Economy

OTTAWA (Reuters) -Inflation in Canada remains “too high” but is headed in the right direction, a Bank of Canada official said on Tuesday, adding that the central bank will do whatever is needed to bring price increases back to target.Deputy Governor Paul Beaudry, speaking to university students in Waterloo, Ontario, said while some have suggested a recession might be needed to tame climbing prices, the central bank believed it could lower the risk of a hard landing by clearly communicating its intentions.”In August, inflation stood at 7%. While we’re headed in the right direction, that’s still too high,” Beaudry said in prepared remarks provided ahead of the speech. “We will continue to take whatever actions are necessary to restore price stability for households and businesses and to maintain Canadians’ confidence that we can deliver on our mandate of bringing inflation back to 2%,” he added later.Inflation slowed again in August, though both headline and core measures remain far above target. Adding to the pinch for consumers, grocery prices rose at their fastest pace in 41-years.Central banks are concerned people may start to assume inflation will continue to rise faster than target, which could lead to price spirals.While some have argued policymakers need to engineer a recession to avoid this, Beaudry said the bank is working to convince Canadians the current period of high inflation is temporary and it will tame surging prices.”Our messages are designed to cut through the noise,” said Beaudry. “The more effective the Bank can be in its guiding role, the greater the chance of a soft landing – and the lower the risk of a hard landing.”Still, economists said if consumer and business surveys due out next month show inflation has become more entrenched, the Bank of Canada may have to change its tune.”The pace of increases clearly shows that if the central bank has to make a choice between avoiding a recession and controlling inflation, they will choose the latter every time,” said Royce Mendes, head of macro strategy at Desjardins Group, in a note.The Bank of Canada has boosted its policy rate by 300-basis points in six months and earlier this month signaled it was not yet done. Money markets are betting on another 50-bp increase in October to 3.75%.The Canadian dollar was trading 0.8% lower at 1.3360 to the greenback, or 74.85 U.S. cents. More

Nato has accused Moscow of escalating its war on Ukraine after Kremlin allies in occupied territories announced referendums to join Russia and the country’s parliament approved legislation that clears the way for military mobilisation.Four Moscow-controlled regions in Ukraine will hold votes this week, a step that the Kremlin has resisted to date and which western powers and Kyiv immediately denounced as a sham. Russia’s Duma also passed a law on Tuesday to increase penalties for desertion and evasion of conscription in the event of mobilisation, a further sign of Moscow’s hardening stance. On Tuesday, US secretary of state Antony Blinken called the referendums “the sign of Russian failure”. “If these referenda proceed, and if Russia purports to annex Ukrainian territory, the United States will never, never recognise it,” he said during the UN General Assembly in New York.Jens Stoltenberg, secretary-general of Nato, decried the referendums as “a further escalation” of the war. “Sham referendums have no legitimacy and do not change the nature of Russia’s war of aggression against Ukraine,” he said.Go deeper: FT reporters take a look at what Putin’s next move could be. Thanks for reading FirstFT Asia. Share feedback on today’s newsletter at [email protected]. — EmilyFive more stories in the news1. China EV maker targets Hong Kong’s biggest IPO of 2022 Electric vehicle maker Zhejiang Leapmotor Technology is seeking to raise as much as $1bn in what would be Hong Kong’s largest initial public offering this year, in the latest test of investor appetite for China’s fast-growing EV market.2. Ecuador reaches debt restructuring deal with China The government of centre-right president Guillermo Lasso said it had reached a $1.4bn deal with two Chinese banks to extend the maturity on loans and reduce interest rates and amortisation. China has been Ecuador’s most important financial partner for the past decade, beginning under leftist former president Rafael Correa, who was in office from 2007-2017.3. Investors in Trump media Spac scramble for better terms Donald Trump and the backers of a blank-cheque company that plan to take his Truth Social media business public are pushing to renegotiate a $1bn financing package with investors ahead of a crucial deadline for the deal. Related news: Chamath Palihapitiya, one of the big boosters of special purpose acquisition companies, has thrown in the towel, returning $1.5bn to investors after failing to find targets.4. Private equity may become a ‘pyramid scheme’, warns Danish pension fund Mikkel Svenstrup, chief investment officer at ATP, compared the private equity industry to a pyramid scheme, warning buyout groups are increasingly selling companies to themselves and to peers on a scale that “is not good business”.5. Number of super-rich individuals swells by a fifth The ranks of the super-rich swelled in 2021, with the number of people worth over $100mn increasing by 21 per cent to 84,500, according to the latest Credit Suisse Global wealth report.The day aheadCardinal Zen faces trial in Hong Kong After the start of the trial, originally set for Monday, was delayed after the judge contracted Covid-19, Cardinal Joseph Zen Ze-kiun and five well-known members of the Democratic Front are due to appear in a court today, accused of failing to properly register a humanitarian fund for which they were administrators.

Cardinal Joseph Zen, centre, at a new year protest in Hong Kong in 2019 © Kin Cheung/AP

US interest rate decision The Federal Open Market Committee is expected to announce today that it will raise interest rates by at least 0.75 percentage points for the third time in a row as it tries to hit the brakes on the overheating US economy.UK business secretary announces support scheme Jacob Rees-Mogg is expected to share details of a business support scheme for companies on Wednesday, ahead of chancellor Kwasi Kwarteng’s “mini-Budget” on Friday.What else we’re reading Hong Kong pins hopes on rugby sevens to rejuvenate city Hong Kong is betting on November’s return of the rowdy rugby sevens tournament to restore the Asian financial centre’s fortunes as the city’s leader said he would “actively study” relaxing a hotel quarantine requirement that has frustrated businesses and residents of the territory since 2020.Indonesia’s unexpected success story As sharply rising US interest rates add to economic problems in the developing world, Indonesia appears unruffled, and its economy is prospering. Yet even as investors pile in, some worry about the sustainability of Indonesia’s newfound stability, particularly its politics.Europe ditches negative rates as inflation surges The era of negative interest rates in Europe is set to end this week when Switzerland’s central bankers leave Japan as the sole proponent of one of the most controversial economic experiments of recent times. After more than a decade, the policy ultimately fell short of hopes that it would quickly vanquish the threat of deflation and revive growth.‘Magic numbers’ are clouding the climate debate Climate change has become an existential crisis of notable exactitude, its parameters mapped out by precise temperature rises, thresholds, deadlines and “tipping points” of no return. But some scientists say climate messaging needs a fundamental reset to make it more accurate and relevant to our lives.Are the British the worst idlers in the world? In the 2012 book Britannia Unchained, five Conservative MPs argued: “Once they enter the workplace, the British are among the worst idlers in the world.” Given that two of the book’s authors were Prime Minister Liz Truss and chancellor Kwasi Kwarteng, Sarah O’Connor says it is worth asking: is there any truth to it?Style Baseball caps are back, but what about in the office? Even in our casualised, post-lockdown world, workplace hats may be a step too far, writes Teo van den Broeke. More

The Federal Reserve’s highly anticipated policy decision arrives later on Wednesday, with markets bracing for another big dose of tightening. The lead-up to the U.S. central bank event has been bumpy and could spell more volatility for Asian markets in the hours before the Fed’s statement.Ahead of the rate decision, rates continued their ascent. Yields on the benchmark U.S. 10-year Treasury note hit 3.6% on Tuesday, their highest since 2011. The 2-year Treasury yield, which tracks Fed rates closely, approached 4%, the highest since 2007.Equity markets are struggling to digest the persistent move up in rates. The S&P 500 slid 1.1% and touched its lowest point in two months, as traders positioned ahead of the Fed. MSCI’s gauge of stocks across the globe also sank to a two-month low.On Tuesday, Sweden provided the appetizer for the feast of central bank action to follow the rest of the week. The country’s central bank caught markets off-guard in hiking interest rates by a larger-than-expected full percentage point. Will Sweden prelude a similar outcome in the U.S.? Markets are bracing for the Fed to raise rates by 75 basis points, but since inflation data came in hot last week, they have been pricing in a chance of a full percentage point hike. Such odds were around 16% late on Tuesday.Beyond Wednesday’s rate move, what Fed Chair Jerome Powell has to say in a press conference following the decision will be critical for investors seeking to gauge the rate trajectory going forward. How Powell is thinking about the threat to the economy from higher rates is also top of mind.Central banks in England, Switzerland and Japan will have their say later in the week.Key developments that could provide more direction to markets on Wednesday: Federal Reserve policy statement/press conferenceBank of Japan meeting beginsKorea 20-day exportsSpeech by Reserve Bank of Australia’s deputy governor More

NEW YORK (Reuters) -The yield on two-year U.S. Treasury notes, a rough gauge of interest rate expectations, rose to almost a 15-year high on Tuesday, a day before the Federal Reserve is likely to hike rates by 75 basis points as it continues to fight inflation.The two-year is highly sensitive to shifts in monetary policy expectations and early on Tuesday it hit 3.992%. The last time its yield broke above 4% was Oct. 18, 2007.The Fed is due to announce its latest policy decision on Wednesday. Money markets are fully pricing in a 75 basis point rate hike, with the chance of a larger full-point rate hike fading to just 16%, according to CME’s FedWatch tool. Sweden’s central bank earlier raised rates by a larger-than-expected full percentage point to 1.75% and warned of more to come as it joins other central banks around the world that also are jacking up rates to tame inflation.Fed Chair Jerome Powell will stand by his hawkish stance and desist offering a moderate tone that has driven recent post-meeting rallies, said Johan Grahn, head of ETF strategy at AllianzIM. “I don’t think you’re going to see even a single dovish feather. He’s tried that a couple of times and then he gets the exact opposite from the market,” Grahn said.Yields on the benchmark 10-year Treasury shot to 3.604% before paring some gains. They were up 8.6 basis points to 3.575% after topping 3.5% for the first time in 11 years on Monday. The two-year yield rose 2.5 basis points to 3.971%. The 10-year moving higher and faster than the two-year could be positioning ahead of Wednesday’s Fed statement or it could be Sweden’s Riksbank raising rates more than expected, said Lawrence Gillum, fixed income strategist at LPL Financial (NASDAQ:LPLA).”What’s happening for the Fed and other central banks is there’s a push to front-load these rate hikes,” Gillum said.”There’s a lot of jitters and some pre-positioning that’s going into (Wednesday’s) meeting,” Gillum added. “Foreign rates moving higher, that makes our rates less attractive.”The closely watched gap between two- and 10-year yields earlier reached a discount of as much as -47.5 basis points, approaching its most negative since Aug. 10 when the discount widened to -56.2 basis points. The gap later narrowed to -39.8 basis points. The two- and 10-year yield inversion, when the short end is higher than the long end, often has been seen as a reliable predictor of a recession in a year or two.After the Fed statement on Wednesday the market will try to gauge whether the central bank will raise rates by 50 basis points in November, said Anthony Saglimbene, chief market strategist at Ameriprise Financial (NYSE:AMP) in Troy, Michigan.”I don’t think they’re going to communicate that, but I think the market will try to anticipate that and if they do, then you could see over the coming months some equilibrium level in rates,” Saglimbene said. “The terminal rate at which the Fed will stop raising interest rates is higher, and that terminal rate is likely to last longer,” Saglimbene added. “All of it is centered around inflation pressures that are more persistent.”Tighter monetary policy is pushing rates up and different securities are setting new milestones. The breakeven rate on five- and 10-year Treasury Inflation-Protected Securities, or TIPS, have surged to 13- and 12-year highs, respectively.The five-year TIPS breakeven rate was last at 2.546%, while the 10-year TIPS breakeven rate was last at 2.403%. The latter indicates the market sees inflation averaging about 2.4% a year for the next decade.The yield on the 30-year Treasury bond rose 7.2 basis points to 3.577%. The U.S. dollar five years forward inflation-linked swap, seen by some as a better gauge of inflation expectations due to possible distortions caused by the Fed’s quantitative easing, was last at 2.410%.The Treasury sold $12 billion in 20-year bonds with a high yield of 3.82%. The auction was “pretty well bid,” with yield about 1.5 basis points lower than the market at the bidding deadline, Lou Brien, market strategist at DRW Trading, said in a note.Sept. 20 Tuesday 3:45 PM New York / 1945 GMTPrice Current Net Yield % Change (bps) Three-month bills 3.2675 3.3408 0.039 Six-month bills 3.7725 3.8995 0.021 Two-year note 98-170/256 3.9707 0.025 Three-year note 98-192/256 3.9481 0.048 Five-year note 97-42/256 3.7588 0.066 Seven-year note 96-128/256 3.7011 0.084 10-year note 93-44/256 3.5748 0.086 20-year bond 93-164/256 3.8346 0.062 30-year bond 89-116/256 3.5771 0.072 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 38.00 1.25 spread U.S. 3-year dollar swap 17.50 0.25 spread U.S. 5-year dollar swap 8.75 0.50 spread U.S. 10-year dollar swap 6.25 -0.50 spread U.S. 30-year dollar swap -31.25 -1.75 spread More

The chief executive officers will testify before two congressional committees this week at a time when Americans face the highest levels of inflation in a generation and economists debate whether the US has entered a recession. The hearings start Wednesday as Federal Reserve officials meet to determine their next interest-rate move and release new economic projections.Citigroup’s Jane Fraser said in her written testimony for the House Committee on Financial Services that “the worst of Covid may be behind us, but the economic challenges we face are no less daunting.” JPMorgan’s Jamie Dimon wrote that the “US economy today is a classic tale of two cities,” with competing headwinds and tailwinds that make it “challenging to predict the future.”“We continue to see strong consumer spending from solid consumer balance sheets” and there are “plentiful job openings, with encouraging jobs reports that continue to surprise economic forecasters,” Dimon wrote in his prepared testimony. “At the same time, many Americans are being crushed by high inflation eroding real incomes, particularly from higher prices on gas and food,” along with persistent supply-chain problems and rising interest rates. “Many Americans are feeling the pain, and consumer confidence continues to drop.”The CEOs said they’re providing help to consumers. Citigroup (NYSE:C) said it eliminated overdraft and other non-sufficient funds fees earlier this year after it collected $103 million in such charges in 2021. Overdraft fees — the $30-something charge banks assess when a consumer spends more than they have in their checking account — have come under fire from lawmakers and regulators, who say the charges hurt those who can least afford them.Still, in an appendix to Fraser’s testimony, the New York-based bank acknowledged that it collected roughly $2.7 billion last year in late fees, annual fees, monthly service charges and wire transfer fees. That amounted to about 8% of the firm’s total revenue from its North American operations.“This revenue and the percentage of revenue they account for have been relatively consistent over the last 10 years,” the bank said in the testimony.At JPMorgan (NYSE:JPM), the country’s largest bank, policy changes on overdraft fees are helping consumers who are short of cash, Dimon said.Overdraft-protection services “help customers make critical payments, like covering a rent check, or automatic withdrawals by third parties, like utilities, which may help customers avoid a late fee or negative impact on their credit report,” he wrote. “This service can be more affordable than many non-bank services like payday loans or check-cashing services.”Almost 70% of transactions covered by the policies incur no overdraft fee at all, Dimon said, adding that revenue from such fees at the New York-based company has plummeted 40% since before the pandemic. Since March 2020, JPMorgan delayed payments due and refunded fees for more than 3.5 million customer accounts, giving back more than $250 million and offering deferred payments and forbearance on more than 2 million mortgage, auto and credit-card accounts, Dimon said.Bank of America (NYSE:BAC), the second-largest US bank, also made changes over the past decade to its overdraft services, “reducing clients’ reliance on overdraft and providing resources to help clients manage their deposit accounts and finances responsibly,” CEO Brian Moynihan said in his prepared remarks. The Charlotte, North Carolina-based bank expects that, by next year, the new programs will reduce consumer overdraft fees by 97% from 2009 levels, he wrote.Payment DeferralsThe lender also assisted clients through the pandemic, helping around 2 million individual consumers and small businesses defer payments on credit cards and vehicle and home loans, Moynihan wrote.“Even with a deferral, the vast majority of those clients remained current on their payments. A small percentage have needed extended assistance, and we continue to work with them individually to help them get back on track,” he said. For clients with mortgages originated by BofA, the lender added deferred payments to the end of the loan term so they aren’t making a lump-sum payment up front, Moynihan wrote.Charlie Scharf, CEO of San Francisco-based Wells Fargo (NYSE:WFC), touted his bank’s recent efforts to limit overdraft-related fees, such as eliminating non-sufficient-fund fees and the introduction of an early payday program for some customers. He also pointed to initiatives to help unbanked households, which have a disproportionate number of Black, Hispanic and Native American customers.Wells Fargo has come under fire from lawmakers this year after a Bloomberg News investigation found the lender approved fewer than half of mortgage refinancings sought by Black homeowners during the pandemic, a lower rate than for White applicants.“We must be customer-centric in how we approach our products and services,” Scharf said in his prepared remarks.In addition to Dimon, Fraser, Moynihan and Scharf, CEOs from U.S. Bancorp, Truist Financial (NYSE:TFC) Corp. and PNC Financial Services Group Inc (NYSE:PNC). are set to appear before the House committee on Wednesday and a Senate committee Thursday. The hearings are focused specifically on issues facing consumers as a potential downturn looms. Questions sent to the banks ahead of the hearing include queries on diversity among top executives and board members, mortgage-lending activities during the pandemic and what steps if any lenders have taken to aid consumers “seeking financing to help them access safe abortion care.”Regional BanksThe largest of the regional banks by assets, Minneapolis-based U.S. Bancorp used its prepared remarks to make a case for its acquisition of MUFG Union Bank NA, which is still awaiting final regulatory approval.“We recognize that banks are the economic engines of our communities,” CEO Andy Cecere wrote in his testimony. “As such, we can make meaningful and significant impacts in supporting the ability of LMI communities and communities of color to access capital and build wealth,” he said, referring to low- and moderate-income communities. Testimony from Pittsburgh-based PNC emphasized steps the bank has taken to fight fraud on Zelle, the person-to-person payments platform owned jointly by the largest banks. US senators earlier this year urged lenders to do more to curb scammer abuse of the platform.Charlotte-based Truist touted its contributions to minority communities and low- and moderate-income borrowers. Those include $31 billion in home-purchase loans and opening 16 new banking branches in low-and moderate-income or minority neighborhoods by the end of this year.©2022 Bloomberg L.P. More

(Reuters) – Denmark on Tuesday pledged over $13 million (100 million Danish crowns) to support developing nations that have experienced losses caused by climate disruptions, becoming the first country to offer “loss and damage” compensation to the most climate-vulnerable areas.Danish Development Minister Flemming Møller Mortensen made the pledge on the sidelines of the United Nations General Assembly, saying the new climate funds would go to the Sahel region in northwestern Africa and other fragile regions.”I am very happy that we have agreed to increase support for climate-related losses and damages,” he said in a statement. “It is grossly unfair that the world’s poorest should suffer the most from the consequences of climate change, to which they have contributed the least.”Some of the world’s most fragile areas, such as low-lying islands are pushing to create a funding facility for “loss and damage” – or consequences of climate change that go beyond what people can adapt to – to be established at U.N. climate negotiations in Egypt in November.The United States, EU and other rich nations that represent the bulk of historical greenhouse gas emissions have opposed the creation of a separate fund to address loss and damage.U.N. Secretary General Antonio Guterres on Tuesday urged rich countries to tax windfall profits of fossil fuel companies and use that money to compensate “countries suffering loss and damage caused by the climate crisis.”At the COP26 climate summit in Glasgow last year, Scottish leader Nicola Sturgeon announced a symbolic 1 million pound loss and damage investment as a way to encourage industrialized countries to follow suit.Denmark offered the new loss and damage funding as part of its 2022 Finance Act and pledge to dedicate at least 60% of its climate aid to help countries adapt to climate change. More

(Reuters) -American Airlines Inc on Tuesday confirmed a data breach and said while an “unauthorized actor” gained access to personal information of a small number of customers and employees through a phishing campaign, there was no evidence of data misuse. Shares of the carrier, the latest U.S. company to suffer a cyber attack, fell 2.6% in afternoon trade. Recently, Uber Technologies (NYSE:UBER) Inc and Take-Two (NASDAQ:TTWO) Interactive Software Inc also disclosed similar breaches, leaving investors and customers worried about data security.”We are also currently implementing additional technical safeguards to prevent a similar incident from occurring in the future,” the airline said on Tuesday. It discovered the breach in July and engaged a third party cybersecurity forensic firm to conduct an investigation to determine the nature and the scope of the incident, according to a Sept. 16 consumer notification letter. American Airlines (NASDAQ:AAL) has notified customers that personal information such as address, phone number, driver’s license number, passport number and/or certain medical information may have been accessed by the hacker, the letter showed. “We regret that this incident occurred and take the security of your personal information very seriously,” Chief Privacy and Data Protection Officer Russell Hubbard said in the letter. More

The number of U.S. nuclear reactors has fallen to 92 from 104 ten years ago due to rising security costs, competition from power plants that burn abundant natural gas and falling prices for wind and solar power. Last year’s bipartisan infrastructure law and this year’s Inflation Reduction Act have billions of dollars in incentives and tax breaks for nuclear power, leading to hope for extending the life of aging plants and opening new advanced reactors.But the issue of the industry’s radioactive, toxic waste, currently kept at nuclear plants across the country, is a problem often cited by the industry’s opponents. The U.S. Energy Department said it will offer $16 million in funding to provide resources in communities that want to learn about interim and consent-based siting of nuclear waste, which the industry calls spent nuclear fuel. The United States gave up a plan of storing the waste at Nevada’s Yucca Mountain, despite spending billion of dollars, after stiff opposition from state and local politicians. “Producing safe, reliable nuclear energy here at home is key to reaching President Biden’s clean energy goals, and the Department of Energy wants to advance the discussion of how communities can best host a variety of nuclear facilities,” U.S. Energy Secretary Jennifer Granholm said in a release.”With this funding, we are facilitating constructive, community-based discussions around the consensual solutions for storing spent nuclear fuel in order to harness the true power of clean nuclear energy.”Some members of communities in rural Texas and New Mexico have supported efforts to store nuclear waste on an interim basis but governors of those states have opposed the idea. More