Economy

BRASILIA (Reuters) – Brazil’s central bank decided on Wednesday to postpone payments to financial institutions for resources held in accounts from the Pix instant payment system, underscoring mounting risks from striking workers despite the relatively small impact for banks.The payment, which was to add interest at the bank’s Selic benchmark rate for the time the funds were held, was due to be made for the first time on Friday.According to the central bank analysts association ANBCB, financial institutions will no longer receive around 2 million reais ($422,030) per day.”The central bank’s workers are carrying out daily partial stoppages and will go on strike from April 1, which affects the performance of various processes,” Monetary Policy Director Bruno Serra said in a vote supporting the decision on Wednesday.To preserve the security of the systems and the maintenance of essential activities ahead of the strike, Serra said it was considered appropriate to postpone the payments, adding they would be again proposed “when the issues are overcome.”Brazil’s central bank employees voted on Monday for an indefinite strike starting on April 1 in the face of unanswered demands about a wage increase. Until now, partial shutdowns have been affecting the release of economic indicators and other data.The central bank said the measure aims to preserve the proper functioning of IT systems considering “the potential risks” imposed by the strike.The financial industry group Febraban called the decision “prudent” adding that policymakers had avoided implementing new features on more sensitive days. ($1 = 4.7302 reais) More

WASHINGTON (Reuters) – The U.S. Export-Import Bank’s board of directors on Thursday voted to formalize the bank’s withdrawal from any further business in Russia and approved financing and guarantee deals worth up to $381 million for Iraq, Sri Lanka and Albania.The U.S. government export credit agency said its board also voted to notify Congress of a proposed renewal of a $450 million credit guarantee to Citibank that backs a $500 million facility to allow 365 suppliers of aircraft maker Boeing (NYSE:BA) to receive accelerated receivables payments related to export sales of Boeing aircraft. The notification is require for any transaction over $100 million. After 35 days, the board can hold a final approval vote.EXIM said the board, meeting for the first time under new president and chair Reta Jo Lewis, approved a $48 million loan guarantee to support the sale of 12 U.S.-made Wabtec Corp locomotives to Sri Lanka Railways. Wabtec, which acquired General Electric (NYSE:GE)’s locomotive business in 2019, won the $56 million contract over Chinese competitors, EXIM said.The lender also approved a preliminary commitment for a nearly $33 million energy efficiency authorization for Albania’s national electric utility to rehabilitate its metering capabilities.For Iraq, the board approved a resolution that authorizes EXIM bank officers to approve, deny and amend requests for insurance coverage on letters of credit used by the Trade Bank of Iraq for up to $300 million on purchases of U.S. goods and services.The formal closing of Russian business follows an announcement last week by EXIM and export credit agencies in Britain and Canada to withdraw all support from Russia and Belarus in response to Russia’s invasion of Ukraine. EXIM previously had an administrative hold prohibiting Russian business since Moscow’s annexation of Crimea in 2014. EXIM still has $410 million in prior credit exposure to Russia, primarily for aviation sector loan guarantees that were granted before Crimea’s annexation.”EXIM is working expeditiously to resolve those transaction repayments,” the bank said. More

WASHINGTON (Reuters) – The U.S. Senate on Thursday unanimously passed a bill to improve oversight of ocean shipping, a step supporters say will help ease export backlogs.The Ocean Shipping Reform Act, led by Senators John Thune and Amy Klobuchar, would strengthen the investigatory authority of the Federal Maritime Commission (FMC (NYSE:FMC)), the U.S. agency that oversees ocean shipping, and boost transparency of industry practices.Senate Majority Leader Chuck Schumer said the legislation “will reduce costs for the American people, by reforming unfair shipping practices hurting exports and consumers alike.”Schumer noted “supply chain backlogs have made it harder for goods to leave these ports and get to their international destination. Every single day that goods lie idle on our ports, it costs producers more and more money.”The legislation would prohibit ocean carriers from unreasonably declining opportunities for U.S. exports that would be determined by the FMC, which would write new rules.It would also require ocean common carriers to report to the FMC each calendar quarter “on total import/export tonnage” making port in the United States.It would allow FMC to begin investigations of ocean common carrier’s business practices and apply enforcement measures. Klobuchar said “Congestion at ports and increased shipping costs pose unique challenges for U.S. exporters, who have seen the price of shipping containers increase four-fold in just two years, raising costs for consumers and hurting our businesses.” Thune said the legislation would make “it harder for ocean carriers to unreasonably refuse goods that are ready to export at U.S. ports.”Similar legislation passed the U.S. House 364-60 in December but lawmakers must resolve differences before it can go to President Joe Biden.On March 15, the White House unveiled a pilot information sharing effort to help clear supply chain bottlenecks at congested U.S. ports.This month, the National Retail Federation said imports at major U.S. retail container ports are expected to be at near-record levels this spring and summer as consumer demand and supply chain challenges continue to spark congestion. More

WASHINGTON (Reuters) – U.S. Senate negotiators on Thursday were nearing a deal on a $10 billion COVID-19 bill to help the federal government acquire more vaccines and medical supplies as it prepares for future variants of the virus that upended American life.Senate Majority Leader Chuck Schumer, a Democrat, said senators were “close to a final agreement” on a bill aiming to shore up stockpiles to be used both domestically and internationally.If a deal is finalized in coming days, the Senate might be able to pass the bill and send it to the House of Representatives before the start of a spring recess at the end of next week.”We need more money right away so we have enough vaccines and testing and life-saving therapeutics,” Schumer said in a speech to the Senate.The amount is a tiny fraction of the $4.6 trillion Congress has approved since early 2020 to fight the virus, much of which was devoted to offsetting its heavy economic hit.Early this month, Congress failed to pass a $15.6 billion relief bill amid Republican opposition to new federal spending. Many Democrats, meanwhile, rebelled against taking back some money earmarked to help state and local governments in order to pay for the new round of coronavirus relief.Schumer said a failure to adequately prepare for a possible new coronavirus variant could reverse progress in fighting the pandemic and reopening most American institutions.Republican Senator Roy Blunt told reporters that nearly half of the financing for the bill would come from recapturing funding from previous COVID aid laws that were intended to help performing arts venues recover from being shuttered during long periods of the pandemic and for aid to aviation manufacturers. COVID-19 has caused 6.5 million deaths globally, with 980,000 in the United States alone. While the pandemic has been showing signs of easing, prompting many to shed the medical masks that had become part of daily life, U.S. deaths still lead the world with an average of 710 per day. More

The action aims to enhance American production of crucial materials for electric vehicles, defense systems and other technologies.WASHINGTON — President Biden took steps on Thursday to try to increase domestic production of critical minerals and metals needed for advanced technologies like electric vehicles, in an attempt to reduce America’s reliance on foreign suppliers.Mr. Biden invoked the Defense Production Act, a move that will give the government more avenues to provide support for the mining, processing and recycling of critical materials, such as lithium, nickel, cobalt, graphite and manganese. Those are used to make large-capacity batteries for electric cars and clean-energy storage systems. Yet except for a handful of mines and facilities, they are almost exclusively produced outside the United States.“We need to end our long-term reliance on China and other countries for inputs that will power the future,” Mr. Biden said during remarks at the White House, where he also announced the release of one million barrels of oil per day from the Strategic Petroleum Reserve.The Defense Production Act is a Cold War-era statute that gives the president access to funding and other enhanced powers to shore up the American industrial base and ensure the private sector has the necessary resources to defend national security and face emergencies.In a determination issued Thursday, the president said that the United States depended on “unreliable foreign sources” for many materials necessary for transitioning to the use of clean energy, and that demand for such materials was projected to increase exponentially.Mr. Biden directed his secretary of defense to bolster the critical mineral supply by supporting feasibility studies for new projects, encouraging waste reclamation at existing sites, and modernizing or increasing production at domestic mines for lithium, nickel, cobalt, graphite and other so-called critical minerals.The secretary of defense would also conduct a survey of the domestic industrial base for critical minerals and submit that to the president and Congress, the presidential determination said.A person familiar with the matter said the actions being contemplated wouldn’t be loans or direct purchases of minerals, but rather funding studies and the expansion or modernization of new and existing sites.The administration will also review potential further uses of the act in relation to the energy sector, according to a White House announcement on Thursday.The United States imported more than half its supply of at least 46 minerals in 2020, and all of its supply of 17 of them, according to the U.S. Geological Survey. Many of the materials come from China, which leads the world in lithium ion battery manufacturing and has been known to shut off exports of certain products in times of political tensions, including rare earth minerals.The Biden administration has warned that a dependence on foreign materials poses a threat to America’s security, and promised to expand domestic supplies of semiconductors, batteries and pharmaceuticals, among other goods. While the United States does have some unexplored deposits of nickel, cobalt and other crucial minerals and metals, developing mines and processing sites can take many years. Two-thirds of the world’s entire production of cobalt is in the Democratic Republic of Congo, where Chinese companies owned or financed 15 of the 19 largest mines as of 2020.But bipartisan support for expanding American mining and processing of battery components has grown in recent years. In a March 11 letter to Mr. Biden, senators including Lisa Murkowski, a Republican of Alaska, and Joe Manchin III, a Democrat of West Virginia, proposed invoking the Defense Production Act to accelerate domestic production of the components of lithium-ion battery materials, particularly graphite, manganese, cobalt, nickel and lithium.Todd M. Malan, the head of climate strategy for Talon Metals, which is developing a nickel mine in Minnesota, said Washington had reached a bipartisan consensus around providing more support for the domestic mining of electric vehicle battery minerals “driven by concern about reliance on Russia and China for battery materials as well as the energy transition imperative.”But some domestic developments may face opposition from environmentalists in Mr. Biden’s own party.Representative Raúl M. Grijalva, an Arizona Democrat who chairs the Natural Resources Committee, said in a statement Wednesday that mining companies were “making opportunistic pleas to advance a decades-old mining agenda that lets polluters off the hook and leaves Americans suffering the consequences.”“Fast-tracking mining under antiquated standards that put our public health, wilderness, and sacred sites at risk of permanent damage just isn’t the answer,” he added.Dionne Searcey More

NEW YORK (Reuters) – Which market has it right? With the first quarter of 2022 over, the U.S. stock and bond markets appear to be conveying drastically different assessments of the growth outlook, leaving investors to decide which view will prevail. The S&P 500 has come roaring back from a near-13% decline and finished the quarter off 4.9% after a rebound that has defied worries over tighter monetary policy and geopolitical instability stemming from the war in Ukraine. Many stock investors have even shrugged off a brief inversion of a closely watched section of the U.S. Treasury yield curve – a phenomenon that has predicted past recessions. Bond investors appear far more pessimistic on the economy, with the ICE (NYSE:ICE) BofA index on track for its worst start to the year ever on worries that the Fed will cause recession by aggressively tightening monetary policy in its bid to fight surging inflation. Yields on the benchmark 10-year Treasury are up 81 basis points this quarter and stand near their highest level since May 2019. Illustrating the countervailing forces in markets, the CBOE Volatility Index – viewed as a gauge of fear in equity markets – stands not far from its lows of the year, with investors pinning the reversal in stocks on everything from quarter-end rebalancing to buying from retail investors. At the same time, the ICE BofAML MOVE index, which tracks Treasury yield volatility, remains elevated. “Rates markets are very consistent in telling a story where the Fed is going to do some damage to the economy, (while) risk markets have not really done a good job of pricing any significant damage to the growth outlook,” said Edward Al Hussainy, senior interest rate and currency analyst at Columbia Threadneedle. “One of these stories is wrong.” Different roads https://fingfx.thomsonreuters.com/gfx/mkt/akvezjnjypr/Pasted%20image%201648745384426.pngOne source of contention among investors has been the yield curve, where rates for two-year Treasuries briefly rose above those for 10-year Treasuries earlier this week. Such an inversion is concerning because it has preceded six of the seven recessions since 1978, according to data from Truist Advisory Services. Some investors, however, have given a broad range of reasons why the signal’s predictive power may not apply this time, including the potentially distortive effects of the Fed’s massive COVID-19 stimulus on rates markets. In any case, recessions have followed past inversions with an average lag of 16 months, and the S&P 500 has averaged an 11% gain in the 12 months following inversions, Truist’s data showed. Overall, the S&P 500 has lost an average of 8.8% during the four recessions since 1990, according to CFRA data. “We would take this (equity) rally as a sort of a gift,” said Sameer Samana, senior global market strategist at Wells Fargo (NYSE:WFC) Investment Institute. “If you weren’t able to reduce your exposure to some of the speculative areas of the market before the correction, now is your time.” Mark Haefele, chief investment officer at UBS Global Wealth Management, cautioned investors against over-interpreting the exuberance in stocks or the gloom in the bond market. Still, the firm has scaled back its outlook for global earnings growth and now sees a more modest upside for stocks with a year-end target of 4,700 on the S&P 500. The index closed at 4,530.41 on Thursday.Others have pointed out that the gap between yields on the 3-month and 10-year Treasuries – another closely followed measure – is positive by approximately 180 basis points. That’s a sign there is still room for the Fed to shift gears before the market starts to price in a recession, said Gary Cloud, a portfolio manager at Hennessy Funds. Though policymakers have said they could raise rates by as much as 50 basis points in a single meeting if warranted and investors are pricing in some 200 basis points of tightening this year, “the Fed doesn’t want to tighten so much that it causes a recession,” Cloud said. [L2N2VW1SG]Others, however, are skeptical the Fed will be able to engineer a soft landing. Tim Murray, a capital markets strategist in the multi-asset division at T. Rowe Price, is moving into commodities and defensive sectors of the stock market while increasing allocations to longer-duration Treasuries, assets he believes will thrive during a downturn. “Once the Fed starts hiking, there’s a good chance that we will have a recession in the relatively near future,” Murray said. “I get a sense that investors are not worried enough about this.”Rocky quarter for stocks, bonds as Fed begins rate hikes https://graphics.reuters.com/USA-MARKETS/QUARTER/egpbkblozvq/chart.png More

With former chancellor Nigel Lawson staring down at him from the picture on the wall of his Downing Street study, Rishi Sunak is keen to portray himself as a chancellor helping encourage enterprise and innovation. In his Spring Statement last week, he claimed to be delivering “the biggest net cut to personal taxes in over a quarter of a century”.If he was still with us, a true darling of the political right would disagree. Milton Friedman, Nobel Prize-winning economist and the founder of the monetarist school of thought, had no time for claims such as these from politicians at a time of rapidly rising prices. In his 1980 TV series, Free to Choose, he described the politics Sunak is playing with inflation and taxes precisely and unfavourably. “Before every election, our representatives would like to make us think we are getting a tax break and they’re able to do it while at the same time actually raising our taxes because of a piece of magic they have in their kit bag. That magic is inflation,” he said. Even Friedman was late to the game in seeing inflation as a bad tax. Writing in 1919 on The economic consequences of the peace, John Maynard Keynes, the darling of the political left, also noticed the benefits of inflation to some politicians. “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily,” he wrote.No one should think that Sunak deliberately stoked the inflation woes around the world to impoverish us, but his decisions have revived the concept of an “inflation tax” in the UK after more than 30 years when no one has had to worry about it. Sometimes an inflation tax can foster good tax policy. In the 1983 Budget, the ceiling for mortgage interest tax relief was set at £30,000, roughly the cost of an average UK home. This mortgage subsidy fuelled house price growth, but sensibly no chancellor after Geoffrey Howe raised the relief’s value, allowing Gordon Brown to abolish it in 2000. More often, the effects of inflation as a tax are arbitrary. Just a year ago in his March 2021 Budget, the chancellor made a point about the fact he was “not hiding” the four-year freeze in thresholds and allowances in income tax. At the time, the chancellor wanted this cut in the real value of allowances and thresholds to raise £8.2bn a year by 2026-27. Sunak was silent last week on the Office for Budget Responsibility’s new estimate that the same policy will now raise £18.8bn annually because higher inflation reduces the real value of the allowances by a greater amount. The £10.6bn additional inflation tax in 2026-27 on this measure alone is precisely the same value as the combined cost of 1p off the basic rate of income tax and the rise in national insurance threshold, according to the OBR.For richer voters in the Tory shires, just as Friedman warned 42 years ago, Sunak’s false claims of tax cutting will not ring true and will further undermine trust in politics.Poorer households face a different kind of inflation tax. Benefits and pensions will be uprated in April by the 3.1 per cent inflation rate of last September. After a year of misery, they will be compensated next April and you can bet ministers will then trumpet a high increase as a generous settlement rather than belated compensation for inflation. Friedman and Keynes were right. Inflation is a bad tax. It is arbitrary, doesn’t require Parliamentary approval, has odd distributional consequences and encourages politicians to play games. Let’s hope this period of history does not last too long. [email protected] More

UK civil servants will feel the full force of the squeeze on living standards, after ministers set guidance that will leave them with below-inflation pay awards averaging just 2 per cent next year.The government published its framework for pay awards in 2022-23 on Thursday, which said departments would be permitted to offer pay awards of 2 per cent on average, with the flexibility to pay an additional 1 per cent if they could demonstrate that it helped to deliver long-term workforce priorities.With inflation expected to rise by close to 9 per cent by the end of the year, according to the Office for Budget Responsibility’s latest forecasts, this means that about 450,000 civil servants staffing government departments, agencies and other public bodies face a hefty real terms pay cut. It comes as public sector workers were already faring worse relative to their private sector peers than at any point in the last 30 years, according to Ben Zaranko, senior research economist at the Institute for Fiscal Studies.Heather Wheeler MP, parliamentary secretary for the Cabinet Office, said in a statement that the guidance would “ensure broad parity with private sector wage settlements” and “fair pay rises for hard-working staff”.But the PCS civil service union said the offer was “derisory” and fell far short of what staff needed to avoid hardship, as food and fuel bills rocketed and tax rates rose.There will be some protection for the lowest paid, with the main rate of the statutory minimum wage set to rise by 6.6 per cent from today — equivalent to £1,000 a year for a full-time worker. But independent forecasts suggest that the pay offer is well below the average private sector offer for the coming year. Surveys by XpertHR, a research group, point to a median pay award of 3 per cent for 2022, with the bottom quartile of employers offering up to 2.5 per cent. The OBR forecast nominal earnings would rise by 5.3 per cent in 2022, with household disposable income falling by 2.2 per cent in real terms.Zaranko said the paltry civil service settlement could set a benchmark for awards in other parts of the public sector that are politically more controversial.The Department for Education has already set out proposals for teachers’ pay that are generous to those near the start of their careers but imply big real terms pay cuts for more senior staff. However, the government has not yet given guidance for health workers, police or prisons, among others.Zaranko said real terms pay cuts could compound recruitment difficulties, especially at the more senior levels and for those working in London.But he added that it was a natural consequence of chancellor Rishi Sunak’s decision in last week’s Spring Statement to “keep a lid on spending and prioritise tax cuts and fiscal tightening”. More