Economy

Standard DigitalStandard & FT Weekend Printwasnow $29 per 3 monthsThe new FT Digital Edition: today’s FT, cover to cover on any device. This subscription does not include access to ft.com or the FT App.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts10 monthly gift articles to shareGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionEverything in PrintWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisPlusEverything in Premium DigitalEverything in Standard DigitalGlobal news & analysisExpert opinionSpecial featuresFirstFT newsletterVideos & PodcastsFT App on Android & iOSFT Edit app10 gift articles per monthExclusive FT analysisPremium newslettersFT Digital Edition10 additional gift articles per monthMake and share highlightsFT WorkspaceMarkets data widgetSubscription ManagerWorkflow integrationsOccasional readers go freeVolume discountFT Weekend Print deliveryPlusEverything in Standard DigitalFT Weekend Print deliveryPlusEverything in Premium Digital More

BRASILIA (Reuters) -Brazil’s central bank said on Tuesday that further deterioration in inflation expectations could extend the monetary tightening cycle, with its action remaining “a fundamental factor” in steering expectations back towards the 3% target.In the minutes from the Nov. 5-6 meeting, when policymakers accelerated the tightening pace with a 50 basis-point hike that pushed rates to 11.25%, the central bank noted that recent concerns over rising public spending and the sustainability of the country’s fiscal framework have significantly impacted asset prices and market expectations.Despite the central bank’s two rate hikes since September and signals of more to come, market inflation expectations have continued to drift from the target amid a more challenging outlook for inflation, marked by a weakening Brazilian real against the U.S. dollar, stronger-than-expected economic activity, and a tight labor market.This backdrop includes inflationary pressures fueled by policy proposals from U.S. President-elect Donald Trump and Brazil’s fiscal uncertainties, which have driven up risk premiums on Latin America’s largest economy. President Luiz Inacio Lula da Silva’s economic team had indicated that a package to curb mandatory spending would be presented following the conclusion of October’s municipal elections. However, despite a series of meetings with ministers, the leftist leader has said he is yet to make a decision.In the minutes, the central bank reinforced the need for sustainable fiscal rules, and said that “the reduction of spending growth, especially in a more structural way, could even induce economic growth in the medium term through its impact on financial conditions, risk premium, and better allocation of resources.”Regarding the United States, policymakers stressed continued high uncertainty around the pace of disinflation and economic slowdown, adding that potential shifts in economic policy – such as fiscal stimuli, labor supply constraints, and new import tariffs – heighten outlook doubts. More

GENEVA (Reuters) -The World Trade Organization plans a special meeting of its top decision-making body later this month where a call could be made on the reappointment of its Director-General Ngozi Okonjo-Iweala, a document showed on Tuesday.Trade sources said such a meeting appeared to be a route that could fast-track the months-long appointment process to avoid any risk of it getting blocked by U.S. President-elect Donald Trump, whose teams and allies have criticised both Okonjo-Iweala and the trade watchdog in the past.A WTO document sent by the General Council chair said the first day of the Nov. 28-29 meeting would allow Okonjo-Iweala, a former Nigerian finance minister, to present her vision for the 166-member organisation and answer delegates’ questions. The second day “could then provide an opportunity for Members to take a decision on the appointment of the next Director-General”, it said.Okonjo-Iweala is the sole candidate for the job but some have observed that the WTO’s lengthy reappointment process could allow for U.S. President-elect Donald Trump’s team to oppose her candidacy.In 2020, Trump’s administration sought to block her first term. She secured U.S. backing only when President Joe Biden succeeded Trump in the White House.Those who follow the trade body say it is likely to face a messy, recriminatory period for trade under Trump, who has promised to impose a 10% tariff on all imports and higher rates on countries such as China. More

$1 for 4 weeksThen $75 per month. Complete digital access to quality FT journalism. Cancel anytime during your trial.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

BERLIN (Reuters) – A new government beckons in Germany after the implosion of its ruling coalition, but it will face the same question: whether to allow higher public borrowing to prop up the flagging economy.Current polling suggests that, whatever the shape of that government, the conservative Christian Democrats (CDU) will be the largest party in it. That puts its leader, Friedrich Merz, in poll position to become chancellor.The following outlines Merz’s stance on Germany’s self-imposed borrowing limit, known as the “debt brake”, and the options he would have should he lead Germany’s next government.WHAT IS MERZ’S STANCE ON THE DEBT BRAKE?Merz has always said Germany should stick with the constitutionally enshrined debt brake, which limits public deficits to 0.35% of gross domestic product and was introduced by his party in 2009 under then Chancellor Angela Merkel. However, he has set two prerequisites for discussing a potential reform: having conditions for the money to be invested in pro-growth programs and controlling social welfare spending.”If we get the overall concept under control, then we can talk about reforming the debt brake, but not about abolishing it,” he said last week. WHAT IS THE VIEW WITHIN HIS CDU PARTY? Critics of the debt brake say it has held Germany back from investing in much-needed infrastructure improvements and contributed to its current economic decline.Within the CDU, the debate was reopened this year by Kai Wegner, the conservative mayor of Berlin. Several powerful CDU leaders from other regional governments have joined the push for reform because the states are also constrained by the debt brake.The CDU says it is not currently planning to change its position on the debt brake. But pressure is building within the party, with CDU state premiers pushing Merz to include reform plans in the election program in recent party meetings. WHAT IS THE POSITION OF THE OTHER PARTIES? Any change to the debt brake requires a two-thirds majority in the upper and lower houses of parliament. The pro-business Free Democrats of recently ousted finance minister Christian Lindner have always been fierce defenders of the debt brake. The far-right AfD, which is polling in second place after the CDU, also opposes any reform. Votes in favour of reform from the two parties in the now-minority government of the Social Democrats (SPD) and the Greens would not be enough. Germany’s new leftist populist party, the Sahra Wagenknecht Alliance (BSW), supports the reform.Together, these parties would have 64% of the votes, according to an INSA poll published on Saturday after the coalition break-up, being short of the two-thirds majority needed. If the CDU changes its line, that would be the decisive factor which tips the balance in favour of reform.WHAT ARE THE OTHER OPTIONS?One option is to suspend the debt brake citing special circumstances. Germany reimposed the debt brake in 2024 after four years in which it was suspended to allow extra spending due to the coronavirus pandemic and the energy crisis following Russia’s invasion of Ukraine.Another option would be off-budget funds to comply with the debt ceiling for financing Germany’s fiscal needs. Germany currently has 29 special funds at the federal level, worth a total of 869 billion euros ($925.75 billion) according to the independent auditing institution Bundesrechnungshof. However, a two-thirds majority would also be required to create one of these funds. ($1 = 0.9387 euros) More

“As we saw in the labour market data that was released this morning, pay growth remains quite sticky at elevated levels and levels that – given the outlook for productivity growth in the UK – are hard to reconcile with the UK inflation target,” Pill said at a conference organised by Swiss bank UBS.The BoE last week cut borrowing costs for only the second time since 2020 and said further reductions were likely to be gradual as it assessed the persistence of inflation pressures including from the first budget of Britain’s new government.Pill said Britain might be behind other economies in working its way through the impact of the COVID pandemic and other shocks in recent years, which could help to explain why investors are pricing higher UK interest rates than elsewhere.While it was not the BoE’s base case that Britain would need higher levels of rates to stabilise the economy, that possibility did need to be considered. “So (given) the fact that we are entertaining that story, it’s not surprising that markets are entertaining some of that story,” Pill said.Financial markets only price in 0.6 percentage points of interest rate cuts by the BoE by the end of next year, compared with 1.4 percentage points for the European Central Bank and 1.0 percentage points for the U.S. Federal Reserve.Pill voted last week with the majority of the BoE’s monetary policymakers to cut Bank Rate to 4.75% from 5% but has voted against lowering borrowing costs in other, closer decisions by the Monetary Policy Committee in recent months. More

U.S. President-elect Donald Trump has promised a big increase in trade barriers, including a 10% universal tariff on imports from all foreign countries and a 60% tariff on imports from China, with the aim of reducing the U.S. trade deficit. “What we do know is that the significant import duties spoken of could have detrimental ramifications for the world economy,” Finnish central bank chief Olli Rehn said in London. “A new trade war is the last thing we need amid today’s geopolitical rivalries – especially among allies.”Austrian central bank chief Robert Holzmann warned that these policies, if implemented, will keep U.S. interest rates and inflation higher, also putting upward pressure on prices elsewhere. “He means what he has said and he will probably implement it faster than we expect. If so, what do markets expect? … That interest rates will stay higher and that inflation will also be higher,” Holzmann said in Vienna, adding that would put upward pressure on the dollar and euro zone inflation. Holzmann argued that if the dollar firms and approaches parity against the euro, that would have a measurable impact on import costs, especially for energy, making it harder for the ECB to get to its 2% inflation target and potentially delaying the process.Trade tensions started to increase between the U.S. and Europe during Trump’s first presidency and Europe struggled to find a joint response, a mistake it should not make this time, Rehn said. “If a trade war were to start, Europe must not be unprepared, as it was in 2018,” Rehn added. “The (ECB) must, within its mandate, act as an anchor for economic and financial stability in this landscape of great challenges,” Rehn said. “No one should doubt that we will shoulder this responsibility in full.” More