Economy

DHAKA (Reuters) – Bangladesh said on Tuesday the World Bank has committed to providing over $2 billion in new financing this fiscal year to support the country’s ongoing reform efforts, flood response initiatives, and improvements in air quality and healthcare.The announcement was made by the World Bank’s Country Director, Abdoulaye Seck, following a meeting with the head of the interim government Nobel laureate in Dhaka on Tuesday, his office said in a statement.”We would like to support you as fast as possible and as much as possible,” Yunus’ office quoted Seck as saying, underscoring the bank’s commitment to addressing Bangladesh’s financial needs as it embarks on critical reforms under the interim government, formed last month following the ousting of Prime Minister Sheikh Hasina after deadly protests.The World Bank also plans to repurpose an additional $1 billion from existing programmes, which will raise the total amount of soft loans and grants to approximately $3 billion for this fiscal year that ends in June 2025. The funds will be used to support a variety of key areas, including the country’s response to natural disasters and economic reforms.Seck highlighted the importance of the reforms for Bangladesh’s future, particularly for its youth, with two million people joining the job market each year. “The completion of the reforms will be critically important for Bangladesh and its young people,” he said.During the meeting, Yunus urged the World Bank to provide the necessary flexibility and support for the country’s reform initiatives. “We need a big push, and we have to focus on the dreams of the students.”In a televised address last week, Yunus said the government was appealing for $5 billion in aid to help stabilise an economy that has been struggling since the Ukraine war sharply increased the cost of fuel and food imports. Bangladesh last year sought a $4.7 billion bailout from the International Monetary Fund.The United States is committed to supporting Bangladesh’s inclusive economic growth, institution building and development and will provide an additional $202 million of aid, a U.S. delegation said during a visit to Dhaka on Sunday. More

It was the second straight outlook upgrade by the Bank of Spain this year following its initial forecast of a 1.9% expansion. Last year, the economy grew 2.5%.It also contrasted with the fortunes of the wider euro zone. The European Central Bank on Thursday lowered its 2024 economic growth projection for that region to 0.8% from 0.9%. Spanish growth is likely to slow down in the third quarter to 0.6% from the preceding three months, when the economy grew a stronger-than-expected 0.8%, Tuesday’s report said. It noted that the strong second quarter had a positive carry-over effect on the full-year forecast.In the first seven months of 2024, spending by foreign visitors rose 18.6% to 71 billion euros ($79 billion), boosting net external demand, despite initial concerns over anti-tourism protests and extreme summer temperatures.Population growth through migration flows and the Spanish manufacturing sector’s relative resilience compared to euro zone peers were also contributing to higher growth, the central bank said.While private consumption was still lagging, it expected lower interest rates and slowing inflation to allow for an improvement in the coming quarters.The central bank also raised the outlook for 2025 and 2026, to 2.2% and 1.9% from 1.9% and 1.7%, respectively.It now expects inflation to hit 2.9% this year, down from 3% predicted three months earlier, and then to gradually moderate to 2.1% and 1.8% in the following two years. More

LONDON (Reuters) – Market expectations of substantial U.S. rate cuts this year are making short-dated debt unattractive as the Federal Reserve is unlikely to be as aggressive in easing monetary policy, said Deborah Cunningham, a money market fund manager for Federated Hermes (NYSE:FHI), on Tuesday.The Fed delivers its decision on policy on Wednesday and is all but certain to cut interest rates from their 23-year high.Investors currently think it more likely to begin with a 50-basis-point cut than with a 25-basis-point one and are pricing around 120 bps of cuts across the three meetings by year end. Federated Hermes, in contrast, expects a 25-bp cut on Wednesday and two more such cuts by year end, Cunningham said. “Short term (U.S.) paper at this point looks unattractive,” Cunningham, chief investment officer for global liquidity markets, told reporters. “The best strategy in the short term is to invest in the longer end of our yield curve – out to 13 months – but it is hard to do that when you’re looking at a yield curve that at the short end is expecting way more (cuts) than we are.” Cunningham’s view differs from market pricing “because there are quite a few market participants that expect a recession, which is not our expectation.” Money market funds are mutual funds that invest in very liquid short-term debt products issued by governments or highly rated companies. Companies and investors have traditionally seen them as safe places to park cash, but poured funds into this asset class as central banks raised rates, taking advantage of the higher returns on offer. Retail investors too have got in on the act and in total, $6.3 trillion is currently invested in U.S. money market funds, according to data from the Investment Company Institute. The yield on a three-month Treasury bill has fallen around 56 bps in the last three months. There has been a full percentage point decline in two-year yields in that time.Cunningham said there were more opportunities to invest in short-dated government bonds in Britain, where markets are pricing fewer rate cuts than in the U.S., as well as short-dated tranches of asset-backed securities, which had been unattractive when rates were rising. Other asset managers are watching to see whether money flows out of money market funds as interest rates fall, but Cunningham said low interest rates on bank accounts meant she saw them continuing to attract inflows and that assets under management would peak over $7 trillion. More

Interest rate futures show a 65% chance of the Fed reducing rates by 50 bps on Wednesday, compared with 35% odds of a 25 bps cut, according to data on the CME’s FedWatch tool.Last week, a Reuters poll found that a majority of 101 economists expected the Fed to cut rates by 25 bps at the meeting, while only nine expected a half-percentage-point cut at the conclusion of the two-day Federal Open Market Committee (FOMC) meeting. Here are the latest forecasts from major brokerages ahead of the Fed’s decision due on Wednesday:Rate cut estimates (in bps) Sept Nov Dec Goldman Sachs 25 25 25 BofA Global Research 25 25 25 UBS Global Wealth 50 25 25 Management J.P.Morgan 50 50 25 Wells Fargo 50 50 25 Nomura 25 25 25 Deutsche Bank 25 25 25 Morgan Stanley 25 25 25 Citigroup 25 50 50 Wells Fargo 50 25 25 Investment Institute Barclays 25 25 25 UBS Global Research 25 25 25 HSBC 25 25 25 Macquarie 25 25 25 * UBS Global Research and UBS Global Wealth Management are distinct, independent divisions in UBS Group* Wells Fargo Investment Institute is a wholly owned subsidiary of Wells Fargo Bank More

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STRASBOURG, France (Reuters) -European Commission chief Ursula von der Leyen on Tuesday named a new team to lead the European Union’s most powerful institution for the next five years, focused on tackling challenges to the region’s security, competitiveness and growth.Lithuania’s Andrius Kubilius will be the EU’s first defence commissioner, with the new role designed to build up European military manufacturing capacity in the face of Russian aggression in Ukraine, on the bloc’s eastern flank.Spain’s Energy and Environment Minister Teresa Ribera will be the new antitrust chief tasked with reining in the power of Big Tech and also ensuring that the EU achieves its green goals.”The whole college (Commission) is committed to competitiveness,” von der Leyen told a press conference, with the aim being “building a competitive, decarbonised and circular economy, with a fair transition for all.”Climate change “is the major backdrop of all what we are doing,” von der Leyen said.But, compared to her first five-year term, “the topic of security, triggered by the Russian war in Ukraine, but also the topic of competitiveness, have … much more impact,” she said. The European Commission has the power to propose new EU laws, block mergers between companies and sign free trade deals.All candidates will undergo hearings with lawmakers in the European Parliament who have to sign off on their nomination.Each of the 27 member states will have one seat at the Commission’s table, a role comparable to a government minister, although its political weight varies greatly depending on the portfolio.The EU’s two biggest countries have top jobs in the Commission – von der Leyen is German, and France’s outgoing foreign minister Stephane Sejourne will be in charge of the key portfolio of industrial strategy.Poland’s nominee Piotr Serafin was appointed to the powerful job of overseeing the EU’s budget.HOT-BUTTON ISSUESRibera, with a record as one of Europe’s most ambitious policymakers on climate change, could step up outgoing antitrust chief Margrethe Vestager’s crackdown against Big Tech. She will also seek to ensure the EU’s single market is not distorted by companies benefiting from foreign subsidies.Key jobs have also gone to smaller member states. Estonia’s Kaja Kallas will be in charge of foreign policy. She has used her position as Estonia’s prime minister to become one of the most vocal critics of neighbouring Russia among European leaders – and one of the staunchest supporters of Ukraine’s bids to join the EU and NATO.Slovakia’s Maros Sefcovic will oversee trade policies, the Netherlands’ Wopke Hoekstra will tackle climate policies, Latvia’s Valdis Dombrovskis will have the economy portfolio and Finland’s Henna Virkkunen will oversee tech-sovereignty, security and democracy. All commissioners will report to von der Leyen, who this summer was handed a second term as EU chief executive by member states after her political camp won the most votes in EU elections. The next EU Commission is expected to take office by the end of the year, meaning one of its first tasks will be fielding the outcome of the U.S. presidential election in November.A second presidency for Donald Trump could sharply alter Western unity on supporting Ukraine against Russia’s invasion and up-end EU-US trade relations.There are 11 women in the Commission team von der Leyen proposed on Tuesday, well short of the gender balance she targeted. She said the imbalance was even worse before she negotiated with member states so they proposed more women for the jobs.Each new commissioner will need to pass a hearing in the European Parliament, expected in the coming weeks, in which EU lawmakers will attempt to extract promises from the nominees on what they will deliver if they get the job. The EU Parliament can block Commission nominees – with Hungary’s Oliver Varhelyi among the candidates EU officials expect to be put under pressure during his hearing.There was some drama on Monday on the Commission’s line-up, when, in order to secure a hefty portfolio, French President Emmanuel Macron picked Sejourne as its new candidate instead of the incumbent, Thierry Breton, who had repeatedly clashed with von der Leyen. More

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With markets pricing in the beginning of an easing cycle that will bring rates down from a 23-year high of 5.25% to 5.5%, investors’ focus has centered around the scope of September’s decision.According to the CME Group’s (NASDAQ:CME) closely-monitored FedWatch Tool, the odds of a 50-basis point cut this week — rather than a more traditional 25-basis point drawdown — currently stand at 65%.The probabilities were even heading into last weekend, but bets for a jumbo cut were bolstered by media reports suggesting that such a reduction was still an option. Former New York Fed President Bill Dudley has also argued that a bumper cut was needed because short-term interest rates are “far above” a neutral level that neither helps nor hinders economic activity.Indications of waning activity could spur the Fed act more aggressively to help prop up the economy. Officials are currently weighing lingering stickiness in recent consumer price growth data, as well as figures pointing to a loosening in the American labor market.Fed Chair Jerome Powell said in August that the “time has come” to adjust monetary policy due to potential “downside risks” facing the jobs picture.Even still, the StanChart analysts said in a note to clients on Monday that they are maintaining their forecast for a 25-basis point cut this month accompanied by a “clear message” from the rate-setting Federal Open Market Committee that it is on the lookout for reasons to slash borrowing costs by 50 basis points in the future.The analysts said they would only support a deeper 50-basis point reduction in September if “all incoming labor and activity data were as clearly negative” as a gradual increase in the US unemployment rate throughout 2024. In August, the jobless rate in the world’s largest economy was at 4.2%, up from 3.7% in January.”[T]he [unemployment rate] is isolated in showing an alarming deterioration,” the analysts said.The StanChart analysts added that a half-point cut will not make sense until the the core personal consumption expenditures index — one of the Fed’s preferred measures of inflation that strips out volatile items like food and fuel — decelerates closer to 2% on an annualized basis. The figure stood at 2.6% in July, matching the pace of the prior month.They also dismissed concerns that a shallower 25-basis point drawdown could dent asset markets, saying it is unlikely that trading conditions are “so fragile that a message of ‘not quite yet’ on a 50-basis point cut would lead to extended disappointment.”Finally, they warned that a 50-basis point cut in September would dampen the impact of a more aggressive reduction later this year should labor demand weaken further.”Starting the cutting cycle with 50 [basis points] will probably add to market pricing that is already aggressive on the easing side. There will be more subsequent confusion and market disruption if the unemployment rate remains in the low 4s and core PCE is flat,” the analysts said. More