since the end of World War Two. Big spending increases – such as the $6 trillion in COVID-19 relief Congress approved in 2020 and 2021 – lead to more debt and more frequent debt-ceiling increases.Most other developed countries do not impose such limits on government borrowing. TERMS APPLYCongress has often imposed conditions on these debt-ceiling hikes, or paired them with other tax and spending activity.Congress delayed a debt-ceiling hike in 1957 to pressure the Pentagon to operate more efficiently, and linked increases to expanded Social Security benefits in the early 1970s. Lawmakers in that era also tried unsuccessfully to use the debt as leverage to stop U.S. bombing of Cambodia.Since 1978, only 26 of 60 debt-ceiling hikes have been passed on their own. Often they have passed with other budget and spending measures – a practice that allows lawmakers to negotiate on several fiscal matters at once and shields them somewhat from the political pain of approving an increase in debt.Congress paired a debt-ceiling hike with broader bipartisan spending packages in 2018 and 2019, for example. The recession-fighting stimulus package of 2009 also included a debt-ceiling hike. The House of Representatives automatically raised the debt ceiling 10 times between 1980 and 2010 when it passed its annual budget plan, under a rule named after Democratic leader Dick Gephardt.This process does not always go smoothly.Republicans unsuccessfully tried to pair a debt-ceiling hike with spending cuts in 1995 and 1996, leading to two partial government shutdowns. A similar showdown in 2011 brought the United States to the brink of default and prompted a first-ever downgrade of the United States’ top-notch credit rating.SUSPENDING ITCongress voted seven times between 2013 and 2019 to suspend the debt ceiling for a set amount of time, rather than raising it. This reduced political pain by allowing lawmakers to avoid signing off on a specific amount of additional debt, and provided some certainty by letting them know when they would have to tackle the problem again.2011 SPENDING RESTRAINTSThe 2011 showdown ended with the Budget Control Act, which imposed spending caps for the following 10 years that Congress eventually diluted. That deal also reversed the usual calculus by allowing the president to raise the debt ceiling unless a majority of Congress voted against it, which they conveniently failed to do.Source: Congressional Research Service More

US stocks closed at their highest level since last summer and government bonds swung higher on Wednesday after the Federal Reserve announced a further slowdown in the pace of interest rate rises.The US central bank lifted its benchmark interest rate 0.25 percentage points to a range of 4.5 per cent to 4.75 per cent. The widely expected move in the federal funds rate was less than previous increases of 0.5 or 0.75 percentage points undertaken at recent meetings.The Fed’s smaller rate increase after its first monetary policy meeting of the year reflects growing confidence that inflation is on a downward trajectory after several months of encouraging data. Wall Street’s benchmark S&P 500 index, which had slipped earlier in the day, rebounded after Fed chair Jay Powell spoke to reporters and closed 1.1 per cent higher for the day. The tech-heavy Nasdaq Composite jumped 2 per cent. The S&P closed at its highest level since August, while the Nasdaq reached the highest level since September.Powell continued to stress the need for further rate rises to bring inflation firmly under control, and said policymakers would not become “complacent” despite encouraging recent data.However, Michael de Pass, head of linear rates trading at Citadel Securities, said investors were encouraged by Powell’s relaxed comments about a recent rally in stock and bond prices.The S&P 500 rose 6 per cent in January while bond yields fell, making it easier for companies to raise cash. Powell had warned about the need for caution during similar rallies last year, but when asked about the trend on Wednesday, he said “our focus is not on short-term moves”, stressing that conditions had “tightened significantly over the past year”.“There was some consensus prior to the meeting that the one area he’d try to push back on was the easing of financial conditions, but that was not the path he took,” de Pass said.Bond markets rallied, with the yield on the benchmark 10-year Treasury dropping 0.13 percentage points to 3.40 per cent. Bond yields fall when prices rise.The dollar index, which tracks the US currency against a basket of peers, fell 0.9 per cent. The dollar has devalued significantly in recent months as the pace of interest rate rises has slowed.The Bank of England and European Central Bank are due to implement their own interest rate increases on Thursday, with both expected to opt for half percentage-point adjustments upwards. The regional Stoxx Europe 600 traded flat after eurozone inflation fell more than expected to 8.5 per cent in January, down from 9.2 per cent in December. Economists polled by Reuters had forecast a decline to 9 per cent. Core inflation, which omits relatively volatile food and energy prices, remained at 5.2 per cent, with investors having expected a decline to 5.1 per cent. London’s FTSE 100 slipped 0.1 per cent.In Asia, Hong Kong’s Hang Seng index added 1 per cent, China’s CSI 300 rose 0.9 per cent and South Korea’s Kospi gained 1.2 per cent. Japan’s Nikkei was steady. More

Brussels has warned that leaks of sensitive UK-EU talks on reforming Northern Ireland’s post-Brexit trading arrangements could endanger a compromise deal between the two sides.The intervention comes as British prime minister Rishi Sunak considers whether he can sell a potential deal on the Northern Ireland protocol, part of the Brexit agreement, to his MPs and pro-UK parties in the region.Sunak will have a big task promoting any compromise with Brussels to Conservative MPs and Northern Ireland’s Democratic Unionist party and media reports about a putative deal have complicated that task.In a sign of potential trouble ahead, Lord David Frost, the former Brexit minister and a leading Eurosceptic Conservative, accused Sunak of giving Brussels the upper hand in negotiations on the protocol.The European Commission urged the bloc’s member states not to leak details of the UK-EU talks, saying they could “endanger the whole process”, according to a summary of a meeting on Wednesday of EU ambassadors.The commission briefed the national representatives that negotiations needed “sufficient space, time and discretion because of the high sensitivities on both sides and the current situation within the UK government”, said the summary, in an apparent reference to the pressure on Sunak. Commission officials reassured EU member states that any compromise deal would be based on the Northern Ireland protocol and the need to “make it work in practice” rather than radically reshape it.Downing Street on Wednesday denied a report in The Times that a deal with Brussels had been agreed on the protocol, saying there was much work remaining regarding post-Brexit trading arrangements for the region.“There is still lots of work to do on all areas, with significant gaps remaining between the UK and EU positions,” said Sunak’s spokesman.Ursula von der Leyen, commission president, struck an upbeat note on the UK-EU talks, which are focused on reducing friction on trade between Great Britain and Northern Ireland. The region remains part of the EU single market for goods.Von der Leyen said the talks were “very constructive” but were ongoing, adding that she had a “very trusted and excellent relationship” with Sunak.Eurosceptic Tory MPs in the European Research Group and the DUP want to remove the internal trade border within the UK at Irish Sea ports. Eurosceptic Conservatives also want to end the jurisdiction of the European Court of Justice in Northern Ireland.Frost claimed Sunak was negotiating with the EU “with a weaker hand” than necessary. In a foreword to a report by Policy Exchange, a think-tank, Frost said Sunak had removed a negotiating tool with Brussels by “effectively abandoning” the government’s Northern Ireland protocol bill, which would unilaterally rewrite that part of the Brexit deal.Several people close to the UK-EU negotiations said the bloc had agreed in principle to a system of “red and green lanes” to reduce checks on goods moving from Great Britain to Northern Ireland, but that talks were continuing regarding the scope of the arrangements. Goods crossing the Irish Sea and intended for sale on UK territory in Northern Ireland would pass through a green lane with reduced physical checks, backed by real-time customs data. Goods destined for the Republic of Ireland and the EU would enter via a red lane and face full customs and regulatory checks. Some British officials have indicated the UK could be prepared to accept a continuing but reduced role for the ECJ in Northern Ireland. But Downing Street rejected reports that disputes could be heard in Northern Ireland courts first, before possibly being referred up to Luxembourg.In its push for a major overhaul of Northern Ireland’s post-Brexit trading arrangements, the DUP has blocked a resumption of the region’s devolved government since elections in May last year.Sir Jeffrey Donaldson, DUP leader, stuck to his demand for “arrangements that reinstate NI’s place in the UK internal market and respect our constitutional position”, writing on Twitter that London and Brussels “know that political progress” needed unionist support.Just as Sunak has to contend with demands from Eurosceptic Tories, the DUP is under pressure from its hardline rival, the Traditional Unionist Voice.Additional reporting by Jasmine Cameron-Chileshe in London More

The writer is an economist serving as secretary-general of the United Nations Conference on Trade and DevelopmentThere is an alarming tendency among the international community to regard debts in the developing world as sustainable because they can, after some sacrifice, be paid off. But this is like saying a poor family will stay afloat because they always repay their loan sharks. To take this view is to overlook the skipped meals, the foregone investment in education and the lack of health spending that forcibly make room for interest payments. This sort of debt trap is a social catastrophe in the making. Ten years from now, the debt may be repaid, but the family will be ruined.This is the dilemma facing many developing countries, both big and small. The pandemic, cost of living crisis and rising interest rates have brought them to a point where they can only pay their debts by way of austerity or foregone investment in the sustainable development goals (SDGs). Their debts are sustainable in that they can be repaid, but unsustainable in every other way.Furthermore, this full-blown development crisis with debt distress at its core also threatens a new lost decade for much of the world economy.The repeat of a 1980s-style debt crisis that could in turn threaten global financial stability is perceived to be marginal. But the public debt of developing countries, excluding China, reached $11.5tn in 2021. By some accounts, serious debt problems are largely confined to a small share of this figure, owed by highly vulnerable low-income countries such as Chad, Zambia or Ethiopia.But the situation is deteriorating rapidly. During the pandemic, government debt ballooned by almost $2tn in more than 100 developing countries (excluding China), as social spending went up while incomes froze due to lockdowns. Now, central banks are raising interest rates, which exacerbates the problem. Rising rates have meant capital flight and currency depreciation in developing economies, as well as increasing borrowing costs. These factors have pushed countries such as Ghana or Sri Lanka into debt distress. In 2021, developing countries paid $400bn in debt service, more than twice the amount they received in official development aid. Meanwhile, their international reserves declined by over $600bn last year, almost three times what they received in emergency support through the IMF Special Drawing Rights allocation. Foreign debts are therefore eating an ever-larger piece of an ever-shrinking national resources pie. As inflation rises, natural disasters become more frequent and food and energy imports rise in price, countries need more, not less, contingency planning assistance. A much bolder approach is needed. Recent efforts by the international community to agree on large-scale emergency debt measures have faltered. This is despite important efforts at the G20 through the now-discontinued Debt Service Suspension Initiative, and the Common Framework for Debt Treatments, which is in need of crucial improvements, such as suspending payments during negotiations and an extension to middle-income countries in debt distress.The failure of these efforts has revealed the complexity of existing procedures, characterised by creditors who refuse to engage in restructuring with extraordinary powers of sabotage. Crisis resolutions are often too little, too late. The world lacks an effective system to deal with debt.An independent sovereign debt authority that engages with creditor and debtor interests, both institutional and private, is urgently needed. At a minimum, such an authority should provide coherent guidelines for suspending debt payments in disaster situations, ensuring SDGs are considered in debt sustainability assessments, and providing expert advice to governments in need.Furthermore, a public debt registry for developing countries would allow both lenders and borrowers to access debt data. This would go a long way in boosting debt transparency, strengthening debt management, reducing the risk of debt distress and improving access to financing. Progress on both these fronts could begin with an independent review of the G20 debt agenda: India’s presidency may bring a historic opportunity to succeed where others have faltered. Tackling the current global debt crisis is not only a moral imperative. In a context of growing climate and geopolitical distress, it is one the biggest threats to global peace and security and financial stability. Without supporting countries to become sustainable, their debts will never be realistically repayable. More

Today’s top storiesRishi Sunak is seeking to convince Unionist politicians in Northern Ireland and Eurosceptic Tory MPs to agree to an outline deal on the Northern Ireland protocol. The Federal Reserve is expected to raise its benchmark interest rate by a quarter of a percentage point, transitioning to a less aggressive pace of rate increases as inflation begins to ease. Russia has rejected US allegations that it is not complying with the New Start treaty, the sole remaining nuclear arms control agreement between the two countries.For up-to-the-minute news updates, visit our live blogGood evening.The European Central Bank is widely expected to announce another sharp rise in interest rates tomorrow as it continues its battle against inflation. New data suggests the ECB may be gaining ground in this fight.Consumer price rises slowed to an annual rate of 8.5 per cent in January, Eurostat’s flash index showed today, down from 9.2 per cent the previous month. This headline figure, the lowest recorded since May, was lower than the 9 per cent expected by economists polled by Reuters, following a significant slowdown in energy inflation. A word of caution, however. These figures do not include data from Germany, which was unavailable at the time of the release due to “technical data processing issues”. Goldman Sachs expects the headline figure to be revised upwards slightly when the German data lands, reports the FT’s financial blog, Alphaville. The positive news on inflation comes in the week it was confirmed the eurozone economy narrowly avoided falling into a recession in the final quarter of 2022. Data released on Tuesday showed that the eurozone economy grew 0.1 per cent in the final three months of 2022, bringing the region’s overall growth last year to 3.5 per cent. John Leiper of Titan Asset Management called it “quite an achievement”. A relatively mild winter, the easing of the energy price shock and generous fiscal support are among the factors that have helped Europe weather the macroeconomic fallout from Russia’s invasion of Ukraine, according to the IMF, which in its latest update forecasts 0.5 per cent growth for the region in 2023. Although lower than the 1.9 per cent growth projected by the Fund in its previous forecast in October, the estimate represents a far more optimistic view than the consensus of a few months ago, when economists and business leaders were warning of a deep recession. Meanwhile, as Andrew Whiffin writes in The Lex Newsletter, European banks posted some of their strongest results in 2022 since the financial crisis. While long-term trends may work to favour US retail lenders, European banks are enjoying the benefits of high interest rates, which have boosted net interest margins, and investor confidence bolstered by greater faith in local regulators.Several considerations, however, will temper European optimism. First, the deceleration in headline inflation belies an unchanged rate of core inflation, which excludes food and energy prices and remains at an all-time high of 5.2 per cent. Widely seen as a better measure of underlying price pressures, persistently high core inflation means the ECB will probably continue to raise borrowing costs aggressively. In a similar vein, the strength of eurozone output and employment figures may be encouraging, but such economic news is not always good news, writes chief economics commentator Martin Wolf. “The stronger economies are, the greater the worry of central banks that inflation will not return to a stable 2 per cent,” Wolf points out. “And so the longer policy is likely to stay tight.” Tight monetary policy is already placing a strain on the housing market, with mortgage demand plummeting at a record pace in January to its lowest level since records began, according to ECB data released on Tuesday. Need to know: UK and Europe economyOnly one major economy will enter recession this year, according to the IMF, which honoured the UK with this unfortunate distinction in its most recent forecast, predicting a 0.5 per cent contraction over the course of the year.Chris Giles, our economics editor, says the easiest way for the UK to raise its growth rate in the short term would be to tackle economic inactivity, as labour force participation has nosedived since the pandemic started. That is far from the only problem plaguing the UK labour market, however, as was made clear today when hundreds of thousands of civil servants, train drivers and teachers co-ordinated to stage the largest strike action since 2011.Industry groups and politicians have warned that UK green industries risk being left behind by the US and EU unless Rishi Sunak’s government can come up with an adequate response to the global “subsidy arms race” for green growth. Meanwhile, the UK has set out plans to regulate the cryptocurrency industry, as it seeks to shore up London’s post-Brexit status as Europe’s leading financial centre. Need to know: Global economyIn the US, the oil and gas boom continues, with unemployment in the sector falling below 2 per cent in December, down from roughly 6 per cent a year ago. Crude production in the Permian basin hit record highs last year, and the state of New Mexico is now producing more oil than the entire country of Mexico south of the border. China and India will together account for half of global GDP growth in 2023, according to the IMF, which raised its expectations for growth in Asia’s largest economies to 5.9 per cent and 7 per cent respectively. India will hope to use some of that growth to supercharge investment in infrastructure and productivity, with the government pledging today to increase capital spending by a third in its final budget before next year’s election. Hong Kong will look forward to a growth rebound this year after a dismal 2022, during which strict Covid restrictions led to its economy shrinking by a more than expected 3.5 per cent.Lebanon has devalued its currency by 90 per cent, but the pound remains far above its black market rate, a reminder of the depth of the economic crisis facing the country. The Banque du Liban, Lebanon’s central bank, said the devaluation was a step towards unifying the country’s multiple exchange rates, a key requirement to unlock a $3bn loan facility from the IMF. Need to know: businessThe US will no longer supply export licences to companies that supply Chinese telecoms giant Huawei, which security officials believe conducts espionage on behalf of Beijing. Japan and the Netherlands have also reached an agreement with the US to restrict exports of chip manufacturing tools to China, as the White House continues its efforts to hamper China’s ability to produce the semiconductors required for certain advanced weapons. With the chip industry facing increasing headwinds, Intel is slashing the pay of its managers and executives as part of its drive to shave $3bn off its operating budget by the end of the year. Shares in Darktrace have fallen significantly this week, after the UK cyber group was accused of irregular accounting practices by short-seller Quintessential Capital Management. Dublin-based financial data group Ion Markets suffered a cyber attack on Tuesday, which affected derivatives that trade on exchanges. Cyber risk, business columnist Helen Thomas argues, is an increasingly costly and lamentably underinsured danger facing companies across the corporate world. The World of WorkThe US National Labor Relations Board has found that Apple violated labour laws on multiple occasions, after an investigation into complaints of former employees concerning workplace harassment and suppression of labour organising. UK conference and events provider Etc Venues has been bought by Convene, its US rival, for about £200mn. Convene is betting that remote working will continue to disrupt the city office market, pushing companies to seek convenient central meeting areas to bring together their staff.Wonder how to get the most out of the introverts on your team? Isabel Berwick, host of the FT’s Working It podcast, speaks to self-described introverts Morra Aarons-Mele and Kesewa Hennessy to find out what we can learn from quiet voices in a loud world. Some good newsResearchers at the University of California San Diego have developed a new injectable biomaterial with potential benefits for the treatment of heart attacks and traumatic brain injuries. The treatment has been shown to reduce inflammation and promote tissue repair in rodent trials, and could be ready to test on human subjects within one or two years, according to the researchers. More