Economy

WASHINGTON (Reuters) – The Federal Communications Commission (FCC) plans to create a new space bureau to address the growing number of satellite launches and policy issues, agency chair Jessica Rosenworcel said.The FCC plans to restructure its International Bureau into a new Space Bureau and a standalone Office of International Affairs. “The satellite industry is growing at a record pace, but here on the ground our regulatory frameworks for licensing them have not kept up,” Rosenworcel said Thursday, adding the agency over the past two years the agency has received applications for 64,000 new satellites. More

Investors had fully priced in the possibility of the three-quarter point increase. Money markets showed traders now expect UK rates to peak at 4.6% by next September, compared to expectations of 4.8% just two days ago.The pound tumbled after the decision, while London-listed stocks fell and UK bonds came under pressure. MARKET REACTIONFOREX: Sterling fell as much as 2.0% against the dollar to a session low of $1.1162. Against the euro, it was down 1.25% at 87.25 pence.STOCKS: The FTSE 100 was last down 0.6%, having traded 0.7% lower ahead of the decision, while the mid-cap FTSE 250 index dropped 1.5%. UK bank stocks fell 0.8% BONDS: Yields on the two-year gilt were last up 1 basis points at 3.041%, compared with 3.064% before the BoE announced its decision.COMMENTSKIT JUCKES, CHIEF GLOBAL FX STRATEGIST, SOCIÉTÉ GÉNÉRALE, LONDON “They raised rates as expected, but the message they are sending certainly isn’t terribly friendly to sterling. At the end, what matters is what people feel about growth and the idea of a two year long recession isn’t going to help the currency.”STUART COLE, HEAD MACRO ECONOMIST, EQUITI CAPITAL, LONDON”Going forward, it may not be too long before the monetary policies pursued by the BoE and Fed start to diverge. The market has already reduced its expected peak interest rate; if we get a more austere than expected fiscal statement on 17th November I think we will see that terminal rate lowered some more.For now, the implication of today’s outcome is likely to be negative for sterling but supportive for gilts, and we are already seeing sterling react negatively to the implications of the BoE’s messaging.” ADAM JONES, WEALTH MANAGER, HOTTINGER, LONDON”We were slightly surprised by the BoE’s decision to hike by 75bps given the recent softening in macro data. Rates markets are pricing another 50bps hike at each of the December and February meetings, although still reflect a lower terminal rate than just a week ago. To us, this suggests growing concern about the outlook for the UK economy.” RICHARD CARTER, HEAD OF FIXED INTEREST RESEARCH AT QUILTER CHEVIOT, LONDON”Markets had widely anticipated the hefty rate hike, particularly given the bank has had to make the move prior to the government’s fiscal statement after it was delayed until later this month.”However, this latest move is actually significantly lower than it could have been given the furore caused by the mini-budget just a matter of weeks ago. The change of Prime Minister appears to have restored some calm to UK bond markets, and the BoE could take a smaller step as a result.”JEREMY BATSTONE-CARR, EUROPEAN STRATEGIST AT RAYMOND JAMES, FRANCE”After the political and economic upheaval of the last few weeks, the Bank of England’s move to increase the base interest rate to 3% is an attempt to steady the ship, even if this requires sailing through a recessionary storm in order to get to the calmer waters on the other side.”There is no doubt we are now looking down the barrel of a recession, which is unfortunately a necessary by-product of the policies required to restore fiscal credibility. The aim is stability in the long-term, as further highlighted by the bank beginning quantitative tightening, with the bank hoping the economy will rise out of the recession by this time next year.”JAN VON GERICH, CHIEF ECONOMIST, NORDEA, HELSINKI”What caught my eye is that while some central banks are saying they don’t know how high rates will go, the BoE is saying the peak is lower than what the market is pricing.”Sterling could face some pressure against the dollar at least.”JANE FOLEY, HEAD OF FX STRATEGY, AT RABOBANK, LONDON”The pound has been slipping against the resurgent USD all morning but notably it has fallen against the EUR also following the BoE announcement and the perception that this was a dovish hike. “With two members of the (Monetary Policy Committee) not willing to endorse the 75 bps rate hike this month and given the likelihood that the UK economy will be in recession the next time the BoE meets, the prospects of another 75-bps hike from the bank could appear to be too difficult an ask.”DAVID OWEN, CHIEF ECONOMIST, SALTMARSH ECONOMICS, LONDON”The move is as expected. We’re still looking over the next couple of years for rates to go to over 5%.”What happens to the pace of quantitative tightening will be important.”ANDREW ALDRIDGE, PARTNER AT DEEPBRIDGE CAPITAL, LONDON”Quelling rampant inflation and kickstarting a slowing economy left the Bank facing a difficult balancing act, with today’s interest rate hike to 3% hardly surprising in this context.”Fiscal and monetary policy remains murky as we move towards year close, and this environment poses significant challenges for investors and financial advisers in the public markets.” More

The Fed raised its main interest rate by another 75 basis points on Wednesday and chair Jerome Powell said the battle against inflation would require borrowing costs to rise “higher than previously expected”, leading investors to price in more ECB hikes too.But Lagarde said the ECB, which itself raised rates by 75 basis points last week, could not simply mimic the Fed because economic conditions were different in the 19-country euro zone – a point also underscored by ECB board member Fabio Panetta and Bank of Italy governor Ignazio Visco.”We have to be attentive to potential spillovers,” Lagarde told a conference in Riga. “We are not alike and we cannot progress either at the same pace (or) under the same diagnosis of our economies.”Lagarde conceded the ECB was “influenced by the consequences” of Fed action through financial markets and especially the euro’s exchange rate, which was falling against the U.S. dollar on Thursday. “Clearly the exchange rate matters and has to be taken into account in our inflation projections,” Lagarde said, repeating her commitment to bring inflation down to the ECB’s 2% target.In his own speech, Panetta said the euro zone was more vulnerable than the United States to a global economic slowdown and higher energy prices, and that the Fed’s tightening was already taking its toll, meaning the ECB needed to be cautious.Specifically, he argued that the ECB should avoid raising interest rates too fast because that could excessively hurt economic growth, home prices and the financial markets.”If these bigger-than-expected increases are interpreted as signalling a higher terminal rate, rather than simply frontloading the normalisation, we could have a stronger impact on financing conditions – and ultimately on economic activity – than intended,” Panetta told an ECB event.Bank of Italy governor Visco also said on Thursday the ECB should not be expected to react in the same way as the Fed and backed market expectations for lower rates in the euro zone than in the United States.His Portuguese peer Mario Centeno went even further by saying the ECB had already completed a large part of the rate hikes it sees as needed after 200 basis points worth of increases since July, which have left the deposit rate at 1.5%.But several other members of the ECB’s policy-making Governing Council continue to take a more aggressive view. Speaking alongside Lagarde, Latvian central bank governor Martins Kazaks said rates needed to rise “much higher” and there was no need to pause the hikes at the turn of the year. Bundesbank President Joachim Nagel also said the ECB should not refrain from further hike rates. Borrowing costs for euro zone companies and consumers have started to rise from record-low levels.The interest rate that banks demand from companies rose by 55 basis points in September, the biggest monthly increase since the euro was created, to stand at 2.41%, ECB data showed on Thursday. This was the highest since 2015. More

HONG KONG (Reuters) – China will keep the yuan currency stable and increase flexibility of the yuan exchange rate, the central bank governor said on Thursday. Yi Gang, governor of the People’s Bank of China (PBOC), also said it is necessary to deepen financial reform and strengthen and improve modern financial supervision, according to a statement from the PBOC. More

Initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 217,000 for the week ended Oct. 29, the Labor Department said on Thursday. Data for the prior week was revised to show 1,000 more applications filed than previously reported. Economists polled by Reuters had forecast 220,000 claims for the latest week.Though there has been an increase in layoffs in interest rate-sensitive sectors of the economy like finance, technology and housing, employers have generally been hoarding workers as labor remains scarce in some service industries. The U.S. central bank on Wednesday raised its policy rate by another three-quarters of a percentage point to a range of 3.75% to 4.00%, but signaled future increases in borrowing costs could be made in smaller steps to account for the “cumulative tightening of monetary policy” it has enacted so far. It was the fourth straight 75-basis-point rate hike as the Fed fights to bring inflation back to its 2% target. Fed Chair Jerome Powell told reporters that the labor market “remains extremely tight,” and “continues to be out of balance.”Job openings unexpectedly rose in September, with 1.9 job openings for every unemployed person at the end of that month.The claims report also showed the number of people receiving benefits after an initial week of aid, a proxy for hiring, rose 47,000 to 1.485 million in the week ending Oct. 22. The data has no bearing on October’s employment report, scheduled to be released on Friday, as it falls outside the survey period.According to a Reuters survey of economists, nonfarm payrolls likely increased by 200,000 jobs in October. The economy created 263,000 jobs in September. Domestic demand barely grew in the third quarter even as gross domestic product rebounded after contracting in the first half of the year, largely driven by a shrinking trade deficit.Though unemployment rolls remain small, there has been an uptick in layoffs. A separate report from global outplacement firm Challenger, Gray & Christmas on Thursday showed job cuts announced by U.S.-based employers increased 13% to 33,843 in October, the highest since February 2021.There was a jump in planned layoffs in construction, technology, industrial goods and warehousing industries.”We are beginning to see more job cut activity in the fourth quarter, historically when the bulk of cuts occur, as companies finalize budgets and plans,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas. Still, announced layoffs so far this year are down 16% to 243,338, the lowest January-October total since Challenger began tracking the series in 1993. Employers announced plans to hire 237,380 workers last month compared to 380,014 in September. More

LONDON, Nov 3 (Reuters) – The Bank of England raised interest rates to 3% on Thursday from 2.25%, its biggest rate rise since 1989 as it warned of a “very challenging” outlook for the economy.The central bank forecasts inflation will hit a 40-year high of around 11% during the current quarter, but that Britain has already entered a recession that could potentially last two years – longer than during the 2008-09 financial crisis.Thursday’s decision – the biggest in 33 years apart from a failed attempt to support the pound on Black Wednesday in 1992 – was in line with economists’ expectations in a Reuters poll, but was not unanimous. Two policymakers, Silvana Tenreyro and Swati Dhingra, voted for smaller increases of a quarter and half a percentage point respectively, as the economy was probably already in recession.But the majority of the Monetary Policy Committee said rates would need to rise higher still, although probably not as high as the 5.2% which was priced into financial markets when the BoE finalised its forecasts.”Further increases in Bank Rate may be required for a sustainable return of inflation to target, albeit to a peak lower than priced into financial markets,” the BoE said in unusually specific guidance to investors.Just before Thursday’s policy decision, markets expected rates to peak at around 4.75%. “The Committee continues to judge that, if the outlook suggests more persistent inflationary pressures, it will respond forcefully, as necessary,” the MPC added.Central banks across the Western world are responding to similar challenges. Inflation has rocketed over the past year due to residual labour shortages and supply-chain bottlenecks since the COVID pandemic and – in Europe’s case – a big increase in energy bills since Russia invaded Ukraine in February. The U.S. Federal Reserve raised its key interest rate by 0.75 percentage points on Wednesday to a range of 3.75-4.0%, and the European Central Bank increased its deposit rate by the same amount to 1.5% last week. The Fed said future rate rises might come in smaller steps. The BoE has faced weeks of political and financial market turmoil since its last rate rise on Sept. 22, as just a day later former Prime Minister Liz Truss’s government launched an unfunded 45 billion-pound ($52 billion) package of tax cuts that received a damning response from investors.The policy was aimed at staving off recession and spurring long-term growth – but instead it pushed sterling to a record low against the U.S. dollar, forced the BoE to prop up the bond market and led to Truss’s resignation.Markets are now more stable, with British government borrowing costs broadly back to where they were before the turmoil. On Tuesday, the BoE was able to begin selling bonds from its 838 billion pound quantitative easing stockpile.However, the fundamental problems facing the British economy remain. Consumer price inflation returned to a 40-year high of 10.1% in September, and is likely to have risen further last month when regulated energy prices rose – despite costly subsidies to limit the increase. At the same time, the economy is slowing sharply, as soaring inflation limits consumer spending on non-essential items.The BoE estimates that Britain’s economy entered recession in the third quarter of 2022 and that the recession will last until the middle of 2024, causing the economy to shrink by 2.9%. Unemployment would rise steadily to 6.4% by late 2025, up from 3.5% now, its lowest since the mid-1970s.If the BoE does not raise rates further, the recession would be shorter – with a quarter of positive growth in the middle, and a cumulative loss of output of around 1.7%But inflation would be slightly slower to fall, remaining just above 2% in two years’ time, compared to some way below if the BoE raises rates as much as markets had previously expected.The BoE’s policymaking is made especially tricky by a lack of clarity over future government policy.While most of Truss’s tax cuts have been reversed, new Prime Minister Rishi Sunak has indicated there will need to be a squeeze on public spending and potentially higher taxes, the scale of which will not be clear until a fiscal statement on Nov. 17.Energy subsidies are due to cease in their current form in April, but the BoE in its forecasts assumed they would continue at roughly half their current size, avoiding a sharp further rise in inflation next year. More

LONDON (Reuters) – The European Union sought on Thursday to reassure international companies it would seek to align its sustainability disclosure rules with a global initiative, after warnings from regulators over fragmenting capital markets.The EU is finalising mandatory environment, social and governance (ESG) disclosures for about 50,000 companies across the bloc to help stop ‘greenwashing’ or exaggerated climate-friendly claims to attract investors.The International Sustainability Standards Board (ISSB) is writing global baseline standards for corporate disclosures on climate for use in non-EU countries such as Britain, while the United States is working on its own disclosure rules.”I am conscious that Europe is ahead, leading the way and we want to show leadership, but we are also very conscious of the need for global coordination and cooperation,” Mairead McGuinness, the EU’s financial services commissioner, said.The EU’s disclosures, drafts of which are due to be completed this month, are being built “on what’s already there, and we will contribute to global standardisation initiatives,” McGuinness told a Central Bank of Ireland conference.Companies and regulators have said that in the absence of a common approach by the EU and ISSB to terminology, it will be harder for investors to compare companies.”We want to see as much alignment as possible with the work of the International Sustainability Standards Board, even though as I have said Europe is likely to go further and faster to meet our more higher ambitions on climate,” McGuinness said.She is moving to the next stage of the EU’s green plans by assessing how best to encourage sustainable retail lending for small firms and households.”With the support of the European Banking Authority, we are examining what needs to be done to promote the growth of green loans and green mortgages,” McGuinness said. More

“I don’t think that we should expect really to react (in) the way the Fed has done,” the Bank of Italy’s governor told an event at the OMFIF’s think-tank. He also said market expectations for the ECB’s deposit rate to peak at 3% next year were “in the range” once that rate was corrected for the inflation premium, putting it “a little bit below that”. More