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    Fed’s Logan calls for ‘gradual’ rate cuts, says ‘should not rush’

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    “Following last month’s half-percentage-point cut in the fed funds rate, a more gradual path back to a normal policy stance will likely be appropriate from here to best balance the risks to our dual-mandate goals,” Logan said in her first public remarks since the Fed reduced its policy rate to the 4.75%-5.00% range three weeks ago. The central bank, she said, “should not rush to reduce the fed funds target to a ‘normal’ or ‘neutral’ level but rather should proceed gradually while monitoring the behavior of financial conditions, consumption, wages and prices.”In prepared remarks to an energy conference hosted by the Greater Houston Partnership, Logan ran through a litany of reasons to go slow, even as she also noted that inflation progress has been broad-based and the labor market has cooled.”I continue to see a meaningful risk that inflation could get stuck above our 2% goal,” she said, noting the potential for stronger-than-expected consumer spending or economic growth; “unwarranted” further easing in financial conditions; and the possibility that the level of borrowing costs that neither presses down or up on economic growth – the “neutral rate” – is higher than it was before the pandemic. Other upside inflation risks include the reemergence of supply chain issues amid geopolitical risks and the East Coast dockworkers strike, she said, noting that workers and port operators plan to revisit their contract in January. Logan did nod to risks that the labor market, while still healthy, could “cool beyond what is needed to sustainably return inflation to 2% or that the employment situation may even deteriorate abruptly.” And Logan also said she “supported” the decision, though omitting any modifier like “strongly” or “whole heartedly” that other Fed policymakers have used to characterize their degree of enthusiasm for the half-point move.”Less-restrictive policy will help avoid cooling the labor market by more than is necessary to bring inflation back to target in a sustainable and timely way,” Logan said. Her comments made clear she remains worried that inflation pressures could reemerge. “Downside risks to the labor market have increased, balanced against diminished but still real upside risks to inflation,” she said. “Any number of shocks could influence what that path to normal will look like, how fast policy should move and where rates should settle.” The policy path, she added, should not follow a preset course; the Fed, she said, “will need to remain nimble and willing to adjust if appropriate.” The Fed will release minutes of its Sept. 17-18 meeting later on Wednesday, and investors expect to learn more about how divided policymakers may have been about delivering a bigger-than-expected rate cut, and their outlook for the rate path ahead. More

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    India denounces ‘stifling’ EU carbon tax on imports

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    Save over 65%$99 for your first yearFT newspaper delivered Monday-Saturday, plus FT Digital Edition delivered to your device Monday-Saturday.What’s included Weekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysis More

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    German economy expected to contract again in 2024, economy minister says

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    BERLIN (Reuters) – Germany’s economy is expected to contract by 0.2% in 2024, the economy ministry said on Wednesday, becoming the only member of the Group of Seven (G7) major industrial democracies to post shrinking output this year, as was also the case in 2023.The government is cutting its forecast from a previous projection of 0.3% growth for this year, as the expected recovery in the second half of the year failed to materialise.Germany’s economy was already the weakest among its large euro zone peers and other G7 countries last year, with a 0.3% decline in gross domestic product.If economic output contracts for a second consecutive year, which last happened in 2002-2003 when exporting and manufacturing industries struggled, Germany would be the only G7 economy in contraction, according to the latest projections of the International Monetary Fund. Germany’s economy contracted in the second quarter, sparking fears of a possible recession, which is defined as two consecutive quarters of contraction. Early indicators such as industrial production and business climate suggest that the economic downturn has continued into the second half of the year, the ministry said. The economy has not grown strongly since 2018 due to its structural problems and geopolitical challenges, German Economy Minister Robert Habeck said in his presentation of the forecasts. To counter the cyclical and structural challenges, the German government has agreed a growth package of 49 measures to stimulate the economy.”If they are implemented, the economy will be stronger and more people will come back to work,” Habeck said.The plans must be approved by both houses of parliament later this year. That means the coalition government need votes from opposition conservatives in the upper house Bundesrat, which represents Germany’s 16 federal states.BACK TO GROWTH IN 2025By the turn of the year, the growth dynamics should gradually revive again, the ministry said, expecting 1.1% growth for 2025, up from 1.0% previously. Growth is expected to resume in 2025 due mainly to increased private consumption resulting from higher wage settlements, falling inflation and tax relief, the ministry said. Lower interest rates should also stimulate consumption, it said. For the first time, the government has included a forecast for 2026, when Germany’s economy is seen expanding by 1.6%.Inflation is expected to decline further, slowing to 2.2% in 2024 from 5.9% last year, then to 2.0% in 2025 and 1.9% in 2026. More

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    Hungary has overcome inflation crisis, economy minister says

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    BUDAPEST (Reuters) -Data suggests Hungary has overcome its inflation crisis, its economy minister said on Wednesday, after the country posted the highest rate of price growth in the European Union last year before it started slowing towards the central bank’s target.Marton Nagy said Prime Minister Viktor Orban’s cabinet would still “keep an eye” on inflation, but would also focus on reviving economic growth amid a weaker-than-expected recovery from last year’s inflation-led downturn.The remarks by Nagy, a former central banker, appeared to be at odds with the National Bank of Hungary’s assessment, which last month warned policymakers against prematurely declaring victory over inflation and backed a cautious rate policy.”While many raise questions about our statements that we have managed to push inflation to the ground and it will stay there, this is looking more and more like a certainty based on the latest results and data,” Nagy told a business conference.Nagy said favourable inflation trends were likely to have prevailed in September.Economists polled by Reuters projected an annual inflation rate of 3.1% last month. The NBH targets 3% inflation, with a tolerance band of one percentage point either side.The NBH, which has slashed borrowing costs by a combined 1,150 bps in its current cycle, said a careful and patient policy approach was justified and said policymakers should not overreact to rate easing by the U.S. Federal Reserve.The bank has also flagged a rebound in core inflation to around 5% by the end of 2024 and said its preferred measure of underlying price trends could still exceed 3% next year.The forint, central Europe’s worst-performing currency which has lost more than 4% versus the euro this year, also plumbed its weakest levels per euro this week than at any point since the NBH started cutting rates in May 2023. More