Economy

BRASILIA (Reuters) -Brazil’s central bank on Wednesday held interest rates at a nearly six-year high for the second policy meeting in a row, noting that economic growth seems to be slowing but inflation remains high.The bank’s rate-setting committee, known as Copom, left its benchmark Selic interest rate at 13.75%, as expected by all 34 economists polled by Reuters. Economists and traders have been watching for clues about when rates might start falling again. Policymakers paused an aggressive tightening cycle in September after 12 consecutive increases lifted rates from a 2.0% record low in March 2021.The central bank again stressed on Wednesday that its strategy involves keeping the Selic rate at this level for a “sufficiently long period” to bring inflation back to “around its targets.”In their statement of Wednesday’s rate decision, Copom said indicators since their September meeting suggested “more moderate” economic growth in Brazil, but consumer inflation remains “high.”Rafaela Vitoria, chief economist at Banco Inter, said the statement seemed harsh in light of the recent improvement in inflation, with policymakers warning again that they may resume hikes if needed. “The disinflation outlook is more positive, with a slowing economy and cheaper commodities. I think inflation will continue to fall faster than we expected,” she said, adding that expects a first rate cut as early as March.Higher borrowing costs and energy tax cuts have contributed to three straight months of deflation through September. In the 12 months through mid-October, inflation fell to 6.85%.While still above the 3.5% target for this year, inflation has eased sharply after running in double digits from September 2021 until July, fueled by surging commodity prices on the back of the Ukraine war.In one of the few changes to the statement, the central bank indicated that 2023 and 2024 are now equally weighted on its policy horizon.Policymakers held their inflation outlook for this year unchanged at 5.8%, but raised their forecast for next year to 4.8%, from 4.6% last month, compared to a 3.25% target. For 2024, they raised the inflation forecast to 2.9%, from 2.8% last month, compared to a 3% target. The outlook for government spending, which Copom again flagged as a potential upside risk for inflation, should be clearer after Sunday’s presidential election.Polls show former leftist President Luiz Inacio Lula da Silva narrowly leading right-wing incumbent Jair Bolsonaro. Both have made expensive promises on the campaign trail, including the extension of more generous welfare payments, which would tweaking a constitutional spending cap. After a law established the formal autonomy of the central bank last year, central bank chief Roberto Campos Neto is set to serve out his term through 2024, regardless of the election’s result. More

SK Hynix has called new US efforts to limit technology exports to China “painful” as the company slashed capital spending over the next year to battle “unprecedented” slowing demand for chips used in electronics.The South Korean chipmaker yesterday cut its 2023 capital expenditure by more than 50 per cent after reporting a 60 per cent drop in third-quarter operating profit owing to higher inflation and sluggish global growth, missing market expectations. SK Hynix broke ranks among South Korean companies and admitted publicly that, despite the waivers in place for now, in the future it might not be able to straddle the Sino-American divide.The chipmaker said it expected difficulties upgrading its plant in Wuxi, China, as a result of Washington’s latest export controls targeting China’s semiconductor industry. The Wuxi plant accounts for nearly half of SK Hynix’s production of DRam chips used in computers, smartphones and servers. “Recently, a lot of geopolitical issues are affecting our business decision-making and the related restrictions are painful to us,” Noh Jong-won, the company’s president, told analysts during a conference call. The South Korean manufacturer followed rivals including US-based Micron Technology and Japan’s Kioxia Holdings in cutting production after memory chip prices slid about 20 per cent in the third quarter.Thanks for reading FirstFT Asia. What do you think about US efforts to limit technology exports to China? Tell me what you think at [email protected] and your response may appear in a future edition of FirstFT. — Emily Five more stories in the news1. Meta shares fall, warns of ‘near-term challenges’ to revenue Meta reported a deepening slowdown and warned that fourth-quarter revenues could come in lower than expected, as Big Tech groups continue to face a reckoning from a digital advertising slump and tough macroeconomic conditions. Shares in Big Tech stocks tumbled on Tuesday after Alphabet reported an unexpectedly severe slowdown.2. Singapore proposes crypto consumer protection rules In Singapore, which has a record of being a welcoming environment for the crypto industry, regulators have proposed restricting retail investors from borrowing money or using credit cards to buy cryptocurrencies and from lending out their digital tokens in search of yields. The move comes after a series of high-profile crypto failures linked to the city-state.Related read: One year after its record-breaking launch, the world’s first exchange traded fund tracking the price of bitcoin has lost a record amount of investor cash.3. Iranians marking Amini’s death clash with police Iranian riot police clashed with protesters as thousands of people took to the streets and gathered at university campuses across the Islamic republic to mark 40 days since Mahsa Amini died in police custody. The internet was shut down in Amini’s hometown of Saqqez as the authorities sought to quash unrest.

An unveiled woman joins a large crowd making its way to Amini’s grave in Saqqez to mark 40 days since her death in police custody © UGC/AFP/Getty Images

4. Netherlands accuses China of operating ‘illegal’ police stations Local broadcaster RTL Nieuws reported this week that offices in Amsterdam and Rotterdam that were set up to help Chinese nationals with administrative tasks, such as obtaining official documents, had also been used to track and harass critics of Beijing.5. China shipping group allowed stake in Germany’s biggest seaport The German government has agreed to allow Chinese shipping conglomerate Cosco to take up to a 25 per cent stake in Tollerort container facility — one of several terminals that comprise the port of Hamburg. The deal is a compromise, agreed at the insistence of German chancellor Olaf Scholz, after opposition on national security grounds.The day aheadSouth Korea Q3 GDP figures Third-quarter growth data will be released at 8am local time. The country’s economy is expected to have slowed to a near halt, according to a Reuters poll of economists. (Reuters) Central bank rate setting meetings The Bank of Japan’s rate-setting committee begins its two-day meeting with the country’s ultra-loose policy expected to be maintained. The European Central Bank, meanwhile, is set to announce its next monetary policy move today with expectations high for a 75 basis point increase. Results Earnings season marches on with the following companies among those set to report results: Amazon.com, Anglo-American, Anheuser-Busch InBev, Apple, Carlsberg, Caterpillar, Comcast, Credit Suisse, Danone, Fujitsu, HelloFresh, Intel, Lufthansa, Lloyds Banking Group, Mastercard, McDonald’s, Merck & Co, Samsung, Shell, Shopify, Southwest Airlines, TotalEnergies, Unilever and more.Thank you to readers who took our poll yesterday. Among respondents, 47 per cent said they have adjusted their spending habits due to rising inflation. What else we’re readingAsian family offices buy into crypto Weak returns from traditional portfolios have made digital assets more attractive to Asian family offices, despite speculation about whether crypto prices have bottomed out. “We never lost interest in [crypto],” said Keith Wong, chief executive of Winland Wealth Management, a Hong Kong-based multifamily office.Pakistan seeks ‘justice’ after floods When the Indus river burst its banks during heavy rains and flash flooding in late August, the disaster put the country at the forefront of an international debate about how to pay for adaptation to the ravages of global warming — and who should pick up the bill.How Bolsonaro built a durable right-wing movement With Brazilians heading to the polls on Sunday, incumbent president Jair Bolsonaro is closing the gap on favourite Luiz Inácio Lula da Silva. Whether he wins or loses, Bolsonaro has forged a durable right-wing movement that blends Brazilian conservatism and nationalism with American-style culture war politics and social media battles.What does the music business do with Kanye West? The world’s largest music companies are scrambling to contain the fallout from a furore over anti-Semitic comments made by Kanye West, condemning the rapper’s remarks despite continuing to host his songs on their platforms.Who’s who in Team Sunak Rishi Sunak yesterday became Britain’s third prime minister in the space of two months and immediately started to assemble a team to tackle “the profound economic crisis” facing the country. Political correspondents Jim Pickard and Sebastian Payne explain who’s who in the new “unity cabinet”.FilmSeemingly banned merely for spotlighting the hard lives of the rural poor, the sleeper hit Return to Dust appears a snapshot of China’s political climate — and a symbol of the vulnerability of art. More

WELLINGTON (Reuters) -New Zealand’s central bank governor, Adrian Orr, said on Thursday that while the country was relatively well positioned to meet challenges inflation remains too high. Orr added that the central bank had its eyes firmly focused on meeting its inflation target of 1% to 3%.”New Zealand is relatively well positioned but inflation is still too high in an absolute sense,” he said in a speech to the Institute of Finance Professionals of New Zealand in Auckland. The speech was also posted on the central bank’s website.New Zealand’s central bank in early October lifted interest rates to a seven-year high and promised more pain to come as it struggles to cool inflation at near three decade highs in an over-stretched economy.Orr added that New Zealand’s financial system remains well placed to support the economy — with banks’ capital and liquidity positions strong, and profitability and asset quality high.”However, there will be stresses in business and amongst households as interest rates and asset prices adjust,” he said.New Zealand’s central bank is due to release its twice yearly Financial Stability report on Nov. 2. More

NEW YORK (Reuters) – Companies that are considering acquisitions should use a slowdown in deals to scope out potential targets, Anu Aiyengar, global co-head of mergers and acquisitions at JPMorgan Chase & Co (NYSE:JPM), said Wednesday. M&A activity has stalled in the face of uncertainty over valuations, interest rates, inflation, recession prospects, consumer demand and regulation, Aiyengar told an Axios conference in New York. Still, companies should build relationships with potential targets so they can be ready to strike when conditions improve, she said.Aiyengar said it was an ideal time to “proactively reach out to start a relationship so that whenever it is that the seller decides to sell, you’re the first call.”She also expects a greater share of deals in healthcare after an abundance of technology transactions in recent years. Healthcare M&A has typically risen during historical downturns, she said.For large companies or private-equity firms sitting on cash that want to buy, “this is a great environment” because they are able to pay for acquisitions with mostly cash, Aiyengar said. The executive opened with a comment on Elon Musk’s buyout of Twitter Inc (NYSE:TWTR). “The company, our client Twitter, plans to close the deal on the previously agreed price and terms,” Aiyengar said. The closing deadline is on Friday and JPMorgan and Goldman Sachs (NYSE:GS) are Twitter’s financial advisers. More

In the latest of a series of campaign-influenced economic speeches ahead of Nov. 8 U.S. congressional elections, Yellen will discuss the growth of Ohio manufacturing brought about by recent legislation enabling hundreds of billions of dollars’ worth of investments in infrastructure, semiconductors, research and clean energy technology.Yellen will join Senator Sherrod Brown, an Ohio Democrat, to deliver at the opening of the Manufacturing Advocacy and Growth Network (MAGNET), a Cleveland-based non-profit incubator for small and midsized manufacturers.She also will hold a roundtable discussion with Cleveland-area manufacturers, the Treasury said.Among investments she is planning to highlight are Intel Corp (NASDAQ:INTC)’s planned semiconductor manufacturing plant, an initial $20 billion investment that could grow to $100 billion to become the world’s largest chip facility.Yellen also plans to discuss over $100 billion in private sector funding for electric vehicle production, battery factories, and charging infrastructure made possible by infrastructure and clean energy legislation.Yellen met with clean power and utility trade groups on Wednesday in the first of several meetings with industry, environmental and labor stakeholders to collect input on the Treasury’s work to develop detailed guidance on some $270 billion worth of clean energy tax credits, including local content and prevailing wage rate requirements. More

Sen. Sherrod Brown this week sent a letter to Fed Chair Jerome Powell, expressing concern about the impact interest rate hikes could have on employment.
“Potential job losses brought about by monetary over-tightening will only worsen these matters for the working class,” the Ohio Democrat said.
The last time the Fed raised interest rates, from 2016 to December 2018, Powell withstood withering criticism from former President Donald Trump.
Powell has in the past been generally dismissive when asked if political pressure can factor into decision making.

Jerome Powell, chairman of the US Federal Reserve, speaks during a Fed Listens event in Washington, D.C., US, on Friday, Sept. 23, 2022.
Al Drago | Bloomberg | Getty Images

Political questioning of Federal Reserve Chair Jerome Powell about the central bank’s policy moves is intensifying, this time from the other side of the aisle.
No stranger to political pressure, the Fed chief this week found himself the focus of concern in a letter from Sen. Sherrod Brown. The Ohio Democrat warned in the letter about potential job losses from the Fed’s rate hikes that it is using to combat inflation.

“It is your job to combat inflation, but at the same time you must not lose sight of your responsibility to ensure that we have full employment,” Brown wrote. He added that “potential job losses brought about by monetary over-tightening will only worsen these matters for the working class.”
The letter comes with the Fed less than a week away from its two-day policy meeting that is widely expected to conclude Nov. 2 with a fourth consecutive 0.75 percentage point interest rate increase. That would take the central bank’s benchmark funds rate to a range of 3.75% to 4%, its highest level since early 2008 and represents the fastest pace of policy tightening since the early 1980s.
Without recommending a specific course of action, Brown asked Powell to remember the Fed has a two-pronged mandate — low inflation as well as full employment — and requested that “the decisions you make at the next FOMC meeting reflect your commitment to the dual mandate.”
The last time the Fed raised interest rates, from 2016 to December 2018, Powell faced withering criticism from former President Donald Trump, who on one occasion called the central bankers “boneheads” and seemed to compare Powell unfavorably with Chinese President Xi Jinping when he asked in a tweet, “Who is our bigger enemy?”
Democrats, including then-presidential hopeful Joe Biden, criticized Trump for his Fed comments, insisting the central bank be free of political pressure when formulating monetary policy.

Standing firm

Brown’s stance was considerably more nuanced than Trump’s — though equally unlikely to move the dial on monetary policy.
“Chair Powell has made it pretty clear that the necessary conditions for the Fed to achieve its full employment objective is low and stable inflation. Without low and stable inflation, there’s no way to achieve full employment,” said Mark Zandi, chief economist for Moody’s Analytics. “He’ll stick to his guns on this. I don’t see this as having any material impact on decision making at the Fed.”
To be sure, while it’s most likely a reaction to a changing tone from some Fed officials and a slight shift in the economic data, market expectations for monetary policy have altered a bit.

Traders have made peace with the three-quarter point hike next week. But they now see just a 36% chance for another such move at December’s Federal Open Market Committee meeting, after earlier rating it a near 80% probability, according to CME Group data.
That change in sentiment has come following cautionary remarks about overly aggressive policies from several Fed officials, including Vice Chairman Lael Brainard and San Francisco regional President Mary Daly. In remarks late last week, Daly said she’s looking for a “step-down” point where the Fed can slow the pace of its rate moves.
“The democratization of the Fed is the issue for the market, how much power the other members have versus the chairman. It’s difficult to know,” said Quincy Krosby, chief equity strategist at LPL Financial. Regarding Brown’s letter, Krosby said, “I don’t think it’s going to affect him. … It’s not the pressure coming from the politicians, which is to be expected.”
A Fed spokesman acknowledged that Powell received the Brown letter and said normal policy is to respond to such communication directly. In the past, Powell has been generally dismissive when asked if political pressure can factor into decision making.

Employment data will be key

Along with the nudging from Brown, Powell also has faced criticism from others on Capitol Hill.
Sen. Elizabeth Warren, the ultra-progressive Massachusetts Democrat and former presidential contender, has called Powell dangerous and recently also warned about the impact rate hikes could have on employment. Also, Sen. Joe Manchin, D-W. Va., last year criticized Powell for what was seen as the Fed’s flat-footed response to the early rise of inflation.
“I don’t necessarily think that Powell will buckle to the political pressure, but I’m wondering whether some of his colleagues start to, some of the doves who have become hawkish,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “Employment’s fine now, but as months go on and growth continues to slow and layoffs begin to increase at a more notable pace, I have to believe that the level of pressure is going to grow.”
Payroll gains have been strong all years, but a number of companies have said they are either putting a freeze on hiring or cutting back as economic conditions soften. A slowing economy and stubbornly high inflation is making the backdrop difficult for the November elections, where Democrats are expected to lose control of the House and possibly the Senate.
With the high stakes in mind, both markets and lawmakers will be listening closely to Powell’s post-meeting news conference next Wednesday, which will come six days before the election.
“He knows the pressure. He knows that the politicians are increasingly nervous about losing their seats,” Krosby said. “There’s very little he could do at this point, by the way, to help either party.”

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The eurozone’s repo and money markets are becoming more dysfunctional and threaten the European Central Bank’s ability to push its monetary policies, an influential trade group has warned.The International Capital Market Association, which represents the bond market’s biggest traders, said it had become concerned about the functioning of Europe’s €10tn repo markets because of a scarcity of liquid assets, and excess liquidity in the region’s banking system.ICMA’s warning comes amid fears climbing global interest rates and poor trading conditions have heightened the risk of market instability. UK gilt markets descended into chaos last month after the government’s ill-fated “mini” Budget of unfunded tax cuts sharply worried investors, sending their yields soaring — although this was because of a lack of buyers of gilts, rather than excess liquidity.Repo markets are a crucial source of short-term funding and collateral for banks, helping them meet margin requirements for derivatives trades. The European Central Bank also sees it as a critical mechanism for transmitting monetary policy.ICMA said that while the imbalance in eurozone repo markets has led to ructions, notably in March 2020 at the onset of the coronavirus pandemic, the normalisation of interest rates increased the potential for bigger and more frequent market dislocations.“Rising dysfunction in the market could imperil the transmission of monetary policy,” ICMA wrote in a letter to the ECB’s director-general of market operations, signed by division heads at BlackRock, Axa Investment Managers, Barclays and UBS.“We’ve moved from an environment where you’ve needed to inject liquidity on a large scale to questioning at what pace that should be reduced,” Bryan Pascoe, chief executive of ICMA, told the Financial Times. “There are contradictory pressures of rates needing to move higher while avoiding demand destruction. It’s a fine balancing act.”ICMA recommended the ECB consider other measures to help markets, such as a reverse repo facility similar to the one introduced by the Federal Reserve in 2013. In it, the US central bank sells securities to counterparties and buys them back later, similar to a short-term loan. ICMA also highlighted the Swiss National Bank’s plan to issue tradable Treasury bills, saying it was simpler to create than a reverse repo facility and “would have the additional advantage of not tying up bank balance sheets”.Germany’s debt agency this month sought to address the scarcity problem by creating more government debt securities that it can lend out to investors via repo markets.The ECB has also taken some steps to address the issue, increasing the amount of cash that can be used as collateral in its securities lending facility in December and removing a zero per cent cap on interest for government deposits last month.The central bank also discussed the idea of launching a reverse repo facility or issuing its own debt certificates at a meeting last month of its money market contact group, a forum for discussions with financial institutions. But the ECB has since pushed back against the idea that it is planning to imminently adopt such proposals.The ECB, which declined to comment on the ICMA letter, has acquired a €5tn portfolio of mostly government bonds over the past decade, which has increased excess liquidity at banks and created a scarcity of high-quality securities. This has put downward pressure on risk-free rates at a time when the central bank is trying to raise them. Konstantin Veit, portfolio manager at Pimco, said: “As there are limited safe options out there to invest in, this leads to collateral scarcity and drives a large part of the money market to trade well below the ECB’s deposit rate.”Veit said he expected the ECB to consider creating a similar vehicle to the Fed’s reverse repo facility or to even issue its own debt, while adding that such a move was not imminent.ICMA warned “pressures on short-term markets and collateral scarcity could be further accentuated” by the changes expected to be announced by the ECB this week to its €2.1tn of ultra-cheap loans to banks, known as targeted longer term refinancing operations (TLTRO).The ECB is expected to encourage banks to repay a big chunk of TLTRO loans in December by making them less attractive. However, officials think this should help to ease the scarcity of high-quality bonds by freeing up the collateral pledged against the loans and reducing the €5tn of excess liquidity in the euro area. More

Employers are taking a variety of approaches to union campaigns.An Amazon Labor Union rally on Staten Island in April.DeSean McClinton-Holland for The New York TimesMaterials being prepared for workers seeking to unionize Starbucks stores.Tony Luong for The New York TimesThere has been a surge in labor organizing among baristas at Starbucks, warehouse workers at Amazon and retail workers at Apple and Trader Joe’s. They have made their voices heard, though only a fraction of each group has joined a union, and some have rejected unionization.We’d like to hear the voices of those farther from the front lines — managers and white-collar workers at those companies, particularly those at corporate headquarters. If you fit this profile, please consider responding to the questions below. Your answers may help us better understand the state of labor relations and inform our reporting.We won’t publish your name or any part of your submission without contacting you first. If you prefer to share tips or thoughts confidentially, you can do so here.Tell us how your employer is dealing with union efforts. More