Economy

Christopher Waller, a Federal Reserve governor, said he favored a quarter-point move. Many of his colleagues agree — or haven’t ruled it out.Christopher Waller, a Federal Reserve governor, added his voice on Friday to a chorus of central bank officials who favor slowing rate increases at the central bank’s Feb. 1 meeting. That most likely locks in place market expectations for a return to smaller policy adjustments after a series of jumbo rate moves.Mr. Waller spoke on the eve of the central bank’s quiet period before its meeting, which means investors will not hear any more commentary from Fed officials before they make their rate decision. His comments were in line with what many of his colleagues have said: Several openly support slowing down rate increases at the meeting, and top policymakers who haven’t made up their minds have not ruled it out.Central bankers raised rates rapidly in 2022, lifting borrowing costs in three-quarter-point increments for much of the year, before slowing to a half-point move in December. But they are entering a new phase that is focused more on how high interest rates rise and less on how quickly they get there. The thinking is that rates are now high enough to meaningfully slow the economy, and that adjusting them more gradually will give policymakers time to see how their policy is working.That has nudged policymakers toward a quarter-point increase, also known as 25 basis points, an increment that was common before the pandemic.“After climbing steeply and using monetary policy to significantly raise interest rates throughout the economy, it was apparent to me that it was time to slow, but not halt, the rate of ascent,” Mr. Waller said of the December downshift. “There appears to be little turbulence ahead, so I currently favor a 25-basis-point increase” at the Fed’s next meeting, he said.Inflation F.A.Q.Card 1 of 5What is inflation? More

Sometimes, optimism can be infectious. The cheery mood in financial markets, where global stock markets have risen about 4 per cent in the first three weeks of the year, spread this week to the rarefied atmosphere of the World Economic Forum in Davos. The annual gathering of business, economic and political elites in the Swiss Alps divides opinions. But it is an ideal place to take the global temperature on economic sentiment — and the consensus view seemed to be that conditions had bottomed out and were becoming more positive. Many had expected 2023 would bring a lasting hangover from Russia’s war in Ukraine, continued Chinese economic weakness and the devastating effects of high energy and food prices on living standards across the world.Instead, delegates came to the mountains to cheer three new developments that improve the outlook. Firstly, China’s decision to end its zero-Covid policy spurred hopes of a bounceback in one of the world’s three large economic zones. Second, a fall of over 80 per cent in wholesale natural gas prices was projected to bring relief to another, Europe. And finally the Inflation Reduction Act, which provided huge subsidies for a green transition, was forecast to power the other leading global economic area in North America.Many business leaders felt that prospects for their companies had been transformed from a few months earlier. In a session at the forum that was supposed to be discussing the cost of living crisis, Unilever chief executive Alan Jope said his company was “gearing up for revenge spending” from Chinese consumers blowing savings accumulated over three years of Covid lockdowns. Vicki Hollub, chief executive of the US oil company Occidental, said the green subsidies in the US Inflation Reduction Act would allow significant investments in the capture and storage of carbon dioxide and that was positive for growth and the environment. “It is one of the most transformational passages of a bill ever in the world,” she said, “and it is going to jump start a lot of things.”European business leaders were more cautiously optimistic. Christian Sewing, chief executive of Deutsche Bank, talked about some “more optimism on the economy”, and Jean Marc Ollagnier, chief executive of Europe at Accenture said most European CEOs were being “optimistic about the year ahead, [having risen] to the challenge to be more resilient”. But the general expectation is now for growth, rather than the significant recession in Europe that most economic forecasts had predicted just a few weeks ago.

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Soon, political leaders had caught the positive bug. German chancellor Olaf Scholz predicted his country would avoid a recession, while Ursula von der Leyen, European Commission president, promised a relaxation of state aid rules to accelerate Europe’s move towards clean energy and took credit for the fall in natural gas prices. “Through collective effort, we brought down gas prices quicker than anyone expected,” she told the main hall. The UK’s prospects have also improved with cheaper natural gas, Andrew Bailey, governor of the Bank of England, said this week on a visit to Wales.The Europeans at Davos were eclipsed, however, by Liu He, China’s vice-premier, who predicted growth in his country would rebound from a lacklustre 3 per cent to a more typical rate of 5.5 per cent. To the delight of US business leaders at a private lunch, he announced that “China is back”.Jozef Síkela, the Czech industry minister, said the difference now compared with last autumn was “like a heaven versus a hell”. He added: “OK, heaven is not as affordable as it was before [Russia’s invasion of Ukraine], but it is affordable.”If those comments were largely country specific and anecdotal, one could also listen to the international organisations that decided to change their own outlooks on the global economy. The IMF, which said at the start of the year that 2023 was going to be tougher than 2022, signalled a change of course. Kristalina Georgieva, its managing director, said her new message was that “it is less bad than we feared a couple of months ago”. The IMF will come out with new forecasts in a week’s time which were likely to be upgraded, she suggested, although she cautioned people not to expect a “dramatic improvement”.Meanwhile, the International Energy Agency in Paris forecast record oil demand this year, “with nearly half the gain from China following the lifting of its Covid restrictions” and a continued surge in production of jet fuel to meet the rapid recovery in global travel. Even some of the most pessimistic voices of 2022 felt they needed to lighten their tone. Larry Summers, professor at the Harvard Kennedy School and a former US Treasury secretary, ended the year warning of recession and higher unemployment in the US.On Friday, however, he told delegates that he felt “some exhilaration of relief.” Lower energy prices, a decline in populism, signs of lower inflation and China’s reopening would all help to avoid recessions in many economies across the world, he said. “We should feel better than a few months ago.” Flies in the ointmentYet for almost every celebration, there are some party poopers. And at Davos and beyond, it was central bankers asking for the music to be turned down. While the improved outlook should be welcomed, they said, more robust spending patterns would complicate the continuing fight against inflation. Lael Brainard, vice chair of the Federal Reserve, urged “time and resolve” on high interest rates, while Christine Lagarde, European Central Bank president, said it was more important than ever to “stay the course”. Their worry is that while headline inflation rates are falling and will fall quickly in 2023, core measures are not falling as fast and underlying inflationary pressures are still strong and could impede the return to price stability of inflation rates close to 2 per cent. Business leaders were also far from naive about the likelihood that central bankers would have to work hard to get inflation durably lower in 2023. A passenger receives a hug after arriving at Shanghai airport. China’s decision to end its zero-Covid policy spurred hopes of a bounceback in one of the world’s three large economic zones © Hector Retamal/AFP/Getty ImagesZiad Hindo, chief investment officer of the Ontario Teachers’ Pension Plan, which holds assets of about C$250bn, warned that an improving economy might increase prices further. “The China reopening is good news for the global economy, but the significant slowdown last year was a big reason why commodity prices softened, and now it’s back. It’s going to put pressure on inflation again,” he said. Lagarde warned governments in Europe not to make her life harder by increasing subsidies to business and consumers, as Von der Leyen had promised to do. “We will do what is necessary [on interest rates]. We don’t want to be pushed into doing more than is necessary,” she said.And while the immediate outlook was more positive than before, there was much less consensus at Davos on the longer-term questions of how to cement a better outlook for growth, living standards and sustainability. Business and economic leaders welcomed progress in the corporate sector on the environment. Some were optimistic that medium-term growth could be driven by investments in clean energy. Tharman Shanmugaratnam, a senior minister in Singapore and longstanding official on the international economic stage, said that raising business investment into green technology had the potential to be “a huge fillip for growth”. But others worried whether, in a world that is still likely to be dominated by large shocks, short-term pressures would again begin to dominate, limiting the green transition and the building of resilience into supply chains and other parts of businesses. A man walks past a ‘now hiring’ sign in New York. The US’s Inflation Reduction Act, which provided huge subsidies, was forecast by many at Davos to power growth in America © Angela Weiss/AFP/Getty ImagesThe best way to ensure consistent economic performance, said Summers, was to keep faith in the institutions that underpin the global economic order. “Better institutions that incentivise the mobilisation of resources better and more efficiently are more important than allocating more resources to any particular priority,” he said. Another longer-term question was how serious China really is in pledging allegiance to that international economic order. Most business leaders listening to Liu, who is the administration’s most senior economic official, were persuaded by his message that he wanted to reconnect with advanced economies. But Liu is expected to step down from his position this year and more jaded commentators were sceptical of a sea change. “Every time Chinese officials visit the Swiss mountain resort they say similar things,” said Mark Williams, chief Asia economist at Capital Economics, while “firms on the ground report that it’s getting harder to operate”. The Emlichheim oilfield in Germany. The International Energy Agency in Paris has forecast record oil demand this year © Martin Meissner/APThe US’s motivations were also under heavy scrutiny. Was its ban on exporting technologically advanced microchips to China aimed at undermining that country’s economic progress? And was the real motivation of the Inflation Reduction Act a piece of pure protectionism to put America first at the expense of Europe? With the ambitions of the world’s two largest economies unclear, senior figures warned that fracturing global trade flows and economic relationships could put a dampener on the economic mood this year — and beyond. “How we handle the security of supply chains matters tremendously,” Georgieva said. “If we are like an elephant in a china shop and we trash the trade that has been an engine for growth for many decades, the cost [could be] up to 7 per cent loss of gross domestic product — $7tn.” Her message to leaders: “Keep the global economy integrated for the benefit of all of us.” Additional reporting by Katie Martin and Yuan YangData visualisation by Keith Fray More

A governor on the board of the Federal Reserve has backed the US central bank further slowing the pace of its interest rate increases to a quarter of a percentage point at its upcoming policy meeting, even as he warned of further monetary tightening ahead.The comments from Christopher Waller, who sits on the Federal Open Market Committee that is responsible for deciding monetary policy and has been one of its most hawkish members, come on the final day officials can make public remarks ahead of the next rate-setting meeting that wraps up on February 1.“Based on the data in hand at this moment, there appears to be little turbulence ahead, so I currently favour a 25-basis point increase at the FOMC’s next meeting at the end of this month,” he said at an event hosted by the Council on Foreign Relations in New York on Friday. “Beyond that, we still have a considerable way to go towards our 2 per cent inflation goal, and I expect to support continued tightening of monetary policy,” he added.In backing a smaller move, which would represent a return to a more normal pace of tightening after a string of half-point and 0.75 point rate increases last year, Waller outlined what he called the “case for cautious optimism” about the trajectory of inflation and, in turn, the economic outlook.Fuelling this more positive view are mounting signs that consumer spending is ebbing, business activity is slowing and demand for workers has also cooled off, leading to what Waller noted was an “encouraging” moderation in wage growth.“The FOMC’s goal in raising interest rates is to dampen demand and economic activity to support further reductions in inflation,” he said in prepared remarks. “And there is ample evidence that this is exactly what is going on in the business sector.”He added: “The goal is not, I would emphasise, to halt economic activity, and so we will be watching these sectors closely to see how this moderation continues.”Waller said he was still “optimistic” that the Fed could avoid tipping the US economy into recession and pull off a “soft landing”.Having moved aggressively since March to tighten monetary policy, Fed officials are now debating how much more to squeeze the economy now that their policy actions are starting to have an effect. A quarter-point rate rise in February would lift the federal funds rate to a new target range of between 4.50 per cent and 4.75 per cent, still shy of the 5.1 per cent level that most officials believe will be necessary to reach in order to get inflation fully under control.

Waller on Friday said that despite the improved data, he was “not ready yet to substantially alter” his outlook for inflation, due in part to concerns about again being caught off guard by the intensity and persistence of price pressures.“Back in 2021, we saw three consecutive months of relatively low readings of core inflation before it jumped back up. We do not want to be head-faked,” he said. “I will be looking for the recent improvement in headline and core inflation to continue.”That cautiousness echoed a sentiment expressed by Lael Brainard, the Fed’s vice-chair, and New York Fed president John Williams on Thursday, who both said the central bank must “stay the course” on further rate rises.In a discussion that followed his remarks, Waller said bets among traders in fed funds futures markets that the central bank would cut rates by year-end rested on a “very optimistic view” that inflation would dissipate quickly.“We have a different view,” he said. “Inflation is not going to just miraculously melt away. It’s going to be a slower, harder slog to get inflation down, and therefore we have to keep rates higher for longer and not start cutting rates by the end of the year.” More

Today’s top storiesGoogle became the latest Big Tech company to announce job cuts, axing 12,000 jobs or around 6 per cent of the total workforce of its owner Alphabet. Many of the recent job losses in the industry are more about trimming expansion plans rather than signs of a sector downturn, says the Lex column.Deutsche Bank cut bonuses for investment bankers by 40 per cent, one of the most severe cuts in the industry, while increasing the payouts for traders.Despite the bullishness of some of the big chains, it turns out that UK retail sales unexpectedly fell by 1 per cent over the Christmas period, official data show today. Consumer confidence meanwhile remained below minus 40 for the ninth month in a row in January — the longest period of pessimism in nearly 50 years. For up-to-the-minute news updates, visit our live blogGood evening.The World Economic Forum in Davos wrapped up today with more warnings of challenges ahead for the global economy, even as policymakers welcomed falling inflation, waning fears of recession and China’s reopening.IMF chief Kristalina Georgieva said the economic landscape was “less bad than we feared a couple of months ago”, but that no one should get carried away, while European Central Bank president Christine Lagarde repeated her message that high interest rates were here to stay until inflation was defeated. Lagarde will have been cheered by new data this morning showing producer price inflation in Germany, the EU’s biggest economy, had fallen to 21.6 per cent in December, its lowest since November 2021.“Staying the course” has very much been the message of the week from central bankers, including Lael Brainard, vice-chair of the US Federal Reserve and John Williams, New York Fed president, who both echoed Lagarde’s comments. Thomas Jordan, chair of the Swiss National Bank, joined in today, warning: “Don’t underestimate the second round effects. Firms do not hesitate anymore to raise prices and that is a signal that it will not be easy to bring inflation back to 2 per cent.”Moreover, many of the business chiefs gathered at Davos think the days of the 2 per cent target are numbered, reports US editor at large Gillian Tett, and certainly do not see a return to the pre-2019 pattern of ultra-low inflation and near-zero interest rates.Wall Street bosses meanwhile are split on what the Fed should do next. JPMorgan chief Jamie Dimon is hawkish, arguing that it would probably need to lift its benchmark rate above 5 per cent, while Morgan Stanley’s James Gorman said inflation had peaked and that it was almost time for the Fed to pause its policy tightening. Across the Atlantic, Bank of England chief Andrew Bailey said there was “more optimism” about an “easier path” out of the current inflation crisis thanks to falling energy prices. This week’s data showing UK inflation had fallen to 10.5 per cent, although expected, was “the beginning of a sign that a corner has been turned”, he said.Japan remains an outlier in sticking with ultra-low interest rates, but new data today showing core inflation hitting a 41-year high of 4 per cent has added to pressure on the country’s central bank to change tack.Need to know: UK and Europe economyPeter Foster’s Britain after Brexit newsletter discusses what can be done about labour shortfalls. The Ikea boss told a Davos audience that the UK’s departure from the EU had caused “chaos”. Opposition leader Sir Keir Starmer said he wanted to fix the post-Brexit relationship with Brussels as part of a more optimistic vision for his country.As in many other parts of the world, the UK is talking up nuclear power as the energy crisis bites. As ever, the financing of new plants is the problem issue, as our Big Read explains. Energy groups such as SSE meanwhile continue to report earnings bonanzas from high prices.

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Russia is feeling the impact of energy sanctions such as the oil price cap. Energy editor David Sheppard says Vladimir Putin is losing the energy war. Need to know: Global economyChinese leader Xi Jinping said the country was entering a “new phase” of the pandemic as fears grow that the lunar new year could become a mass spreader event. Xi’s top economic adviser had a clear message for Davos: “China is back”.What could go wrong in the Middle East in 2023? Plenty, writes Kim Ghattas, from political disruption in Israel to deepening unrest in Iran and economic crisis in Egypt.South Korea, the world’s 10th-largest economy, is easing regulation of its financial markets to attract more foreign investors.Jacinda Ardern, New Zealand’s prime minister since 2017, is stepping down next month after a five-year term that brought her international acclaim and generated global interest for her socially progressive policies and hardline response to Covid-19. Since 2008, a series of rolling shocks such as the financial crisis, rising populism, US-China tensions and the pandemic have hobbled the onward march of globalisation, free-market capitalism and democracy, or what we might call the markets era. US editor at large Gillian Tett ponders what might come next. Chief economics commentator Martin Wolf however remains optimistic: there’s life in global capitalism yet, he writes.Need to know: businessOne thing Davos has never been short of is interventions from big company bosses in polarised political debates. But as the risks from such stances grow, US business editor Andrew Edgecliffe-Johnson says CEO activism may have peaked.The crypto crisis continues. Broker Genesis’s lending unit filed for bankruptcy, US prosecutors charged the Russian founder of the Bitzlato exchange and the FT reported that billionaire Peter Thiel’s fund wound down its eight-year bet on bitcoin just before the market crash. But despite all that, as columnist Jemima Kelly puts it, the clowns of cryptoland haven’t given up yet. Fines for money laundering and other financial crimes rose globally by more than 50 per cent last year, casting doubt on the effectiveness of crackdowns by regulators.Insurers are talking with the UK government about whether its terrorism reinsurance scheme should cover state-backed cyber attacks as concerns grow about online attacks on companies. Science round upCovid-19 infections are falling across the UK, extending the downward trend in England and Wales, according to the latest official weekly data. Despite more researchers in more institutes publishing more papers than ever, science is losing its ability to disrupt, writes Anjana Ahuja. “‘Publish or perish’ cannot be the only research mantra,” she argues. “We need a well-supported philosophy of ‘disrupt or ossify’, too.FT magazine columnist Tim Harford on the other hand takes a more positive view of the future. After 50 years of disappointment, tech breakthroughs might again start improving our lives, he says, as polycrisis breeds polyinnovation.UK health security chief Jenny Harris told the FT in an interview that new variants meant Covid would “taunt us for years”.Scientists unveiled a laser beam that could deflect lightning strikes and protect critical infrastructure in thunderstorms.And finally, we’d all like to be a bit Doctor Dolittle, right? Innovation editor John Thornhill looks at sonic advances that might help us talk to animals.Some good newsScientists using satellite mapping technology have discovered a new emperor penguin colony in Antarctica. The birds, which are vulnerable to loss of sea ice, their favoured breeding habitat, are under threat of extinction if warming trends continue.

Emperor penguins are under threat of extinction because of global warming © REUTERS More

When it comes to monetary policy, inflation expectations matter. That’s awkward for the Bank of England, because UK inflation expectations are neither reliable nor logical.One key thing about household inflation expectations is that they tend to move in lockstep with actual reported inflation. Because recency shapes perception, people often default to thinking that tomorrow’s inflation will be equal to today’s, or some fraction thereof. This relationship started to fray for UK consumers after the 2016 Brexit referendum, then broke down last year. Such an unmooring of expectations from CPI readers — what economists call adaptive expectation — can make inflation more persistent by feeding into pay settlements and prices.But if the reasons to diverge from CPI are rational, it’s no big deal. Adaptive expectations ought to decline as one-off spikes moderate (utility bills, etc) so there’s not much risk that inflation becomes self-perpetuating. So as long as the long-term view on inflation stays close to the central bank’s inflation target, its rate setting committee can look through all the potentially temporary stuff. De-anchored expectations are more of a problem. When price perceptions lose their tether to reality, the bank needs to drive expectations back down by running a permanent output gap, says Robert Wood, chief UK economist at Bank of America.Britain has been showing signs of de-anchoring, first in 2016 and then again last year, Wood says. It might all stem from the BoE gaining independence in 1997, which nudged public thinking from “tomorrow’s inflation will be the same as today” to “bank’ll fix it”, he speculates. Brexit first chipped away at that confidence, then came last year’s double-digit inflation to shatter all the old certainties:We wonder whether developments in inflation expectations in 2022 would have been as large had expectations not already been dislodged to some degree by Brexit. Perhaps households were already inclined to reassess their traditional rules of thumb when inflation surged.Whatever the reason, household inflation expectations seem to have become invariant to spot inflation since the start of 2022.Making sense of the sentiment trend from official data is tricky, however, because in early 2020 the BoE switched from in-person interviews to online surveys. Reported inflation expectations dropped sharply at around the same time — but what’s odd is that independent surveys don’t show the same dip. Here, in a very messy chart, is BoA’s proprietary inflation expectations data versus the BoE’s:

Evidence for a 2022 structural breakdown theory is therefore tentative. At first glance it also appears contradictory. Below is a chart (equally messy, sorry!) showing one- and two-year UK inflation expectations. Immediately after the Brexit vote there’s a seemingly structural move, to about a 20-basis-point premium above CPI. Then last year, expectations stopped rising even as inflation surged:

BoA’s one-, two- and five-year scatter plots are even messier, though hopefully more clear about the long term trend. What they show are UK household inflation expectations flatlining at around the 4-per-cent level:

One possible conclusion is that UK consumers have become notably more pessimistic about inflation ever returning to the BoE’s 2-per-cent target level. That in turn raises questions about bank credibility.What explains the flatlining? It might be adaptive expectations at work, Wood says, or it might be because the UK consumer has become catatonic: It seems odd that households’ perception of the persistent component of inflation would remain invariant to economic news for a year. The BoE, for example, has revised its view a lot over that period and so have financial markets. The data have changed considerably. Inflation expectations becoming invariant to inflation may be more suggestive of households shifting from adaptive expectations to a more de-anchored rule; for instance, assuming inflation will be 4 per cent regardless of spot inflation. Households may have made such a change to their rules of thumb for inflation forecasting because those rules were performing poorly.Other countries are not seeing similar trends. In the US and Europe, inflation expectations have continued to track the headline rate normally. And anyway, faith in the Fed keeps US inflation expectations in check irrespective of the spot rate, as shown by the below (very, very messy) five-year scatter plot. It’s hard not to conclude that sticky inflation may be a uniquely British disease:

And if UK household inflation expectations have de-anchored, what can the bank do about it? Talk tough until all alternatives are expended, BoA advises:Slowing the economy and raising spare capacity would be the traditional answer. By running the economy below potential persistently the BoE may be able to reassert its inflation credibility. Our proprietary consumer confidence survey suggests that words may matter as well as actions, however. [ . . . ] The more hawkish the BoE sounded over the past year the more inflation expectations fell. Adding to a BoE credibility problem is its own Monetary Policy Committee committee, whose record with inflation forecasting inspires little confidence. MPC one- and two-year expectations have consistently been below actual inflation on average by 60 basis points and 66 basis points, respectively, says Professor Costas Milas of the University of Liverpool, whose chart this is:

BoA’s base case is for two more 25-basis-point UK rate hikes this year, followed by two cuts in 2024. The sharp slowdown in wage growth expected by the BoE may never arrive, but that’s next year’s problem, and there’s reason not to be seen to panic early on tentative data, Wood says. Better to tolerate “somewhat” higher pay and core inflation in the hope that expectations drift back naturally towards target.And if they don’t? Rates up until it’s anchors away, he concludes: “The UK seeming like an outlier also leads us to think the risks skew to the BoE being the slowest of the major central banks to cut rates.” More

CARACAS (Reuters) – Venezuela’s opposition is discussing how it might move frozen funds in foreign bank accounts into a proposed United Nations-administered humanitarian fund, including moving small amounts to protect the money from creditors, four sources said.Venezuela’s government and opposition in November asked the United Nations to manage more than $3 billion now held in foreign banks, gradually releasing the money to fund humanitarian efforts.The fund is not yet operational and there is no timeline for its implementation. Adding to the uncertainty is the opposition’s recent replacement of its U.S.-backed interim government with new leadership, which Washington has said it will recognize.The socialist government of President Nicolas Maduro and the opposition are in sporadic talks to end years of political stalemate, which has seen the opposition refusing to participate in elections they have called rigged, while Venezuela’s once oil-rich economy has collapsed.Backed by many Western countries, the opposition controls some Venezuelan assets abroad, including refiner Citgo Petroleum, which had its creditor protection extended this week by the United States. On Thursday the opposition assembly appointed a committee to manage foreign assets.Though at least one group of Venezuela’s bondholders supports the proposed U.N. fund, the opposition fears creditors might seek to collect the assets to begin recouping the more than $60 billion the country owes to creditors.And the Maduro government ramped up pressure this week, saying it sees no reason to return to the Mexico-based talks unless the assets are made available.Members of an opposition delegation met with officials in Washington over recent days to discuss how to move money into the fund without exposing it to creditors, said four sources with knowledge of the matter.One option is to move relatively small amounts, which would cost creditors too much in legal fees to be worth pursuing, they said.The sources did not provide details about other strategies but said the process of moving money would “take time”.The U.S. State Department did not immediately respond to a request for comment on the potential strategies for moving funds, but a spokesman said it urged Maduro to follow through on holding negotiations while the fund is being put together.”Of course the fund will have obstacles,” opposition negotiator Tomas Guanipa told journalists on Thursday.Guanipa confirmed the opposition met this week with U.S. officials about the fund but would not be drawn on details. “The delegation has not stopped working on this, so the technical details can be resolved,” he said.The United Nations has expressed full support for the potential fund, saying it could support millions of vulnerable Venezuelans, but has not provided details on how it could be administered.”The UN continues to engage with the parties with a view to finding a solution,” spokesman Stephane Dujarric said last week. More

ROME (Reuters) – Italian Economy Minister Giancarlo Giorgetti plans to reorganise the ministry, creating a new unit at the Treasury department to manage state-owned firms and banking regulation in a project he will take to the cabinet next week, sources told Reuters.The proposed shake-up would enable Giorgetti and Prime Minister Giorgia Meloni to put a key ally at the heart of Treasury operations to deal with the most delicate corporate issues facing Italy. Political sources have previously said that Meloni was looking to put her stamp on key positions.The move follows criticism from Meloni’s aides over the way previous governments dealt with Italy’s main financial dossiers, which led Rome to appoint on Thursday economist Riccardo Barbieri as Treasury director general, replacing Alessandro Rivera in the position.These dossiers include the privatisation of national airline ITA Airways and efforts to relaunch bank Monte dei Paschi di Siena (MPS), which is 64%-owned by the Treasury following a 2017 bailout that cost taxpayers 5.4 billion euros ($5.85 billion).Under Giorgetti’s plan, the influential Treasury department within the ministry would be split into two units, said two political sources who asked to not be named.One of the units would mainly be devoted to macroeconomic policies and European and international relations, while the other would handle state-controlled firms, public assets and financial regulation.The newly created department is expected to have its own director general.The reorganisation plan requires time to be implemented and Barbieri will continue to lead the whole Treasury department under its current set-up in the meantime, one of the sources said.A number of other senior roles will also be up for grabs in the coming weeks, including chairmen and CEOs of state-controlled energy groups ENI (BIT:ENI) and Enel (BIT:ENEI).The boards of MPS, defence group Leonardo and power grid Terna are also due for renewal in the next few months, while a new Bank of Italy governor will have to be found when Ignazio Visco finishes his term at the end of October.($1 = 0.9234 euros) More

LONDON (Reuters) – Global stocks headed for their first weekly loss of the year so far as markets switched focus from China reopening to recession risks driven by central bank rate hikes. The MSCI World Price Index edged 0.3% higher by midday in London, boosted by gains in Asia, after Chinese authorities said on Thursday that the number of COVID-19 patients needing critical care in hospitals had peaked. But the all-country equity gauge was also on course to notch up a loss of around 1.5% for the week.Wall Street’s benchmark S&P 500 was on track for its worst weekly drop in more than a month, of around 2.5% at Thursday’s close. S&P futures traded flat ahead of the market open. Some analysts say equities have been showing too much optimism about an economic improvement, as both the U.S. Federal Reserve and the European Central Bank remain resolute about tightening monetary policy to battle inflation. Europe’s STOXX 600 share index, which rose 0.5% on Friday, has during the first three weeks of January, recovered almost half of 2022’s 12.9% loss. That bounce has been driven by China reopening trades and easing natural gas prices.”The European market remains unprepared for the wave of pain that is coming from credit conditions tightening,” Andreas Bruckner, European equity strategist at Bank of America (NYSE:BAC), said. ECB President Christine Lagarde told the World Economic Forum’s Davos gathering on Thursday that the bank would stay the course with raising interest rates. The Fed also looks set to sustain its tightening campaign, even after reports on Wednesday showed retail sales, producer prices and production at U.S. factories fell more than expected in December. On Thursday, U.S. weekly jobless claims were also lower than expected, pointing to a tight labour market, which sent the S&P 500 0.8% lower. Boston Fed President Susan Collins said the central bank would probably need to raise rates to “just above” 5%, then hold them there, while Fed Vice Chair Lael Brainard said that despite the recent moderation in inflation, it remains high and “policy will need to be sufficiently restrictive for some time”.Government bond markets and riskier assets, such as equities and high-yield credit, had kicked off 2023 driven by “contradictory” narratives, Artemis fixed income investment manager Juan Valenzula said. “We’ve had a monumental rally in government bonds,” he said, “based on the idea that the impact of rate hikes makes a recession more likely”. “Risk assets are not reacting in a coherent manner,” he added. “They are focusing on a different economic outlook. The 10-year US Treasury yield hit its lowest since mid-September earlier this week, as traders bet downbeat economic data would force the Fed to slow down the pace of its interest-rate hikes.The key 10-year yield added around 4 basis points to 3.435% on Friday but remained far below the high of around 4.3% struck in October. Bond yields fall as prices rise.The dollar index – which measures the U.S. currency against six peers, including the euro and yen – rose 0.3% to 102.34, holding within sight of Wednesday’s 7-1/2-month low.The Japanese yen, which has been volatile as traders debate when the Bank of Japan might scrap its controversial policy of buying vast quantities of government bonds to suppress borrowing costs, fell 1.2% to 129.97 per dollar. Elsewhere, crude oil prices continued to rise. Brent futures for March delivery were 30 cents, or 0.35%, higher at $86.46 a barrel, while U.S. crude advanced 49 cents to $80.82 per barrel, a 0.6% gain. More