Economy

The debt brake – which played a part in breaking the coalition, precipitating the calling of a snap election – limits the public deficit to 0.35% of gross domestic product and can only be changed with a two-thirds majority in the upper and lower houses of parliament.”I can definitely rule that out,” the Christian Democrats’ (CDU) Merz told Deutschlandfunk radio station. “Lifting the debt brake just before the end of this coalition has always been a clear answer from us: No, we won’t do that,” Merz added.Merz was somewhat more open, albeit sceptical, about after the election: “We can discuss the debt brake, but not if it involves simply increasing spending, because then all the other problems are not solved,” he said. State spending would first have to be reformed before he would consider a change to the debt brake, said Merz, and even then, he was “very, very sceptical” as to whether this was the right way to create more debt. Merz had showed openness to reforming the brake, which was introduced by his party under Angela Merkel, earlier this month after previously arguing the country should stick with it. More

COLOMBO (Reuters) -Sri Lanka’s central bank set a new single policy rate of 8% on Wednesday, easing monetary settings below previously used benchmarks, in an effort to shore up the island nation’s fragile recovery from a deep financial crisis.The introduction of an overnight policy rate (OPR), which had been flagged as likely earlier this year, would help markets more easily adjust to lower rates and help foster growth, the Central Bank of Sri Lanka (CBSL) said.Until now it set two key rates, the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR), which economists had expected would be reduced by 25 basis points each to 8% and 9%, respectively.The SDFR and SLFR will no longer be considered policy interest rates, CBSL said but added that banks can continue to use them to borrow or lend from it and these would be set 50 basis points on either side of the OPR.Factors that prompted further easing include deeper-than-expected deflationary conditions in the near term as well as further moderation of underlying inflationary pressures and inflation expectations, the bank said.The lack of further leeway to reduce market lending rates and better-than-expected developments for the global macro economy were also factors, it said.”I don’t expect the kind of sharp easing we had since last year to this year – don’t expect that kind of trend to continue but whether we ease further, will need to wait and see,” Governor P. Nandalal Weerasinghe said.He added that the bank will monitor inflation-growth dynamics, external balances, real interest rates and the output gap to decide on policy.The South Asian economy is gradually emerging from a debt crisis after a $2.9 billion assistance package from the International Monetary Fund (IMF) was secured in March 2023.Sri Lanka’s economy is expected to grow by 4.5%-5% in 2024, slightly above the World Bank’s estimate of 4.4%, an official at the bank said.Weerasinghe said the baseline expectation is for the economy to expand 3% in 2025 but he was confident it would grow much faster.”There is no direct signalling of an end to the easing cycle,” said Thilina Panduwawala, head of research at Frontier Research.”But they do say that without further policy easing, they did not see further space for market rates to reduce. That might imply CBSL assumes rates can bottom out after this rate cut and that can make sense given their inflation forecast expects inflation to rise going into mid-2025.”On Tuesday, Sri Lanka launched a long-awaited bond swap, a major step to completing its $12.55 billion debt restructuring and enabling its fragile economic recovery to continue.Bondholders have until Dec. 12 to vote in support of the proposal, which would see them swap existing bonds for a set of new issues.Completion of the nearly 30-month debt restructuring process and a budget aligned with the IMF programme could bring down interest rates of government securities and boost credit growth, analysts said. More

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President-elect Donald J. Trump on Tuesday picked Jamieson Greer, a lawyer and former Trump official, to serve as his top trade negotiator. The position will be crucial to Mr. Trump’s plans of issuing hefty tariffs on foreign products and rewriting the rules of trade in America’s favor.Mr. Greer is a partner in international trade at the law firm King & Spalding. During Mr. Trump’s first term, Mr. Greer served as chief of staff to Robert E. Lighthizer, the trade representative at the time. He was involved in the Trump administration’s trade negotiations with China, as well as the renegotiation of the North American Free Trade Agreement with Canada and Mexico.Before that, Mr. Greer served in the Air Force, where he was a lawyer who prosecuted and defended U.S. airmen in criminal investigations. He was deployed to Iraq.“Jamieson will focus the Office of the U.S. Trade Representative on reining in the Country’s massive Trade Deficit, defending American Manufacturing, Agriculture, and Services, and opening up Export Markets everywhere,” Mr. Trump said.The position of trade representative has historically been fairly low profile, but it has taken on greater importance under Mr. Trump. In his first term, the office helped wage a trade war against China, imposed substantial tariffs on its products and negotiated a series of trade deals.In his next term, Mr. Trump has promised to again make aggressive use of the government’s authority over trade. On Monday, he said he would impose tariffs on all products coming into the United States from Canada, Mexico and China on his first day in office.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

BEIJING (Reuters) – China’s state media shrugged off U.S. President-elect Donald Trump’s pledge to slap additional tariffs on Chinese goods in editorials late on Tuesday, accusing the former president of blaming China for the country’s failure to address the fentanyl crisis.Trump, who takes office on Jan. 20, said on Monday he would impose “an additional 10% tariff, above any additional tariffs” on imports from China. He previously said he would introduce tariffs in excess of 60% on Chinese goods. The tariff threat is rattling China’s industrial complex, which sells goods worth more than $400 billion annually to the U.S. and hundreds of billions more in components for products Americans buy from elsewhere.Economists have begun downgrading their growth targets for the $19 trillion economy for 2025 and 2026.Editorials in Chinese communist party mouthpieces China Daily and the Global Times focused squarely on the reason Trump gave for imposing the tariffs: fentanyl.”Scapegoating others can’t end U.S.’ drug crisis,” read the headline of a China Daily editorial on Tuesday, while the Global Times urged the “U.S. not to take China’s goodwill for granted regarding anti-drug cooperation after Trump’s remarks.””The excuse the president-elect has given to justify his threat of additional tariffs on imports from China is farfetched,” China Daily said. “The world sees clearly that the root cause of the fentanyl crisis in the U.S. lies with the U.S. itself,” it added.”There are no winners in tariff wars. If the U.S. continues to politicise economic and trade issues by weaponising tariffs, it will leave no party unscathed.”Trump’s team maintains China is “attacking” the U.S. with fentanyl.China is the dominant source of chemical precursors used by Mexican cartels to produce the deadly drug. Trump on Monday also pledged 25% tariffs on goods coming from Mexico and Canada until they clamp down on drugs and migrants crossing the border.Trump is threatening Beijing with far higher tariffs than the 7.5%-25% levied on Chinese goods during his first term. S&P Global on Sunday lowered its growth forecast for China for 2025 and 2026 by 0.2 and 0.7 percentage point, respectively, to 4.1% and 3.8%, citing the impact Trump’s tariffs could have.”What we assumed in our baseline is an across-the-board increase from around 14% now to 25%. Thus, what we assumed is a bit more than the 10% on all imports from China,” said Louis Kuijs, Chief Asia Economist at S&P Global Ratings.”For now the only thing we know for sure is that the risks in this area are high.” More

By Lucy CraymerWELLINGTON (Reuters) -New Zealand’s central bank cut the cash rate by 50 basis points to 4.25% on Wednesday, as annual inflation ran near the 2% midpoint of its target range and economic activity remained subdued.The decision was in line with expectations, with 27 of the 30 economists in a Reuters poll forecasting the Reserve Bank of New Zealand (RBNZ) would cut the cash rate by 50 basis points. This follows a similar move in October.”If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR (official cash rate) further early next year,” the statement said.”The Committee agreed that a 50 basis point cut is consistent with their mandate of maintaining low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates and the exchange rate,” the minutes of the meeting said.The RBNZ is now forecasting the cash rate to be at 3.8% in the second quarter of 2025 and at 3.6% in the fourth quarter of 2025, suggesting more cuts than had been expected in August.The statement said domestic price and wage setting behaviour is becoming consistent with inflation remaining near the target midpoint and that the price of imports has fallen, also contributing to lower headline inflation. It added economic growth is expected to recover during 2025, as lower interest rates encourage investment and other spending. Employment growth is expected to remain weak until mid-2025 and, for some, financial stress will take time to ease. More

TOKYO (Reuters) – The U.S. dollar steadied against major peers on Wednesday as investors continued to take stock of President-elect Donald Trump’s tariff pledges, while keeping an eye on a key inflation figure out of the U.S. later in the day. The New Zealand dollar rose after the Reserve Bank of New Zealand cut benchmark rates by 50 basis points to 4.25% while noting that inflation had declined to near the mid-point of its targeted range.Trump’s vows on Monday of big tariffs on Canada, Mexico and China, the United States’ three largest trading partners, have left investors jittery, even if some of the reaction was tempered later in the U.S. day. “Markets are likely to remain edgy as a second Trump administration brings back uncertainty about policy making in the U.S.,” said Carol Kong, currency strategist at Commonwealth Bank of Australia (OTC:CMWAY).”This uncertainty can lead markets to ‘sell first and ask questions later’ which is a positive for the USD.”The dollar was last little changed versus its Canadian counterpart at C$1.4052, below Tuesday’s 4-1/2-year high of C$1.4178.The dollar remained off Tuesday peak against the Mexican peso, after touching its highest since July 2022 in the previous session. The U.S. currency also rose to its highest level since July 30 against China’s yuan, on Tuesday. A ceasefire between Israel and Iran-backed group Hezbollah will take effect on Wednesday after both sides accepted an agreement brokered by the United States and France, U.S. President Joe Biden said on Tuesday. The Israeli shekel hit a three-month high on Tuesday. The yen, meanwhile, held onto gains made from safe-haven bids amid the turmoil. The dollar was last down 0.19%at a two-week low of 152.81 yen.The dollar has experienced some turbulence in the past few sessions, falling on the back of Trump’s late Friday naming of hedge fund manager Scott Bessent to become U.S. Treasury secretary, before surging after Trump’s tariff vows.The dollar index, which measures the greenback against six rivals, was last down 0.07% at 106.83.The main scheduled news release left this week is the October Personal Consumption Expenditures (PCE) price index due later on Wednesday.Fed minutes of the central bank’s November meeting released on Tuesday showed many policymakers in agreement that it was appropriate to reduce policy restraint gradually.The euro was little unchanged at $1.0493, while sterling last fetched $1.25735, up 0.05%.The Australian dollar was mostly flat at $0.64755 after domestic consumer price inflation stayed at a three-year low in October.In cryptocurrencies, bitcoin was trading at $91,795, keeping well below the record high of $99,830 it touched last week. Bitcoin has struggled to rise above the symbolic $100,000 barrier as profit-taking set in. It has climbed more than 40% since the U.S. election on expectations Trump will loosen the regulatory environment for cryptocurrencies. More