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Recession’s coat of many colours

A return to reality for Europe Returning from the summer break always helps when looking at the bright side of the world’s economic prospects. An often heard truism is that relaxed economists make fewer pessimistic forecasts. But when you’re tracking the European and, specifically, German economies, no summer break is long enough to make short-term economic forecasts more optimistic. On the contrary, returning to Europe’s economic reality after the summer means returning to a recessionary environment, as gas prices are moving from one astronomic high to the other and will ...

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Will the cost of living crisis ease next year? The global public thinks not

Financial worries are particularly acute as rising inflation, interest rates and tax burdens weigh heavy on people’s minds right now. And with significant cost of living increases throughout 2022, many people don’t hold out much hope for an improvement in finances next year. Inflation, interest rates, unemployment and taxes will all rise in 2023, people predict, according to the monthly Ipsos Global Inflation Monitor report. Researchers interviewed almost 25,000 adults in 36 countries on their thoughts about the global economy. Nearly seven in 10 of them thought inflation would continue ...

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EU to adapt state aid schemes in response to U.S. subsidy package

The EU will adapt its state aid rules to prevent an exodus of investment triggered by a new U.S. green energy subsidy package, the bloc’s chief executive said. “Competition is good … but this competition must respect a level playing field,” European Commission President Ursula von der Leyen said in a speech in the Belgian city of Bruges. “The (U.S.) Inflation Reduction Act should make us reflect on how we can improve our state aid frameworks and adapt them to a new global environment,” she added. The 27-country bloc fears ...

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Germany sceptical of swift EU debt reform agreement – sources

Many questions remain unanswered on the topic of reforming European Union debt rules, German government sources said on Friday, dampening hopes for a swift agreement on the matter ahead of a meeting of finance ministers in Brussels this week. The sources said Berlin was expecting long and intensive talks at Tuesday’s conference of EU finance ministers. On the reform drive, one said, “There are voices that are very optimistic that we could have something by March.” However, Berlin does not share such optimism. The European Commission has so far presented ...

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Hot US jobs market backs the Fed’s call for higher rates

The US economy added 263,000 jobs in November, well ahead of the 200,000 consensus estimate, even when accounting for a 23,000 downward revision to the past couple of months of data. Private payrolls rose 221,000, led by 88,000 jobs in leisure and hospitality and 82,000 in education and health. Construction was up 20,000 and manufacturing gained 14,000. However, there was weakness in trade & transport (-49,000) and retail trade (-30,000). There was more positive news for workers in the form of big wage gains of 0.6% month-on-month, double what was ...

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As the Fed plans to ‘raise and hold,’ new projections may show the cost

U.S. Federal Reserve officials have signaled plans for a half-point interest rate hike at their meeting this month, and while that would be a step down from recent rate increases, new projections issued then could show a policy rate headed toward levels last seen on the eve of the 2007 financial crisis. Moreover, in an outlook that could lean against market expectations for rate cuts by the end of next year, the 19 U.S. central bankers’ new forecasts may well show the federal funds rate remaining at that elevated level ...

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ECB to start offloading debt to fight inflation

The European Central Bank is all but certain to start offloading some of its 5 trillion euro ($5.3 trillion) bond stash next year as it ramps up efforts to bring down record-high inflation in the euro zone. Along with a continuing streak of interest rate increases, it hopes so-called quantitative tightening, or QT, will raise borrowing costs and thereby slow demand for goods and services across the 19 countries that use the euro. The policy shift will be historic, after the ECB spent nearly a decade doing the exact opposite ...

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Here’s why rates will keep on rising

So, how do central banks fight inflation exactly? Central banks impact the macroeconomy by finessing financial conditions. It’s not as simple as setting official rates though; it requires the wider financial system to push in the same direction. Most importantly, market rates need to be in tune with central bank thinking. Credit spreads are key too; wider credit spreads add to the all-in funding costs for corporates and households, amplifying the impact of higher market rates. And this together with other central bank liquidity management tools will broadly determine overall ...

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Asian exports are softening

Asian exports going sideways As economies worldwide re-opened after the lockdowns of the Covid pandemic, non-China Asian exports to the rest of the world surged. But that rate of growth looks like it’s slowing. Distortions caused by the Lunar New Year always make interpretation of trade data trends at the beginning of the year tricky, and there was an expected jump in March. But since then, the numbers look to be struggling. In year-on-year terms, the rate of overall export growth is now skirting single-digits again. A slowdown in year-on-year ...

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Global central banks extend rate hike push in November

The pace and scale of rate hikes delivered by central banks in November picked up speed again as policy makers around the globe battle decade high inflation. Central banks overseeing six of the 10 most heavily traded currencies delivered 350 basis points (bps) of rate hikes between them last month. The U.S. Federal Reserve, the Bank of England, the Reserve Bank of Australia, Norway’s Norges Bank, Sweden’s Riksbank and the Reserve Bank of New Zealand all raised interest rates in November. The European Central Bank, the Bank of Canada, the ...

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European Union plans to criminalise violation of sanctions against Russia

The European Commission has proposed making the circumvention of the European Union’s (EU) sanctions against Russia a criminal offence. It proposes to establish the same level of penalties in all member states to close existing legal loopholes and increase the deterrent effect of violating EU sanctions, reports Xinhua news agency. It aims to establish “common basic standards” for penalties, the Commission said in statement. “Depending on the offence, the individual person could be liable to a maximum penalty of at least five years in prison; companies could be liable to ...

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Mexico, U.S. plan pitch by early 2023 to lure firms from abroad

Mexican Economy Minister Raquel Buenrostro and U.S. Secretary of Commerce Gina Raimondo on Friday agreed to set out a plan by early 2023 for the relocation of companies from Asia to North America, Mexico’s government said. On her first visit to Washington since taking office in October, Buenrostro has this week met senior U.S. officials to discuss joint trade concerns, as well as efforts to attract businesses from Asia. Buenrostro’s ministry said she and Raimondo on Friday talked about boosting supply chains, in particular for printed circuit boards and semiconductors, ...

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BoE’s Dhingra warns of deeper and longer recession with higher rates

Bank of England rate-setter Swati Dhingra said in an interview published on Saturday that higher interest rates could lead to a deeper and longer recession, adding there were few signs that demands for higher wages risked a wage-price spiral. “You do see a much deeper and a longer recession with rates being much higher,” she told the Observer newspaper. “That is what I think we should all be worried about … are we going to end up lengthening and deepening the recession if the tightening continues at the pace it ...

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As economy stutters, China’s youth seek safety of civil service

As a physics student at the elite Peking University in Beijing, Lynn Lau was expecting big Chinese private sector companies to scour the campus this summer for upcoming talent. But with the world’s second-largest economy growing at its slowest rate in decades, many recruiters stayed away this year. The wishes of Lau’s parents that she had a “safe” civil service career suddenly made more sense. “Last year, I feel my older classmates by this point had already got offers from big companies but then these same companies this year have ...

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Inside China’s fight over the future of zero-COVID

Samuel Ren is sick of zero-COVID. “Omicron is not a threat, it is just like a normal cold,” said the IT worker in his mid-20s in Shanghai, describing China’s ongoing lockdown measures as “ridiculous”. His frustration about civil rights and economic damage won’t sway Cai Shiyu, a 70-year-old resident of the megacity who has heart disease and high blood pressure. “This isn’t like a cold that just goes away after a while,” said Cai, who feels one case of COVID-19 is too many to tolerate. “Otherwise the epidemic will definitely ...

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