2024-09-27 02:43

BENGALURU, Sept 27 (Reuters) - The Reserve Bank of India (RBI) is expected to cut interest rates by a modest 50 bps over the next six months, according to a majority of economists in a Reuters poll who said it would likely wait until December to start rather than move in October. Inflation held below the RBI's medium-term target of 4.0% for a second month in August. While it is expected to rise a bit in coming months, it has held in the 2%-6% comfort zone for nearly a year and was expected to stay there through mid-2026. Most economists said the RBI would not be led to follow up quickly after the U.S. Federal Reserve's 50 basis-point cut this month, thanks to a strong domestic economy and a stable currency. Median forecasts for the repo rate have not changed in Reuters polls taken since April. Over 80% of economists, 63 of 76, in a Sept. 17-26 Reuters poll predicted the RBI would hold the repo rate (INREPO=ECI) , opens new tab at 6.50% at the conclusion of its Oct. 7-9 meeting. Twelve forecast a 25 basis-point cut, while one anticipated a drop to 6.15%. The RBI has held the repo rate steady since February 2023, focusing on maintaining a tight trading range for the rupee through direct intervention in the FX market. "The reason why the RBI will not be in a hurry, unlike the Fed who had to go for a cut, is because the Indian economy is still on a very strong wicket," said Suman Chowdhury, economist at Acuite Ratings. "With...food inflation showing signs of coming down and for the next few months likely to behave better compared to last year, I see the likelihood of the cut in December," he added. Governor Shaktikanta Das reiterated recently , opens new tab that it was important to "not get carried away by some dips in inflation," leading several to conclude it would take a few more readings of benign inflation to give the RBI enough confidence to cut rates. Some economists did not provide rate estimates beyond the upcoming meeting amid uncertainty over the appointment of three new external members to the Monetary Policy Committee as the terms for current members are due to expire on Oct. 4. Median forecasts showed a quarter-point cut next quarter with nearly 60% (41 of 71) expecting rates to be 6.25%. Still, just less than a third (22) saw them at 6.50% and the rest (8) expected rates at 6.15% or lower. Over half of those who provided year-end forecasts said the central bank would wait until December before cutting rates, despite many major central banks already easing. The RBI was expected to cut another 25 basis points in February, lowering the repo rate to 6.00%, according to median forecasts. That is much slower than the Fed, which is expected to cut by another 50 basis points in the next three months and by 100 basis points in 2025. Despite the recent dip, the poll forecast Indian inflation to rise again, and average 4.5% this fiscal year and 4.3% next. Asia's third-largest economy was expected to expand 6.9% this fiscal year, softer than the 8.2% growth in FY 2023-24. But it will remain the fastest-growing major economy. (Other stories from the Reuters global economic poll) Sign up here. https://www.reuters.com/world/india/rbi-keep-repo-rate-650-october-cut-by-25bps-december-2024-09-27/

2024-09-27 00:45

China plans to issue 2 trillion yuan in special sovereign bonds Central bank cuts reserve requirement ratio by 50 basis points Fiscal measures to focus on consumer subsidies, government debt Shanghai, Shenzhen to lift key home purchase curbs, sources say BEIJING, Sept 27 (Reuters) - China's central bank on Friday lowered interest rates and injected liquidity into the banking system as Beijing assembled a last-ditch stimulus assault to pull economic growth back towards this year's roughly 5% target. More fiscal measures are expected to be announced before China's week-long holidays starting on Oct. 1, after a meeting of the Communist Party's top leaders showed an increased sense of urgency about mounting economic headwinds. Reuters reported on Friday, citing sources, that megacities Shanghai and Shenzhen are planning to lift key home purchase restrictions in coming weeks, joining a long list of smaller cities that have done so to ease a years-long property crisis. On the heels of the Politburo huddle, China plans to issue special sovereign bonds worth about 2 trillion yuan ($284.43 billion) this year as part of fresh fiscal stimulus, two sources with knowledge of the matter have told Reuters. Capital Economics chief Asia Economist Mark Williams estimates the package "would lift annual output by 0.4% relative to what it would otherwise have been." "It's late in the year, but a new package of this size that was implemented soon should be enough to deliver growth in line with the 'around 5%' target," he said. Chinese stocks are on track for the best week since 2008 on stimulus expectations. The world's second-largest economy faces strong deflationary pressures due to a sharp property market downturn and frail consumer confidence, which have exposed its over-reliance on exports in an increasingly tense global trade environment. A wide range of economic data in recent months has missed forecasts, raising concerns among economists that the growth target was at risk and that a longer-term structural slowdown could be in play. On Friday, data showed industrial profits swinging back to a sharp contraction in August. "We believe the persistent growth weakness has hit policymakers' pain threshold," Goldman Sachs analysts said in a note. As flagged on Tuesday by Governor Pan Gongsheng, the People's Bank of China on Friday trimmed the amount of cash that banks must hold as reserves, known as the reserve requirement ratio (RRR), by 50 basis points. This will release 1 trillion yuan ($142.5 billion) in liquidity into the banking system and was accompanied by a cut in the benchmark interest rate on seven-day reverse repurchase agreements by 20 bps to 1.50%. The cuts take effect on Friday and Pan, in rare forward-looking remarks, left the door open to another RRR reduction later this year. FISCAL OOMPH Given weak credit demand from households and businesses, investors are more focused on the fiscal measures that are widely expected to be announced in coming days. Reuters reported on Thursday that 1 trillion yuan due to be raised via special bonds will be used to increase subsidies for a consumer goods replacement programme and for business equipment upgrades. They will also be used to provide a monthly allowance of about 800 yuan, or $114, per child to all households with two or more children, excluding the first child. China aims to raise another 1 trillion yuan via a separate special debt issuance to help local governments tackle their debt problems. Bloomberg News reported on Thursday that China is also considering injecting up to 1 trillion yuan of capital into its biggest state banks. Most of China's fiscal stimulus still goes into investment, but returns are dwindling and the spending has saddled local governments with $13 trillion in debt. The looming fiscal measures would mark a shift towards stimulating consumption, a direction Beijing has said for more than a decade that it wants to take but has made little progress on. China's household spending is less than 40% of annual economic output, some 20 percentage points below the global average. Investment, by comparison, is 20 points above and has been fuelling more debt than growth. The politburo also pledged to stabilise the troubled real estate market, saying the government should expand a white list of housing projects that can receive further financing and revitalise idle land. Shanghai and Shenzhen are seeking to scrap limits on the number of homes that Chinese can buy, Reuters reported. Beijing is also considering lifting similar restrictions across most areas of the city, but more gradually. The September meeting is not usually a forum for discussing the economy, which suggests growing anxiety among officials. "We get a sense of urgency from the latest Politburo meeting, suggesting that China's top leadership has become increasingly wary of the current economic situation," BNP Paribas said in a note. ($1 = 7.0189 Chinese yuan) Sign up here. https://www.reuters.com/markets/asia/chinas-central-bank-cuts-banks-reserve-requirement-ratio-by-50-bps-2024-09-27/

2024-09-27 00:20

MEXICO CITY, Sept 26 (Reuters) - Hurricane John strengthened once again on Thursday as it hurled rain at Mexico's southwestern coast dotted with ports and tourist hotspots, an area already soaked by the slow-moving storm system over the past several days. John has churned menacingly near the stretch of coastline since Monday, weakening and strengthening again as it impacted major cargo ports, temporarily shutting local airports as well as claiming at least five lives, mostly due to mudslides. AccuWeather meteorologist Jesse Ferrell referred to John as a "zombie" storm - a term that refers to systems that dissipate before strengthening back into a storm, first coined by the U.S. National Weather Service in 2020 when the remnants of storm Paulette regenerated near the Azores after striking Bermuda. In 2004, Hurricane Ivan, which lasted close to an entire month, smashed the Caribbean before dissipating and coming back to life to strike the United States. Ivan caused some $26 billion in damages for that year. Christopher Rozoff, atmospheric scientist at the National Center for Atmospheric Research, said John was slow-moving and had no large-scale steering forces moving it elsewhere. This, Rozoff said, made it "prone to take a disastrous path back over sea to reintensify and further torment the Mexican coast with extreme rainfall." John was hurling rain across the Mexican state of Guerrero on Thursday, after already hitting the state earlier in the week in a strike that uprooted trees, knocked out power to tens of thousands and triggered deadly landslides that crushed houses. Guerrero state Governor Evelyn Salgado on Thursday morning urged residents to take all precautions, a day after a rising tide battered beach-front restaurants in Acapulco, one of the state's top resort areas, and rains flooded nearby roads. Acapulco is still recovering from major destruction caused by Hurricane Otis last year. After crawling northwest, John was stationary 55 miles (89 km) southwest of the major cargo port of Lazaro Cardenas, packing maximum sustained winds of 75 miles per hour (121 kph), according to the U.S. National Hurricane Center. The Miami-based center expects the hurricane to skirt Mexico's southwest coast, along Michoacan, Guerrero and Oaxaca states, further drenching the area through at least Saturday. "This heavy rainfall will likely cause significant and catastrophic life-threatening flash flooding and mudslides," it warned. AccuWeather lead hurricane expert Alex DaSilva said that both John and Otis had strengthened rapidly due to the warm sea temperatures, with some areas where John developed nearing 32 degrees Celsius (90 degrees Fahrenheit), providing storms with more fuel. Rowan University meteorologist Andra Garner said the warm waters had likely helped John reform after its first landfall. Moving into the future, added DaSilva, it is "very likely" we will see warmer sea surface temperatures, which "could lead to more episodes of rapid intensification as we look ahead." Sign up here. https://www.reuters.com/world/americas/back-hurricane-strength-john-soaks-mexicos-pacific-coast-2024-09-26/

2024-09-27 00:19

Sept 30 (Reuters) - Over 1.6 million homes and businesses in the Carolinas, Georgia, Florida and other U.S. Southeastern and Midwestern states were still without power on Monday after Helene slammed into the Florida Panhandle as a major hurricane on Sept. 26, according to data from PowerOutage.us. Those outages were down from around 2.1 million earlier in the day as utilities continue to restore power. In total, the storm knocked out service to around 5.5 million customers. Helene's winds, rain and storm surge killed over 100 people, according to a Reuters tally of state and local officials. U.S. energy company Duke Energy (DUK.N) , opens new tab had the most power outages in the Carolinas with about 415,601 customers still out in South Carolina and 287,369 out in North Carolina, according to PowerOutage.us. Duke said on Sunday it restored power to more than 1.1 million customers in the Carolinas and expected to restore service to most customers by Friday. Duke's storm director for the Carolinas, Jason Hollifield, however, noted "there are lots of areas across the South Carolina Upstate and North Carolina mountains where were going to have to completely rebuild parts of our system, not just repair it." Here are the major outages by state: Sign up here. https://www.reuters.com/business/energy/over-100000-florida-customers-without-power-due-approaching-hurricane-helene-2024-09-26/

2024-09-26 23:33

ORLANDO, Florida, Sept 26 (Reuters) - It's safe to say that the timing and scale of the stimulus measures unleashed by China this week were, in large part, prompted by the U.S. Federal Reserve's jumbo-sized interest rate cut only a few days before. But unfortunately for Chinese policymakers, the U.S. central bank's apparent commitment to an aggressive easing campaign – and the impact this could have on the exchange rate between the yuan and the dollar – could put Beijing in a serious bind. On the face of it, the yuan's substantial appreciation against the dollar in the two months to Monday was baffling. While an increasingly gloomy domestic economic outlook slammed Chinese stocks and bond yields lower, the yuan powered to a 16-month high. And then the yuan got another boost this week, as Beijing rolled out a series of liquidity, monetary and fiscal stimulus measures running into the trillions of yuan. The offshore yuan has scaled the 7.00 per dollar barrier for the first time since January 2023. This latest whoosh makes more sense. Investors are betting that Beijing is finally taking the serious measures required to revive growth. It's notable that the yuan's rally this week has been accompanied by surging stocks and higher bond yields. In the long run, a strong currency is good news for China. It will boost foreign investor sentiment and attract capital inflows while raising China's nominal dollar-denominated GDP – a metric Beijing will need to be keenly focused on if it ever wants to truly rival or even surpass the U.S. On that note, China's nominal annual GDP growth rate right now is lower than that of Japan and the U.S., something few would have predicted only a few years ago. But the short-term picture is more complicated. With growth cratering and deflationary forces intensifying, the last thing China's economy needs is a strong exchange rate. Policymakers will welcome the renewed optimism around China, but not the strong currency that generates. Stephen Jen, co-founder of hedge fund Eurizon SLJ and long-time China watcher, thinks Beijing is stuck between a rock and a hard place. As the Fed's easing cycle rolls on, the dollar's floor against the yuan will almost certainly drop. "I continue to believe USD/CNY is heading lower, possibly by 10% in the coming year. Almost everyone is the wrong way around. Positioning adjustment will make this prospective decline non-linear," he wrote on Wednesday. LIMITED OPTIONS The People's Bank of China is obviously powerless to stop the Fed from slashing U.S. rates. So if the PBOC wants to prevent an overvaluation of the yuan, it could either lower China's various lending rates or initiate a bond-buying, or 'quantitative easing,' program. But it has limited scope to do the former, and even less desire to do the latter. That being the case, it could use one other tool to keep the exchange rate from overheating: buying dollars. This plan involves high political risk, though. China and the United States are in a trade war that has escalated meaningfully in recent years. This has deepened the political divide between the two superpowers, which is partly why China has reduced its holdings of U.S. Treasuries. China's official stash of U.S. Treasuries has fallen 30% from a post-pandemic peak of $1.1 trillion in early 2021. Its overall holdings of dollar-denominated assets have not shrunk anywhere near as much, but the direction of travel is clear. Ramping up purchases of America's currency and government debt would likely be a difficult sell for Beijing domestically. What's more, the incoming U.S. presidential administration, whether it be headed by Kamala Harris or Donald Trump, would almost certainly baulk at what it would surely allege to be currency manipulation. Retaliatory action, perhaps in the form of even more punitive tariffs, would likely follow. In other words, Beijing can no longer consider bursts of FX intervention a reliable default strategy. So even though the steps taken this week may have gotten China back on the path to a long-term recovery, its currency conundrum could ensure the road is rocky in the short term. (The opinions expressed here are those of the author, a columnist for Reuters.) Sign up here. https://www.reuters.com/markets/asia/chinas-fx-conundrum-mutes-stimulus-optimism-mcgeever-2024-09-26/

2024-09-26 23:29

Sept 26 (Reuters) - U.S. retailer Costco Wholesale (COST.O) , opens new tab is taking a wide variety of steps to prepare for possible strikes next week at U.S. ports on the East Coast and Gulf of Mexico, the company's chief executive said on Thursday. Contingency plans in place include pre-shipping some products to get in holiday goods early and preparing to use different ports, Costco's CEO Ron Vachris said on the company's fourth-quarter earnings call. Companies that rely on ocean shipping are increasingly worried the International Longshoremen's Association's 45,000 members will strike on Oct. 1 and close 36 ports that handle more than half of U.S. ocean trade of products such as bananas, meat, prescription drugs, auto parts, construction materials and apparel. If that happens, delays and costs could quickly cascade, threatening the U.S. economy in the weeks ahead of the country's presidential election, burdening already taxed global ocean shipping networks and foisting higher prices on consumers over time. "We've cleared the ports, we've pre-shipped. We've done several different things that we could to get holiday goods in ahead of this time frame, and looked at alternate plans that we could execute with moving goods to different ports and coming across the country if needed," Vachris said. Asked about bringing in goods early, he said, "We have done a little bit of everything you spoke about," and added, "It could be disruptive, but how impactful, I can't tell you... until we know what could happen out there." A prolonged strike could result in shortages of familiar items such as bananas, coffee and cocoa, which could translate to higher grocery prices over time. It could also mean lost export sales of key agricultural products including beef, pork, chicken and eggs. Sign up here. https://www.reuters.com/business/retail-consumer/costco-says-doing-a-little-bit-everything-prepare-us-port-strike-2024-09-26/