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ECB’s money drain has silver lining for markets

There are 50 ways to leave your lover, as Paul Simon once sang. There are at least as many ways to leave massive monetary stimulus. The European Central Bank has chosen one that will enable it to keep tight control of interest rates as it slowly drains some 4.7 trillion euros in liquidity. Banks will have to decouple from cheap money, but life in the single lane won’t be that bad. On March 13, ECB President Christine Lagarde started preparing markets for a breakup. For most of the past decade, ...

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Fed’s new neutral may be one FOMC takeaway

Next week’s Federal Reserve meeting has lost the heat it once had as a likely moment for the central bank’s first interest rate cut – but it could shine a big light on where the Fed thinks the economy is at over the long run. Conditioned by verbal pushback from Fed officials all year and still-sticky inflation and punchy growth readings, futures markets currently price a near zero chance of a first cut at the March 20 gathering and now favour June or July instead. And yet the readout from ...

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China may be facing too many economic obstacles to hit its ambitious growth target for 2024

Chinese leaders who have been predicting an end to the country’s deflation would have been heartened by official statistics this week showing consumer prices had increased for the first time in six months. The news came as the ruling Communist party used its annual gathering in Beijing to declare the economy would clock up growth of “around 5%” in 2024. However in his speech, Premier Li Qiang warned dutiful delegates they “should not lose sight of worst-case scenarios and should be well prepared for all risks and challenges”. And little ...

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How do economies fare under populist rule?

Populism is on the rise around the world. According to the economist Christoph Trebesch, more than a quarter of the world’s nations are currently ruled by populists. Recep Tayyip Erdogan has been in power for years in Turkey, as has Viktor Orban in Hungary; Javier Milei recently won the election in Argentina, and Donald Trump might to return as president of the United States. In Germany, too, the right-wing populist party AfD is gaining more and more support. Populists usually present themselves as defenders of the people in the battle ...

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Swiss bank UBS targets US deals, says chairman

Swiss banking giant UBS UBSG.S will look for merger and acquisitions opportunities in the United States in the next few years, its chairman told the NZZ newspaper on Sunday. UBS, which took over former rival Credit Suisse last June, wants to expand its U.S. wealth-management business through potential M&A in the next three or four years, Colm Kelleher said. “Only in wealth management and not yet,” he added. Since rescuing Credit Suisse, UBS has faced criticism over a $1.6 trillion-plus balance sheet that is nearly twice the size of the ...

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EU to bolster Egypt ties with billions of euros in funding

European leaders are expected to announce a 7.4 billion euro ($8.06 billion)funding package and an upgraded relationship with Egypt in Cairo on Sunday, part of a push to stem migrant flows across the Mediterranean that has been criticised by rights groups. The agreement, which lifts the European Union’s relationship with Egypt to a “strategic partnership”, is designed to boost cooperation in areas including renewable energy, trade, and security while delivering grants, loans and other funding over the next three years to support Egypt’s faltering economy. That funding is expected to ...

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Crisis-stricken Argentina must dollarize and get rid of the central bank, veteran economist says

Argentina is in the grip of a profound economic crisis, and one veteran economist believes part of the solution is for President Javier Milei to deliver on his campaign promise to dollarize the economy and abolish the central bank. Latin America’s third-largest economy is currently struggling to cope with the world’s fastest rising prices, which is hammering the purchasing power of Argentinians. Data published Tuesday by the country’s statistical office showed that Argentina’s 12-month inflation rate through February rose to 276.2%, reaffirming Argentina’s position as having the world’s worst inflation. ...

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Will Germany’s wave of strikes stifle economic growth?

In the heart of Germany’s industrial landscape, labor disputes and growth concerns are casting a shadow over the nation’s economic outlook. At the forefront of the current tumultuous landscape is Jens Höngen, a seasoned 30-year-old locomotive driver with a decade-long tenure at Deutsche Bahn, the country’s leading railway operator. Höngen’s journey within state-owned Deutsche Bahn has been marked by both dedication and discontent. Despite his years of service, he has found himself at odds with his employer, and has participated in multiple strikes in recent months. “Striking isn’t fun,” Höngen ...

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PBOC held rates steady in March

PBOC stood pat in March The People’s Bank of China (PBOC) kept the 1-year Medium-term Lending Facility (MLF) rate unchanged at 2.5%, in line with expectations. Typically the MLF decision is a precursor for the Loan Prime Rate (LPR) decision to follow. Last month proved an exception as we saw the 5-year rate cut while the 1-year rate was left unchanged, the first time on record we saw an asymmetric rate cut where the 5-year rate was cut instead of the 1-year rate. This month, we expect a return to ...

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Russia to hold rates at 16% with first cut expected in June

Russia will hold interest rates at 16% on Friday, a Reuters poll showed on Monday, with many economists expecting the bank to start easing monetary policy in June as inflation is stubbornly high. Inflation has eroded Russians’ living standards over the last decade. President Vladimir Putin, fresh from securing a new six-year term in office, has recycled old promises with new deadlines and pledged more than 11.5 trillion roubles ($125 billion) of public spending. Widespread labour shortages, rouble weakness, hefty government spending to fund what Moscow calls its “special military ...

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Turkey set to hold rate steady this week, but hike is coming – Reuters poll

Turkey’s central bank is expected to leave its key interest rate unchanged at 45% this week, holding steady for a second straight month, though most economists forecast another rate hike later this year, a Reuters poll showed on Monday. The central bank has recently moved to tighten policy, including action on reserve requirements, prompting some banks to either reduce loan limits or even stop offering loans. On Saturday the bank raised the maximum interest rate on credit card cash withdrawals. All but two of 22 respondents expected the bank to ...

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Cost to buy homes could fall as big US real estate group settles litigation

The National Association of Realtors agreed to resolve antitrust litigation accusing brokerages of inflating sales commissions, a settlement likely to bring major changes and lower costs when people buy and sell homes. Friday’s $418 million settlement calls for the NAR to eliminate decades-old rules governing the commissions, and make it easier for buyers to negotiate fees with their own agents or use no agents at all. These changes could spur more home sales by lowering typical commissions by thousands of dollars, a benefit to less-wealthy individuals and families struggling with ...

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Inflation frustration may prompt Fed to dial back rate-cut outlook

U.S. central bankers are not expected to cut borrowing costs this week, but their new economic projections may be a wild card, potentially signaling fewer interest rate cuts and a later start to the policy easing than they previously had estimated. Keeping interest rates at the current high levels for a longer period of time could have big implications for American households and businesses, especially in a presidential election year when the state of the economy is already a central talking point for President Joe Biden and his Republican challenger, ...

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Central banks: How our views compare to yours

Our verdict: Federal Reserve US growth, jobs and inflation data remain too hot for the Federal Reserve to contemplate imminent interest rate cuts. Nonetheless, officials believe that “the risks to achieving our employment and inflation goals have been moving into better balance”. At the December forecast update, the Fed signalled they felt three 25bp rate cuts were the most likely path forward for 2024. We expect a similar set of projections at the 20 March FOMC meeting with the messaging indicating that the Fed is inclined to cut rates later ...

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China Feb new bank loans dip more than expected, lending growth at record low

New bank lending in China fell more than expected in February from a record high the previous month, even as the central bank seeks to spur sluggish economic growth and fight deflationary pressures. Chinese banks extended 1.45 trillion yuan ($201.5 billion) in new yuan loans in February, according to Reuters calculations based on data released by the People’s Bank of China, down sharply from January and falling short of analysts’ expectations. Outstanding yuan loans grew 10.1% from a year earlier – the lowest on record – compared with 10.4% growth ...

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