<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/World-Bank-board-elects-US-nominee-Ajay-Banga-as-president-820x547.jpg" alt="" class="wp-image-424614" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/World-Bank-board-elects-US-nominee-Ajay-Banga-as-president-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/World-Bank-board-elects-US-nominee-Ajay-Banga-as-president-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/World-Bank-board-elects-US-nominee-Ajay-Banga-as-president-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/World-Bank-board-elects-US-nominee-Ajay-Banga-as-president-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/World-Bank-board-elects-US-nominee-Ajay-Banga-as-president-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/World-Bank-board-elects-US-nominee-Ajay-Banga-as-president-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: U.S. nominee to head World Bank, Ajay Banga, stands with officials during his visit at the headquarters of Ivorian electricity company of Yopougon in Abidjan, Ivory Coast, March 7, 2023. REUTERS/Luc Gnago/File Photo/File Photo</figcaption></figure>



WASHINGTON, May 3 (Reuters) &#8211; The World Bank&#8217;s board of governors on Wednesday elected former Mastercard CEO Ajay Banga to a five-year term as president, ushering in an Indian-born finance and development expert to revamp the lender to tackle climate change and other global crises.



Banga, 63, was nominated for the post by U.S. President Joe Biden in late February and was the sole contender to replace departing World Bank chief David Malpass, an economist and former U.S. Treasury official who served in the Trump administration. He starts the new job on June 2.



The election came after World Bank board members interviewed Banga for four hours on Monday. Malpass&#8217; last day at the bank will be June 1. The decision came in a vote by 24 of the board&#8217;s members, with Russia abstaining, instead of the usual consensus-based process, a source familiar with the process said.



Biden congratulated Banga on his &#8220;resounding approval&#8221; to run the World Bank, which he described as &#8220;one of humanity’s most critical institutions to reduce poverty and expand prosperity around the globe.&#8221;



&#8220;Ajay Banga will be a transformative leader, bringing expertise, experience, and innovation to the position of World Bank President,&#8221; Biden said. &#8220;He will help steer the institution as it evolves and expands to address global challenges that directly affect its core mission of poverty reduction — including climate change.&#8221;



Treasury Secretary Janet Yellen said Banga brought the &#8220;right leadership and management skills&#8221; to the job, and would play a critical role in pushing forward with additional reforms, including by forging partnerships between the public and private sectors and nonprofit groups.



&#8220;Ajay understands that the challenges we face – from combatting climate change, pandemics, and fragility to eliminating extreme poverty and promoting shared prosperity – are deeply intertwined. He has effectively built a broad global coalition around his vision for the Bank over the course of his candidacy,&#8221; Yellen said in a statement.



Katie Malouf-Bous, interim head of Oxfam International’s Washington office, said the bank needed &#8220;serious reform&#8221; to tackle the widening gap between rich and poor, but that would require huge new public investments and &#8220;guardrails around private finance that has run riot for too long.&#8221;



One senior U.S. official said Banga&#8217;s election came at a critical moment marked by emerging debt distress in lower- and middle-income countries and ongoing problems in food and energy markets as a result of Russia&#8217;s war in Ukraine.



&#8220;It is a challenging moment, but it&#8217;s a moment where the World Bank remains more vital than ever, and where getting the evolution of the World Bank is absolutely critical,&#8221; the official said.



The bank already loans out hundreds of billions of dollars to developing countries but is working to increase its lending to help them address overlapping global challenges such as climate change, conflict and brace for future pandemics.



&#8220;The Board looks forward to working with Mr. Banga on the World Bank Group Evolution process … on all the World Bank Group’s ambitions and efforts aimed at tackling the toughest development challenges facing developing countries,&#8221; the bank said.



The World Bank has been led by an American since its founding at the end of World War Two, while the International Monetary Fund has been led by a European.



Banga, who was born in India and spent his early career there, has been a U.S. citizen since 2007.



Banga has met with officials from 96 governments since his nomination, the source said. He visited eight countries during a three-week world tour to meet with government officials, business leaders and civil society groups, flying a total of 39,546 miles (63,643 km). (Reporting by Andrea Shalal and David Lawder; Editing by Jonathan Oatis and Mark Potter)

FILE PHOTO: US World Bank nominee Banga set for vote Wednesday after 4-hour interview

World Bank board elects US nominee Ajay Banga as president

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107209924-1678975936427-gettyimages-1248375159-GERMANY_ECB-820x547.jpeg" alt="" class="wp-image-424610" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107209924-1678975936427-gettyimages-1248375159-GERMANY_ECB-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107209924-1678975936427-gettyimages-1248375159-GERMANY_ECB-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107209924-1678975936427-gettyimages-1248375159-GERMANY_ECB-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107209924-1678975936427-gettyimages-1248375159-GERMANY_ECB-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107209924-1678975936427-gettyimages-1248375159-GERMANY_ECB-1536x1025.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107209924-1678975936427-gettyimages-1248375159-GERMANY_ECB-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Christine Lagarde, president of the European Central Bank (ECB), pauses during a rates decision news conference in Frankfurt, Germany, on Thursday, March 16, 2022. Alex Kraus | Bloomberg | Getty Images</figcaption></figure>



FRANKFURT — The European Central Bank is expected to lift its benchmark rate by a smaller step of 25 basis points Thursday, as core inflation declines and its own survey data points to much tighter financial conditions in the region.



The new economic figures both strengthen the case for the ECB to only hike rates by a smaller amount at is policy meeting, and to possibly announce an increase in the pace of its balance sheet reduction.



Quantitative tightening, or QT, has already taken place with the ECB shrinking its gigantic bond portfolio sitting on its balance sheet after years of government debt purchases and monetary stimulus. The ECB has kept interest at zero, and below, for years, and has launched bond-buying program like the APP (Asset Purchase Program) and PEPP (Pandemic Emergency Purchase Program) in an effort to simulate lending.



APP started in mid-2014 to deal with persistently low inflation levels. It was frozen between January and October 2019 and then lasted until July 2022 — but continued to reinvest payments from the assets that had matured. On the other hand, PEPP was a more flexible bond purchase program introduced during the coronavirus pandemic.



“To stop financial conditions from overreacting to a downshift to a +25bp pace, we expect the ECB to announce faster QT: an increase in the roll-off of APP reinvestments from EUR15bn per month to EUR20bn per month from Q3,” said Deutsche Bank chief economist and ECB watcher, Mark Wall, in a note to clients.



Inflation in the euro area rose slightly to 7% in April, according to new data released this week, but core inflation — which excludes food, fuel, tobacco and alcohol — slowed to 5.6% from 5.7%, its first decline since last June and lower than what the market was expecting.



“The inflation trend goes down, as the big push from higher food prices is fading out,” said Joerg Kraemer, chief economist at Commerzbank in a research note.



“It’s a positive sign that&nbsp;core inflation has fallen for the first time in a long time. But because of wage settlements above 5 percent the inflation pressure should remain stubbornly high.”



In addition, the ECB’s bank lending survey pointed to an exceptionally large drop in credit demand amid tighter lending criteria, adding to the case for a smaller rate hike.



A net 38% of banks in the 20 nations that share the euro saw a decline in demand for credit from companies in the first three months of this year. That was the biggest net decline since the global financial crisis of 2008-09.



While the euro area avoided a recession in the first quarter with anemic growth of 0.1%, the effects of the monetary tightening cycle do show the first signs that it’s dampening demand. Traditionally, monetary policy has a time lag of roughly a year and the ECB only started its hiking cycle in June 2022.



“After May, we expect one more rate hike of 25 basis points in June,” said Kraemer.



“Afterwards the ECB should be done with hiking rates and will watch the effects of its tighter monetary policy on the real economy.”



—CNBC’s Silvia Amaro contributed to this article.

107209924-1678975936427-gettyimages-1248375159-GERMANY_ECB

European Central Bank set to slow rate hikes as financial conditions tighten rapidly

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106800835-1606137435956-laxx-820x547.jpg" alt="" class="wp-image-424537" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106800835-1606137435956-laxx-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106800835-1606137435956-laxx-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106800835-1606137435956-laxx-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106800835-1606137435956-laxx-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106800835-1606137435956-laxx-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106800835-1606137435956-laxx-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Travelers wearing protective masks receive nasal swabs from nurses at a COVID-19 test site inside Terminal B at Los Angeles International Airport (LAX), on Sunday, Nov. 22, 2020. Bing Guan | Bloomberg | Getty Images</figcaption></figure>



The Biden administration will end its Covid-19 vaccine mandates for federal employees, contractors and international air travelers next week.



The White House said in a statement Monday that those vaccine requirements will end on May 11, the same day the Covid public health emergency expires.



“While vaccination remains one of the most important tools in advancing the health and safety of employees and promoting the efficiency of workplaces, we are now in a different phase of our response when these measures are no longer necessary,” the White House said.



Although Covid cases, hospitalizations and deaths have declined dramatically this year, the virus is still killing more than 1,000 people per week.



The Health and Human Services Department also will start phasing out its vaccine mandate for health-care facilities that participate in Medicare and Medicaid, the White House said. In addition, it will end vaccination requirements for Head Start programs.



And the Department of Homeland Security will lift vaccination requirements for people entering the U.S via its land borders with Canada and Mexico, according to the Biden administration. U.S. citizens, nationals and permanent residents were never subject to those requirements.



HHS and DHS will provide more details on the end of these vaccine requirements in the coming days, the White House said.



The Biden administration implemented the vaccine requirements for health workers, federal employees, contractors, and international air travelers as part of its drive to boost lackluster vaccination rates and slow the spread of the virus as the delta variant surged in late 2021 followed by omicron in the winter of 2022.



The mandates faced fierce opposition and lawsuits from critics who decried the requirements as government overreach, while the White House stressed they were essential to protect public health.

106800835-1606137435956-laxx

Biden will end Covid vaccine mandates for federal workers and international travelers on May 11

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="728" height="485" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/11/XHKVTPVB7VP4BFAXPTIKCF3PVI.jpg" alt="" class="wp-image-421644" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/11/XHKVTPVB7VP4BFAXPTIKCF3PVI.jpg 728w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/XHKVTPVB7VP4BFAXPTIKCF3PVI-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/XHKVTPVB7VP4BFAXPTIKCF3PVI-135x90.jpg 135w" sizes="auto, (max-width: 728px) 100vw, 728px" /><figcaption class="wp-element-caption">An excavator clears out rocks into a dumper at the gold mine, operated by Endeavour Mining Corporation in Hounde, Burkina Faso February 11, 2020. Picture taken February 11, 2020. Reuters/Anne Mimault</figcaption></figure>



April 28 (Reuters) &#8211; Gold eased on Friday after a rise in U.S. inflation in March buoyed the dollar and reinforced bets for an interest rate hike next week, but banking sector concerns kept bullion on course for a small monthly gain.



Spot gold was 0.3% lower at $1,982.65 per ounce by 9:50 a.m. EDT (1350 GMT), but was up 0.8% for the month. U.S. gold futures eased 0.4% to $1,991.30.



The U.S. core personal consumption expenditures (PCE) index, the Federal Reserve&#8217;s preferred inflation gauge, rose 0.3% in March, the same as in February and in line with expectations, with traders adding to bets for a rate hike next week. Elevated rates dull zero-yielding bullion&#8217;s appeal. Gold seemed to largely ignore the last key piece of data ahead of next week&#8217;s meeting, but &#8220;a 25 bps hike next week is now certain though it remains in question whether the Fed will signal a pause&#8221;, said Tai Wong, an independent metals trader based in New York.



&#8220;Gold seems likely to remain in its tight recent range for now, though a weekly close under $1,965 could trigger further losses, while bulls would welcome a push back above $2,000.&#8221;



The dollar held gains after the inflation data, but is headed for a monthly decline. A weaker dollar makes bullion cheaper for overseas buyers.



Bullion has consolidated this month due to &#8220;growth concerns sending U.S. rate cut expectations higher, softer bond yields and a continued lingering banking sector concern&#8221;, said Ole Hansen, head of commodity strategy at Saxo Bank.



Gold had scaled a one-year peak of $2,048.71 in mid-April as the banking crisis unfolded.



Also on the radar were developments surrounding the U.S. debt ceiling.



Silver fell 0.6% to $24.80 per ounce, platinum shed 0.9% to $1,067.85, while palladium gained 1.1% to $1,511.32 — all headed for second monthly rises. (Reporting by Deep Vakil, Arpan Varghese and Ashitha Shivaprasad in Bengaluru; Editing by Elaine Hardcastle and Shilpi Majumdar)

FILE PHOTO: FILE PHOTO: An excavator driven by Rosalie Guirou Kulga, 30, clears out rocks into a dumper at the gold mine, operated by Endeavour Mining Corporation in Hounde

Gold holds losses as inflation data reinforces rate hike bets

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/03/FederalReserve-820x547.jpg" alt="" class="wp-image-416006" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/03/FederalReserve-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/03/FederalReserve-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/03/FederalReserve-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/03/FederalReserve-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/03/FederalReserve-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/03/FederalReserve-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A security guard walks in front of an image of the Federal Reserve following the two-day Federal Open Market Committee (FOMC) policy meeting in Washington, March 16, 2016. REUTERS/Kevin Lamarque</figcaption></figure>



Despite a year’s worth of interest rate increases, inflation rose again in March, according to economic data released Friday that the Federal Reserve watches closely.



The personal consumption expenditures price index excluding food and energy increased 0.3% for the month, in line with the Dow Jones estimate. On an annual basis, so-called core PCE increased 4.6%, slightly higher than the expectation for 4.5% and down 0.1 percentage point from February.



Including the volatile food and energy components, headline PCE also rose just 0.1% for the month, equating to a 4.2% annual increase, down sharply from 5.1% in February. That measure peaked out around 7% in June 2022, the highest level since December 1981.



The headline number was softer as energy prices slid 3.7% for the month while food costs declined 0.2%. Goods prices fell 0.2% while services increased 0.2%.



In another key inflation measure for the Fed, the employment cost index increased 1.2% for the first quarter, higher than the 1% estimate.



The inflationary pressures were reflected in the willingness of consumers to keep spending. Personal income rose 0.3% for the month but consumer spending was flat, as expected.



While the annual rates are below the peaks hit in 2022, they are still well above the central bank’s 2% target and further evidence that price increases are proving stickier than policymakers had anticipated.



Since March 2022, the Fed has raised its benchmark interest rate nine times for a total of 4.75 percentage points. Markets widely expect the rate-setting Federal Open Market Committee to approve another quarter percentage point increase at next week’s meeting, before it pivots to see the impact the policy tightening is having on the $26.5 trillion U.S. economy.

FederalReserve

Key inflation gauge for the Fed rose 0.3% in March as expected

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Global-money-market-funds-see-big-inflows-in-the-week-to-April-26-820x547.jpg" alt="" class="wp-image-424513" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Global-money-market-funds-see-big-inflows-in-the-week-to-April-26-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Global-money-market-funds-see-big-inflows-in-the-week-to-April-26-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Global-money-market-funds-see-big-inflows-in-the-week-to-April-26-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Global-money-market-funds-see-big-inflows-in-the-week-to-April-26-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Global-money-market-funds-see-big-inflows-in-the-week-to-April-26-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Global-money-market-funds-see-big-inflows-in-the-week-to-April-26-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: Woman holds U.S. dollar banknotes in front of Euro banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration/File Photo</figcaption></figure>



April 28 (Reuters) &#8211; Investors put their cash in the relative safety of global money market funds in the seven days to April 26, on worries over a slowdown in global economic activity with the recent decline in U.S. companies&#8217; quarterly earnings feeding pessimism.



Data from Refinitiv Lipper showed investors purchased a net $42.68 billion worth of money market funds in the week to April 26, taking the cumulative inflows for the year to a massive $427.4 billion.



U.S. and European money market funds obtained $47.72 billion and $1.89 billion worth of inflows, respectively, during the week. But Asia funds suffered about $90 million worth of outflows.



Investors have sought out U.S. money market funds avidly this year on worries over a recession and concerns about the safety of uninsured bank deposits after the failure of two regional banks, including Silicon Valley Bank. In turn, money has been pulled from global equity funds, considered more exposed.



Among money market funds, Morgan Stanley Institutional Liquid Government securities fund, State Street US Government Money Market Fund and Invesco Government &amp; Agency Portfolio Fund led inflows during the week, receiving $12.15 billion, $8.1 billion and $4.6 billion, respectively.



Meanwhile, global equity funds saw $8.89 billion worth of net selling, the biggest weekly outflow in four weeks, undermined by lacklustre first-quarter results.



Investors sold tech and healthcare funds of $860 million and $441 million, respectively, while financials obtained a third weekly inflow worth $489 million.



Earnings from a wide range of companies, including 3M Co , General Motors Co, PepsiCo Inc, United Parcel Service Inc and McDonald&#8217;s Inc, provided a mixed picture of corporate profit and outlook.



Meanwhile, global bond funds drew $3.57 billion in inflows compared with net purchases of $124 million the previous week.



Government bond funds saw purchases of $3.15 billion after $1.68 billion worth of net selling in the previous week. Investors withdrew $407 million from short- and mid-term bond funds after three straight weeks of net buying.



Among commodities, precious metal funds obtained $656 million in their biggest weekly inflow in three weeks, while energy funds saw about $6 million worth of net buying after three weeks of net selling in a row.



Data for 23,940 emerging market funds showed investors sold $230 million worth of equity funds after four consecutive weeks of net buying. They also exited $130 million worth of bond funds.



(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru;Editing by Elaine Hardcastle)

FILE PHOTO: Illustration shows U.S. dollars and Euro banknotes

Global money market funds see big inflows in the week to April 26

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="551" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Pfizer-pledge-for-more-equal-access-to-RSV-shot-faces-hurdles-820x551.jpg" alt="" class="wp-image-424503" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Pfizer-pledge-for-more-equal-access-to-RSV-shot-faces-hurdles-820x551.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Pfizer-pledge-for-more-equal-access-to-RSV-shot-faces-hurdles-300x202.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Pfizer-pledge-for-more-equal-access-to-RSV-shot-faces-hurdles-134x90.jpg 134w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Pfizer-pledge-for-more-equal-access-to-RSV-shot-faces-hurdles-768x516.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Pfizer-pledge-for-more-equal-access-to-RSV-shot-faces-hurdles-1536x1032.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Pfizer-pledge-for-more-equal-access-to-RSV-shot-faces-hurdles-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: Vials with a sticker reading, &#8220;COVID-19 / Coronavirus vaccine / Injection only&#8221; and a medical syringe are seen in front of a displayed Pfizer logo in this illustration taken October 31, 2020. REUTERS/Dado Ruvic/File Photo</figcaption></figure>



LONDON, April 28 (Reuters) &#8211; Pfizer Inc has pledged to deliver critical new medicines more quickly in low-income nations, but its first such vaccine effort faces hurdles likely to delay distribution in poorer countries by several years, global health officials told Reuters.



Pfizer made a commitment on more equitable access last year, following criticism that it prioritized wealthy nations for doses of its COVID-19 shot early in the pandemic. The company says it wants to shorten a timeline in which poorer countries often get vaccines many years after they are available elsewhere.



The drugmaker received a $28 million grant from the Bill and Melinda Gates Foundation in September to support the launch of the respiratory syncytial virus vaccine in poorer countries, where RSV &#8211; a common cold-like virus &#8211; is much more likely to be lethal for very young children.



Pfizer&#8217;s maternal RSV vaccine is expected to be approved for use in pregnant women in May in the United States and several months later in Europe, and the company plans to launch the product in both markets in the fall. Its peak sales forecast is of more than $2 billion annually together from the maternal vaccine and an RSV shot for older adults.



But the vaccine will need a different delivery system to be used in developing countries in Africa and Asia, including alternative packaging and syringes. Preparations for those modifications are just beginning, according to the World Health Organization and the company &#8211; which is likely to push back delivery by several years.



The case highlights how equitable global access will require better advance planning by drugmakers, governments and health organizations, health officials say.



&#8220;They could have tried sooner,&#8221; said Erin Sparrow, WHO&#8217;s technical officer for the RSV vaccine, referring to Pfizer. &#8220;It&#8217;s a little bit disappointing, but they are doing the right thing now.&#8221;



Pfizer says it is committed to a faster timeline for rolling out medicines to poor nations but acknowledges that there are challenges in meeting such goals.



&#8220;We are committed to working with the appropriate organizations, including regulatory authorities and other global health partners, to help ensure the vaccine candidate, once approved, is available in lower- and middle-income countries as quickly as possible,&#8221; a Pfizer spokesperson said when asked about the timeline for the RSV shot.



In an interview last month, Pfizer&#8217;s head of vaccines research and development Annaliesa Anderson said the company still aimed to make its vaccine – the first of its kind – available for pregnant women in low-income countries more or less in the &#8220;same time frame&#8221; as in wealthy countries.



It had pledged last May to offer its existing portfolio, as well as newly developed drugs and vaccines, at a not-for-profit basis to 45 lower-income countries on a faster timeline than in the past.



The company had learned during the COVID-19 pandemic that &#8220;parallel development&#8221; to meet the needs of different regions was possible, Anderson said.



LEARNING CURVE



Rates of RSV have surged since the pandemic. Inoculating pregnant women against RSV can protect babies from the virus that kills nearly 100,000 children worldwide each year.



Most of those children are under five years old, with 98% living in low and middle-income countries that have fewer healthcare resources to treat the infection.



Pfizer has yet to take a number of steps needed to make the vaccine available in developing countries, according to global health officials and the company.



They include seeking approval for the shot from the WHO, whose authorization is used by governments that don&#8217;t have a strong domestic drugs regulator, and by nonprofits &#8211; such as the global vaccine alliance Gavi &#8211; that fund purchases in low-income countries.



Early discussions with the WHO are underway, but the process will be complicated because Pfizer&#8217;s RSV vaccine is not designed for syringes that automatically disable after one injection, which are preferred by the health agency for safety reasons to prevent reuse.



In addition, the RSV shot is currently only available in a single-dose vial. In lower-resource settings, multi-dose vials are often used because they are cheaper and simpler to distribute.



Multi-dose vials require the addition of a preservative, which means the manufacturer needs to run new trials to ensure there is no impact on the vaccine’s safety or efficacy.



The Gates grant will be used to fund trials of a multi-dose vial, which are likely to begin next year and may take another year to complete, a source with knowledge of the plans said.



A Gates Foundation official said that the investment in the RSV program represented a learning process for the organization and the company on the steps needed for more equitable access.



They have already reached a partnership for a maternal vaccine in earlier stages of development against Group B Streptococcus, which kills around 90,000 babies a year and causes 46,000 stillbirths, over half of them in sub-Saharan Africa.



&#8220;We very much want to see that time gap [between high and low-income countries] reduced, such that there&#8217;s no space between the two,&#8221; said Padmini Srikantiah, lead on the RSV vaccine launch at Gates.



She still expects it to be several years before the RSV vaccine is launched in lower-income countries.



&#8220;I think we&#8217;re doing better than in years before,&#8221; she said. &#8220;It&#8217;s a process.&#8221; (Reporting by Jennifer Rigby and Maggie Fick; Editing by Michele Gershberg and Deepa Babington)

FILE PHOTO: Pfizer vaccine photo illustration

Pfizer pledge for more equal access to RSV shot faces hurdles

<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/106906820-16255703122021-07-06t100015z_246826306_rc2yeo9pvrov_rtrmadp_0_usa-fed-global-820x462.jpeg" alt="" class="wp-image-424402" width="820" height="462" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/106906820-16255703122021-07-06t100015z_246826306_rc2yeo9pvrov_rtrmadp_0_usa-fed-global-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/106906820-16255703122021-07-06t100015z_246826306_rc2yeo9pvrov_rtrmadp_0_usa-fed-global-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/106906820-16255703122021-07-06t100015z_246826306_rc2yeo9pvrov_rtrmadp_0_usa-fed-global-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/106906820-16255703122021-07-06t100015z_246826306_rc2yeo9pvrov_rtrmadp_0_usa-fed-global-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/106906820-16255703122021-07-06t100015z_246826306_rc2yeo9pvrov_rtrmadp_0_usa-fed-global.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /></figure>



Calls to move away from relying on the U.S. dollar for trade are growing.



More and more countries — from Brazil to Southeast Asian nations — are calling for trade to be carried out in other currencies besides the U.S. dollar.



The U.S. dollar has been king in global trade for decades — not just because the U.S. is the world’s largest economy, but also because oil, a key commodity needed by all economies big and small, is priced in the greenback. Most commodities are also priced and traded in U.S. dollars.



But since the Federal Reserve embarked on a journey of aggressive rate hikes to fight domestic inflation, many central banks around the world have raised interest rates to stem capital outflows and a sharp depreciation of their own currencies.



“By diversifying their holdings reserves into a more multi-currency sort of portfolio, perhaps they can reduce that pressure on their external sectors,” said Cedric Chehab from Fitch Solutions.



To be clear, the U.S. dollar remains dominant in global forex reserves even though its share in central banks’ foreign exchange reserves has dropped from more than 70% in 1999, IMF data shows.



The U.S. dollar accounted for 58.36% of global foreign exchange reserves in the fourth quarter last year, according to data from the IMF’s Currency Composition of Foreign Exchange Reserves (COFER). Comparatively, the euro is a distant second, accounting for about 20.5% of global forex reserves while the Chinese yuan accounted for just 2.7% in the same period.



China is one of the most active players in this push given its dominant position in global trade right now, and as the world’s second largest economy.



Based on CNBC’s calculation of IMF’s data on 2022 direction of trade, mainland China was the largest trading partner to 61 countries when combining both imports and exports. In comparison, the U.S. was the largest trading partner to 30 countries.



“As China’s economic might continues to rise, that means that it’ll exert more influence in global financial institutions and trade etc,” Chehab told CNBC last week.



China — long among the top 2 foreign holders of U.S. Treasurys — has been steadily reducing its holdings of U.S. Treasury securities.



Mainland China held nearly $849 billion of U.S. Treasurys as of February this year, the latest data from the U.S. Treasury department showed. That’s at a 12-year low, according to historic data.



<h2 class="wp-block-heading" id="h-changing-dynamics"><a></a>Changing dynamics</h2>



But China isn’t the only country calling for a shift away from the U.S. dollar.



Brazilian President Lula made a state visit to Beijing in April where he reportedly called for reduced reliance on the U.S. dollar for global trade.



Trade between Brazil and China reached $150 billion in 2022, a 10% jump from a year ago, according to S&amp;P Global Market Intelligence.



During a recent visit to China, Malaysia’s Prime Minister Anwar Ibrahim was said to have suggested setting up an “Asian Monetary Fund” to reduce reliance on the U.S. dollar. In an April 6 interview with CNBC, Malaysia’s trade minister also acknowledged Malaysia’s concerns about Asia’s dependency on the U.S. dollar.



At the ASEAN finance ministers and central banks meeting in Indonesia in March, policymakers also discussed the idea of cutting their reliance on the U.S. dollar, the Japanese yen and the euro and “move to settlements in local currencies” instead.



In early April, Indian media widely reported that the<a href="https://timesofindia.indiatimes.com/topic/indian-rupee" target="_blank" rel="noreferrer noopener"> </a>Ministry of External Affairs (MEA) had announced that India and Malaysia were starting to settle their trade in the Indian rupee.



<h2 class="wp-block-heading"><a></a>Economic benefits</h2>



Analysts say changing global economic dynamics are driving the co-called de-dollarization trend which can benefit local economies in a number of ways.



Trading in local currencies “allow exporters and importers to balance risks, have more options to invest, to have more certainty about the revenues and sales,” former Brazilian ambassador to China, Marcos Caramuru, told CNBC last week.



Another benefit for countries moving away from using the dollar as the middle man in bilateral trade, is to “help them move up the value chain,” said Mark Tinker from ToscaFund Hong Kong told CNBC “Street Signs Asia” early April.



“It isn’t about selling cheap stuff to Walmart, keeping down the prices for American consumers in order to earn dollars to buy its energy. This is now about actually a completely bilateral trade bloc,” Tinker said.



Meanwhile, growth of non-U.S. economic blocs also encourage these economies to push for wider use of their currencies. The IMF estimates that Asia could contribute more than 70% to global growth this year.



“U.S. growth might slow, but U.S. growth isn’t what it’s all about anymore. There is a whole non-U.S. block that’s growing,” said Tinker.&nbsp;“I think there is going to be a re-internationalization of flows.”



<h2 class="wp-block-heading"><a></a>Geopolitical concerns</h2>



Geopolitical risks have also accelerated the trend to move away from U.S. dollar.



“Political risk is really helping introduce a lot of uncertainty and variability around how much of a safe haven that U.S. dollar really is,” said Galvin Chia from NatWest Markets told “Street Signs Asia” earlier.



Tinker said what accelerated the calls for de-dollarization was the U.S. decision to freeze Russia’s foreign currency reserves after Moscow invaded Ukraine in February 2022.



The yuan has reportedly replaced the U.S. dollar as the most traded currency in Russia, according to Bloomberg.



So far, the U.S. and its western allies have frozen more than $300 billion of Russia’s foreign currency reserves and slapped multiple rounds of sanctions on Moscow and the country’s oligarchs. This forced Russia to switch trade to other currencies and increase gold in its reserves.



“Now you find that if you disagree with U.S. foreign policy, you risk having those confiscated or frozen. You’ve got to have alternative place to put those assets,” Tinker said. In the Middle East, major oil exporter Saudi Arabia has reportedly signaled it’s open to trade in other currencies other than the greenback. 



Although analysts don’t anticipate a complete break away from dollar-denominated oil trade over the short-term, “I think what they’re saying more is, well, there’s another player in town, and we want to look at how we trade with them on a bilateral basis using yuan,” said Chehab. &nbsp;&nbsp;



<h2 class="wp-block-heading"><a></a>Dollar is still king</h2>



Despite the slow erosion of its hegemony, analysts say the U.S. dollar is not expected be dethroned in the near future — simply because there aren’t any alternatives right now.



“Euro is somewhat an imperfect fiscal and monetary union, the Japanese yen, which is another reserve currency, has all sorts of structural challenges in terms of the high debt loads,” Chehab told CNBC.



The Chinese yuan also falls short, Chehab said.



“If you look at the yuan reserves as a share of total reserves, it’s only about 2.5% of total reserves, and China still has current account restrictions,” Chehab said. “That means that it’s going to take a long time for any other currency, any single currency to really usurp the dollar from that perspective.”



Data from IMF shows that as of the fourth quarter of 2022, more than 58% of global reserves are held in U.S. dollar — that’s more than double the share of the euro, the second most-held currency in the world.



The international reserve system “is still a U.S.-reserve dominated system,” said NatWest’s Chia.



“So long as that commands the majority, so long as you don’t have another currency system or economy that’s willing to step up to that international reach, convertibility and free floating and the responsibility of a reserve currency, it’s hard to say dollar will be displaced over the next 3 to 5 years. unless someone steps up.”



—&nbsp;CNBC’s Joanna Tan and Monica Pitrelli contributed to this report.

106906820-16255703122021-07-06t100015z_246826306_rc2yeo9pvrov_rtrmadp_0_usa-fed-global

Calls to move away from the U.S. dollar are growing — but the greenback is still king

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107206670-1678464549426-gettyimages-1472560730-dscf6744_034cdc81-1587-4e83-80e9-dc94ceadf2e0-820x547.jpeg" alt="" class="wp-image-424358" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107206670-1678464549426-gettyimages-1472560730-dscf6744_034cdc81-1587-4e83-80e9-dc94ceadf2e0-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107206670-1678464549426-gettyimages-1472560730-dscf6744_034cdc81-1587-4e83-80e9-dc94ceadf2e0-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107206670-1678464549426-gettyimages-1472560730-dscf6744_034cdc81-1587-4e83-80e9-dc94ceadf2e0-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107206670-1678464549426-gettyimages-1472560730-dscf6744_034cdc81-1587-4e83-80e9-dc94ceadf2e0-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107206670-1678464549426-gettyimages-1472560730-dscf6744_034cdc81-1587-4e83-80e9-dc94ceadf2e0-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107206670-1678464549426-gettyimages-1472560730-dscf6744_034cdc81-1587-4e83-80e9-dc94ceadf2e0-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



U.S. Treasury yields fell on Thursday as investors awaited economic data and comments from Federal Reserve officials that could provide hints about the central bank’s monetary policy plans.



At 3:56 a.m. ET, the yield on the 10-year Treasury was down by almost four basis points to 3.5623%. The 2-year Treasury was last trading at around 4.2166% after falling by close to five basis points.



Yields and prices move in opposite directions and one basis point is equivalent to 0.01%.



Investors assessed what could be next for Fed policy, especially regarding interest rates. Many are expecting the central bank to announce another 25 basis point interest rate hike after its next meeting on May 2-3. &nbsp;&nbsp;



The Fed indicated at its last meeting in March that a pause of rate hikes could be on the horizon, depending on economic data.



Both the latest consumer and producer price index reports in the U.S. have since indicated that inflation could be easing. Globally, however, the picture has been less clear, with the U.K.’s latest inflation reading, published Wednesday, remaining unexpectedly high.



That fueled investor concerns about further interest rate hikes, and rates staying elevated for longer — a prospect which Fed officials, including Atlanta Fed President Raphael Bostic, have also hinted at.



On Thursday, investors will be scanning remarks from Fed Governor Christopher Waller, Atlanta Fed President Raphael Bostic and Cleveland Fed President Loretta Mester for fresh policy hints.



Existing home sales and initial weekly jobless claims figures are also due Thursday. &nbsp;

107206670-1678464549426-gettyimages-1472560730-dscf6744_034cdc81-1587-4e83-80e9-dc94ceadf2e0

U.S. Treasury yields fall as investors weigh interest rate outlook

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="460" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107217230-1680111851945-gettyimages-1248376685-AFP_33BF9YC-820x460.jpeg" alt="" class="wp-image-424257" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107217230-1680111851945-gettyimages-1248376685-AFP_33BF9YC-820x460.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107217230-1680111851945-gettyimages-1248376685-AFP_33BF9YC-300x168.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107217230-1680111851945-gettyimages-1248376685-AFP_33BF9YC-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107217230-1680111851945-gettyimages-1248376685-AFP_33BF9YC-768x431.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107217230-1680111851945-gettyimages-1248376685-AFP_33BF9YC-1536x861.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107217230-1680111851945-gettyimages-1248376685-AFP_33BF9YC-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



The European Central Bank must “carry on and act consistently” with interest rate hikes as it continues its efforts to tackle high inflation, policymaker Olli Rehn said Friday.



Rehn, who is a member of the ECB’s Governing Council and governor of the Bank of Finland, said that the central bank’s next rate decision will be “data dependent,” particularly as it pertains to stubbornly high core inflation.



Euro zone core inflation — which excludes volatile energy, food, alcohol and tobacco prices — reached an all-time record of 5.7% in March, up from 5.6% in February. Headline inflation, meanwhile, fell significantly to an annual rate of 6.9% last month.



“Inflation is still by far too high, and especially I’m concerned about core inflation, underlying inflation,” Rehn told CNBC’s Joumanna Bercetche at the International Monetary Fund’s spring meeting in Washington, D.C.



The ECB has raised interest rates by 50 basis points at its last six consecutive policy meetings. However, Rehn said the moves have yet to have a significant impact.



“In my view, it is important that we carry on, and act consistently, but we have to calibrate our decision on the basis of an approach based on data dependency,” he added.



“We have been reaching restrictive territory and it’s important that we don’t relax prematurely.”



Asked whether Europe was poised for a period in which interest rates were held higher for longer, Rehn replied, “I would concur with that.”



He added, “Once we reach the peak policy rate, perhaps over the summer … then we have to keep the peak policy rate at a stable level for a sufficient period of time to see that core inflation is genuinely in a sustained decline.”



Rehn’s comments come as a number of ECB policymakers indicated this week that they may be reconsidering the path of interest rate hikes in the wake of last month’s banking turmoil.



The ECB hiked rates by 50 basis points in mid-March at the height of the banking stress, despite some calls for the central bank to pause.



Yet, several ECB Governing Council members this week noted the risk of a knock-on economic impact of continued hikes.



“Quite definitely what we experienced with the bank crisis in the U.S. and with Switzerland, this led to changes in outlook and if the outlook changes, we have to change our views,” said Austrian National Bank Governor Robert Holzmann.



Earlier Friday, Boris Vujčić, governor of the Croatian National Bank, reiterated that the bank’s upcoming decision would be “data dependent.” However, he suggested that a 25 basis point hike could be in the cards at forthcoming meetings.



“It will be, as we say, data-dependent as to what we decide to do in May, whether we stick with the 50 basis points or we move down to the 25 basis points,” Vujčić said.



— CNBC’s Elliot Smith contributed to this report.

107217230-1680111851945-gettyimages-1248376685-AFP_33BF9YC

ECB must ‘carry on and act consistently’ with interest rate hikes, policymaker says

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107213501-1679511870376-gettyimages-1249066464-AFP_33BV348-820x461.jpeg" alt="" class="wp-image-424201" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107213501-1679511870376-gettyimages-1249066464-AFP_33BV348-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107213501-1679511870376-gettyimages-1249066464-AFP_33BV348-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107213501-1679511870376-gettyimages-1249066464-AFP_33BV348-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107213501-1679511870376-gettyimages-1249066464-AFP_33BV348-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107213501-1679511870376-gettyimages-1249066464-AFP_33BV348-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107213501-1679511870376-gettyimages-1249066464-AFP_33BV348.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



WASHINGTON – Fallout from the U.S. banking crisis is likely to tilt the economy into recession later this year, according to Federal Reserve documents released Wednesday.



Minutes from the March meeting of the Federal Open Market Committee included a presentation from staff members on potential repercussions from the failure of Silicon Valley Bank and other tumult in the financial sector that began in early March.



Though Vice Chair for Supervision Michael Barr said the banking sector “is sound and resilient,” staff economists said the economy will take a hit.



“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years,” the meeting summary said.



Projections following the meeting indicated that Fed officials expect gross domestic product growth of just 0.4% for all of 2023. With the Atlanta Fed tracking a first-quarter gain around 2.2%, that would indicate a pullback later in the year.



That crisis had caused some speculation that the Fed might hold the line on rates, but officials stressed that more needed to be done to tame inflation.



FOMC officials ultimately voted to increase the benchmark borrowing rate by 0.25 percentage point, the ninth increase over the past year. That brought the fed funds rate to a target range of 4.75%-5%, its highest level since late 2007.



The rate hike came less than two weeks after Silicon Valley Bank, at the time the 17th largest institution in the U.S., collapsed following a run on deposits. The failure of SVB and two others spurred the Fed to create emergency lending facilities to make sure banks could continue operations.



Since the meeting, inflation data has been mostly cooperative with the Fed’s goals. Officials said at the meeting that they see prices falling further.



“Reflecting the effects of less projected tightness in product and labor markets, core inflation was forecast to slow sharply next year,” the minutes said.



But concern over broader economic conditions remained high, particularly in light of the banking problems. Following the collapse of SVB and the other institutions, Fed officials opened a new borrowing facility for banks and eased conditions for emergency loans at the discount window.



The minutes noted that the programs helped get the industry through its troubles, but officials said they expect lending to tighten and credit conditions to deteriorate. “Even with the actions, participants recognized that there was significant uncertainty as to how those conditions would evolve,” the minutes said.



<h2 class="wp-block-heading" id="h-half-point-hike-if-not-for-crisis"><a></a>Half-point hike if not for crisis?</h2>



Several policymakers questioned whether to hold rates steady as they watched to see how the crisis unfolded. However, they relented and agreed to vote for another rate hike “because of elevated inflation, the strength of the recent economic data, and their commitment to bring inflation down to the Committee’s 2 percent longer-run goal.”



In fact, the minutes noted that some members were leaning toward a half-point rate rise prior to the banking problems. Officials said inflation is “much too high” though they stressed that incoming data and the impact of the hikes will have to be considered when formulating policy ahead. “Several participants emphasized the need to retain flexibility and optionality in determining the appropriate stance of monetary policy given the highly uncertain economic outlook,” the minutes said. Inflation data has been generally cooperative with the Fed’s aims. The personal consumption expenditures price index, which is the inflation gauge policymakers watch the most, increased just 0.3% in February and was up 4.6% on an annual basis. The monthly gain was less than expected. Earlier Wednesday, the consumer price index showed a rise of just 0.1% in March and decelerated to a 5% annual pace, the latter figure down a full percentage point from February. However, that headline CPI reading was held back mostly by tame food and energy prices, and a boost in shelter costs drove core inflation higher by 0.4% for the month and 5.6% from a year ago, slightly above where it was in February. The Fed expects housing inflation to slow through the year. There was some bad news on the inflation front: A monthly survey from the New York Fed showed that inflation expectations over the next year increased half a percentage point to 4.75% in March.



Markets as of Wednesday afternoon were assigning about a 72% chance of one more quarter percentage point rate hike in May before a policy pivot where the Fed cuts before the end of the year, according to CME Group data. Though the FOMC approved an increase in March, it did alter language in the post-meeting statement. Where previous statements referred to the need for “ongoing increases,” the committee changed the phrasing to indicate that more hikes “may be appropriate.”

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Fed expects banking crisis to cause a recession this year, minutes show

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107178051-1673549930994-gettyimages-1456025275-dsc00016_176a4086-9135-46a3-884d-f5d89f65d7cb-820x547.jpeg" alt="" class="wp-image-424180" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107178051-1673549930994-gettyimages-1456025275-dsc00016_176a4086-9135-46a3-884d-f5d89f65d7cb-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107178051-1673549930994-gettyimages-1456025275-dsc00016_176a4086-9135-46a3-884d-f5d89f65d7cb-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107178051-1673549930994-gettyimages-1456025275-dsc00016_176a4086-9135-46a3-884d-f5d89f65d7cb-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107178051-1673549930994-gettyimages-1456025275-dsc00016_176a4086-9135-46a3-884d-f5d89f65d7cb-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107178051-1673549930994-gettyimages-1456025275-dsc00016_176a4086-9135-46a3-884d-f5d89f65d7cb-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107178051-1673549930994-gettyimages-1456025275-dsc00016_176a4086-9135-46a3-884d-f5d89f65d7cb-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



Inflation cooled in March as the Federal Reserve’s interest rate increases showed more impact, the Labor Department reported Wednesday.



The consumer price index, a widely followed measure of the costs for goods and services in the U.S. economy, rose 0.1% for the month against a Dow Jones estimate for 0.2%, and 5% from a year ago vs. the estimate of 5.1%.



Excluding food and energy, core CPI increased 0.4% and 5.6% on an annual basis, both as expected.



The data showed that while inflation is still well above where the Fed feels comfortable, it is at least showing continuing signs of decelerating. Policymakers target inflation around 2% as a healthy and sustainable growth level.



A 3.5% drop in energy costs and an unchanged food index helped keep headline inflation in check.



A 0.6% increase in shelter costs was the smallest gain since November, but still resulted in prices rising 8.2% on an annual basis. Shelter makes up about one-third of the weighting in the CPI and is being watched closely by Fed officials.



Used vehicle prices, a major contributor to the initial inflation surge in 2021, declined another 0.9% in March and are now down 11.2% year over year.



Over the past year or so, the Fed has raised its benchmark interest rate nine times for a total of 4.75 percentage points, the fastest pace of tightening since the early 1980s. Officials initially dismissed inflation as transitory, expecting it to fall as pandemic-related factors dissipated, but were forced to play catch-up as price increases proved more durable.



One key area the central bank has targeted is the labor market. A shortage of workers had helped push up wages and prices, a situation that has eased somewhat in recent months.



In March, nonfarm payrolls increased by 236,000, the smallest gain since December 2020, and average hourly earnings rose at a 4.2% annual pace, the lowest level since June 2021.



The Fed is hoping it can calibrate policy so that the slowdown it is trying to engineer in the labor market doesn’t tip the economy into recession. Gross domestic product growth is tracking at a 2.2% annualized pace in the first quarter, according to Atlanta Fed data, though many economists expect a contraction to come later in the year.

107178051-1673549930994-gettyimages-1456025275-dsc00016_176a4086-9135-46a3-884d-f5d89f65d7cb

U.S. Inflation rises 0.1% in March, less than expected

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107221437-1680748898943-gettyimages-1245834621-AA_27122022_1004249-820x462.jpeg" alt="" class="wp-image-424113" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107221437-1680748898943-gettyimages-1245834621-AA_27122022_1004249-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107221437-1680748898943-gettyimages-1245834621-AA_27122022_1004249-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107221437-1680748898943-gettyimages-1245834621-AA_27122022_1004249-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107221437-1680748898943-gettyimages-1245834621-AA_27122022_1004249-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107221437-1680748898943-gettyimages-1245834621-AA_27122022_1004249.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">WASHINGTON D.C., UNITED STATES &#8211; DECEMBER 26: The International Monetary Fund (IMF) building is seen in Washington D.C., United States on December 26, 2022. (Photo by Celal Gunes/Anadolu Agency via Getty Images) Anadolu Agency | Anadolu Agency | Getty Images</figcaption></figure>



The International Monetary Fund said in a Wednesday report that global tensions could disrupt overseas investment and eventually lead to a long-term loss of 2% of the world’s gross domestic product.



Companies and policymakers across the globe are exploring ways to make their supply chains more resilient by “moving production home or to trusted countries,” the IMF warned in its report, adding that this will lead to fragmenting foreign direct investment.



The IMF pointed to recent bills adopted against the backdrop of rising tensions between the U.S. and China, such as Washington’s Chips and Science Act. Japan recently imposed its own restrictions on 23 types of semiconductor manufacturing equipment, joining U.S. efforts to curb China’s ability to make advanced chips.



A recent survey conducted by the American Chamber of Commerce in China similarly showed a shift of foreign direct investment away from China. Less than half of its respondents ranked China as a top three investment priority for the first time in 25 years.



IMF economists said that money is now flowing into what are considered “geopolitically close countries.” The rise of “friend-shoring” could hurt less developed markets the most, the organization said.



“Emerging market and developing economies are particularly affected by reduced access to investment from advanced economies, due to reduced capital formation and productivity gains from the transfer of better technologies and know-how,” IMF economists including Jae-bin Ahn wrote in the report.



This comes as tensions increase between China and the United States. After a recent meeting between U.S. House Speaker Kevin McCarthy and Taiwanese President Tsai Ing-wen in California, Beijing made veiled threats, pledging to take “resolute actions” in response to the “provocation.”



The IMF economists added that developing economies are more vulnerable to this shift in foreign direct investment as “they rely more on flows from more geopolitically distant countries.”



Even if more powerful countries reap the benefits they seek through heightened tensions, those gains could be partially offset due to spillover from weaker external demand, IMF warns.



“A fragmented world is likely to be a poorer one,” the IMF economists wrote.



<h2 class="wp-block-heading" id="h-vulnerable-to-shocks"><a></a>Vulnerable to shocks</h2>



IMF argues that while “reconfigured” supply chains according to geopolitical alliances may benefit a country’s national security interests and secure an upper hand against competitors, there are also consequences.



“Friend-shoring to existing partners will often reduce diversification and make countries more vulnerable to macroeconomic shocks,” IMF economists wrote in a note. The organization argued for more supply diversification in global trade a year ago, saying that a “more diversified global value chains could help lessen the impact of future shocks.



The organization revisited that argument, saying that even for developed economies, overseas firms ramping up competition “spurs domestic enterprises to be more productive.”



It warned that policy uncertainty should be minimized, as it “amplifies losses from fragmentation.”



“In a fragmented world with heightened geopolitical tensions, investors may worry that nonaligned economies will be forced to choose one bloc or the other in the future, and such uncertainty could intensify losses,” IMF wrote.

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IMF says U.S-China tensions could cost the world about 2% of its output

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="615" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1248366213-1-820x615.jpg" alt="" class="wp-image-424081" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1248366213-1-820x615.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1248366213-1-300x225.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1248366213-1-120x90.jpg 120w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1248366213-1-768x576.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1248366213-1-1536x1152.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1248366213-1-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Signage of Credit Suisse Group AG at the company&#8217;s office in Singapore, on Thursday, March 16, 2023. Credit Suisse tapped the Swiss National Bank for as much as 50 billion francs ($54 billion) and offered to repurchase debt, seeking to stem a crisis of confidence that has sent shockwaves across the global financial system. Photographer: Nicky Loh/Bloomberg via Getty Images</figcaption></figure>



Credit Suisse Chairman Axel Lehmann on Tuesday told shareholders he was “truly sorry” for the collapse that led to the bank’s controversial takeover by UBS.



“It is a sad day for you and for us too. I can understand the bitterness, the anger and the shock of all those who are disappointed, overwhelmed and affected by the developments,” Lehmann said at the bank’s annual meeting, the first time its leaders have addressed the public since the rescue.



“I apologize that we were no longer able to stem the loss of trust that had accumulated over the years, and for disappointing you.”



A police presence was established early Tuesday at the venue, as protesters and shareholders began arriving in droves, hoping for answers and accountability following the demise of the 167-year-old Swiss institution.



Swiss authorities brokered an emergency rescue of the stricken bank by its larger domestic rival for just 3 billion Swiss francs, over the course of a weekend in late March.



It followed a collapse in Credit Suisse’s deposits and share price amid fears of a global banking crisis, but the deal remains mired in legal and logistical challenges. Neither UBS nor Credit Suisse shareholders were allowed a vote on the deal.



“Until the end, we fought hard to find a solution, but ultimately there were only two options: deal or bankruptcy,” Lehmann, who became chairman in January 2022, told shareholders. “The merger had to go through.”



In a statement Sunday, the office of the attorney general confirmed that Switzerland’s Federal Prosecutor is investigating potential breaches of Swiss federal law by government officials, regulators and top executives at Credit Suisse and UBS.



Both banks declined to comment on Monday.



<h3 class="wp-block-heading" id="h-we-ran-out-of-time">‘We ran out of time’</h3>



Credit Suisse CEO Ulrich Koerner took over in 2021, when the bank was reeling from a series of high-profile scandals, risk management failures and heavy losses.



In October 2022, Credit Suisse launched a massive strategic overhaul, aimed at fixing its risk and compliance culture and addressing perennial underperformance in the investment bank.



Koerner told shareholders on Tuesday that he returned to Credit Suisse in 2021 hoping to “tackle the problems that existed and build a new Credit Suisse.”



“In short, I wanted to create an organization that our shareholders, our clients and all our employees could be proud of. Unfortunately, we didn’t succeed in the end. We ran out of time. This fills me with sorrow,” he said.



“What has happened over the past few weeks will continue to affect me personally and many others for a long time to come.”



Commentators have highlighted the importance of the deal’s success for Swiss authorities against a febrile political backdrop. The lack of input from shareholders, bondholders and Swiss taxpayers in UBS’ acquisition of its embattled rival has sparked widespread anger.



Speaking outside the annual meeting, Vincent Kaufmann, CEO of Ethos Foundation which represents pension funds comprising between 3% and 5% of Credit Suisse shareholders, told CNBC that they had “lost a lot of money” and “need to know what management is doing.”



Potential courses of action include “trying to retrieve some of the viable pay that was granted for former management, who may have failed in their duties to protect shareholders’ interests,” he said.



“We’re still looking for possibilities — it’s quite difficult with the Swiss company law to prove the damage. Mismanagement of a company is not per se something we can concretely act against former members of the management or current members of the management, but still we need to be sure that they gave the whole truth to investors and to the market, so there is still open question,” Kaufmann told CNBC’s Joumanna Bercetche.



Holders of Credit Suisse’s AT1 bond instruments, which were subject to a $17 billion wipeout as part of the UBS takeover, last week instructed a global law firm to pursue discussion and possible litigation with Swiss authorities.



“There is still a chance that the various actors will recognize and correct the mistakes made in hastily orchestrating this merger,” Thomas Werlen, managing partner at Quinn Emanuel Urquhart &amp; Sullivan, which is representing a “diverse array” of affected bondholders in Switzerland, the U.K. and U.S., said in a release Monday.



“While we are certainly prepared to pursue whatever proceedings are necessary, a potential constructive engagement with the relevant stakeholders could prevent years of litigation. That will be an important focus for us over the coming weeks.”



Norway’s sovereign wealth fund, Norges Bank Investment Management, has already announced that it will vote against the re-election of Lehmann and six other board members, while Kaufmann told CNBC that Ethos Foundation will only reject members who have been sitting for more than two years.



UBS announced last week that former CEO Sergio Ermotti would return to the helm of the new bank as it undertakes the huge task of integrating its fallen compatriot into its business.



UBS will hold its own AGM on Wednesday, with further clarity expected on plans for the new integrated lender. Swiss regulator FINMA will also hold a press conference on Wednesday.



Swiss newspaper Tages-Anzeiger reported Sunday, citing one source, that plans for the new entity include a 20%-30% cut to its combined global workforce.

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‘I am truly sorry’: Credit Suisse chair pleads with angry shareholders at annual meeting

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="537" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1246705986-820x537.jpg" alt="" class="wp-image-424072" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1246705986-820x537.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1246705986-300x196.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1246705986-137x90.jpg 137w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1246705986-768x503.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1246705986-1536x1006.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/GettyImages-1246705986-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">31 January 2023, Schleswig-Holstein, Kiel: The pump nozzle at a gas station is labeled &#8220;Diesel B7&#8221;. From February 5, 2023, the European Union will no longer purchase petroleum products such as diesel, gasoline or lubricants from Russia. Photo: Axel Heimken/dpa (Photo by Axel Heimken/picture alliance via Getty Images)</figcaption></figure>



SINGAPORE, April 4 (Reuters) &#8211; Record volumes of Russian diesel poured into the Middle East in March, shiptracking data showed, as traders cashed in on low prices to stock up the fuel at the Fujairah hub of the United Arab Emirates and in Saudi Arabia, which is boosting exports.



The Middle East is quickly becoming a key supplier of the industrial fuel to Europe and Africa, while adding stocks to Asia, as Russian oil adds to rising output from Saudi and Kuwaiti refineries.



That effectively elbows Asian diesel exporters out of those markets, further weighing on prices and refiners&#8217; margins &lt;GO10SGCKMc1&gt; in the East, which are already hovering at their lowest in more than a year.



At least 500,000 tonnes of the fuel have been discharged at Fujairah and Saudi Arabia in March, shiptracking data from Refinitiv, Kpler and Vortexa showed, compared with almost no Russian arrivals a year earlier.



The Middle East took up slightly over 10% of Russia&#8217;s exports loading in February and March.



The European Union banned imports of Russian crude and oil products in December and February, respectively, forcing shipments to <a href="https://www.reutersconnect.com/all?search=all%3AP:4295877339&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">go elsewhere</a>.



Curbs on access to Western insurance and ships have made it difficult to sell Russian oil, with traders opting to <a href="https://www.reutersconnect.com/all?search=all%3AL1N35M22O&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">store the oil</a> at <a href="https://www.reutersconnect.com/all?search=all%3AL4N35Z1H1&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">hubs such as Fujairah</a> before re-exporting it.



<h2 class="wp-block-heading" id="h-saudi-arabia">SAUDI ARABIA</h2>



Top oil exporter Saudi Arabia imported 261,000 tonnes of Russian diesel in March and early April, the largest volume it has ever received from Russia.



One of the cargoes went to Ras Tanura, while three were discharged at Jeddah, Refinitiv and Vortexa data showed.



March-loading Russian diesel cargoes traded at $60 to $70 per barrel on a free-on-board basis, equivalent to a discount of about $20 per barrel to the Middle East benchmark, two traders said.



That is below the price cap of $100 a barrel set by the G7 grouping, which allows traders access to Western ships and insurance services.



&#8220;The discounts would need to be large, given freight rates plus (high) risk premium, to ensure the costs are still less than the alternative marginal barrel,&#8221; said Mark Williams, research director at Wood Mackenzie.



<h2 class="wp-block-heading">EXPORTS</h2>



The Middle East&#8217;s monthly diesel exports to northwest Europe averaged above 1 million tonnes for the first quarter of 2023, up from 785,000 tonnes a month in 2022&#8217;s final quarter, data from Refinitiv showed.



March-loading exports to Africa hit a four-month high of 2.57 million tonnes, up from a monthly average of about 1.3 million in 2022, Refinitiv data showed, while volumes to Asia were at a new high for March.



&#8220;Middle Eastern exports to Asia rose to 150,000 barrels a day in March, filling some of the void left by slower Chinese exports,&#8221; Energy Aspects analysts said in a note.



Saudi Arabia ramped up diesel exports from Yanbu and Rabigh, where state giant Saudi Aramco &lt;2222.SE&gt; operates joint venture refineries with Exxon Mobil Corp &lt;XOM.N&gt;, Sinopec &lt;600028.SS&gt;, TotalEnergies &lt;TTEF.PA&gt;, and Sumitomo Chemical &lt;4005.T&gt;, to Europe, the data showed.



Aramco did not immediately respond to an email query from Reuters.



More exports could come from <a href="https://www.reutersconnect.com/all?search=all%3AL4N35W17M&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Saudi Aramco&#8217;s Jizan</a> and <a href="https://www.reutersconnect.com/all?search=all%3AL1N35701E&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Kuwait&#8217;s Al Zour</a> refineries will boost output this year, in addition to Oman&#8217;s Duqm project, which is starting up in the third quarter.



Rising supplies could weigh on global refining margins, which could hit $6.60 a barrel in the fourth quarter, down from an average of $11 in the corresponding 2022 quarter, Wood Mackenzie analysts told clients in a note.



Vessels sending Russian diesel to Saudi Arabia



(1 tonne=7.45 barrels)



Middle East&#8217;s diesel exports to Europe<a href="https://tmsnrt.rs/3K7OVJl" target="_blank" rel="noreferrer noopener">https://tmsnrt.rs/3K7OVJl</a>



Asia gasoil cracks<a href="https://tmsnrt.rs/3Y84lU8" target="_blank" rel="noreferrer noopener">https://tmsnrt.rs/3Y84lU8</a>



(Reporting by Trixie Yap in Singapore and Natalia Chumakova in Moscow; Editing by Florence Tan and Clarence Fernandez)

EU stops buying oil products from Russia

Record flows of Russian diesel to Mideast boost exports to Europe, Africa

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107130739-1665113367040-gettyimages-1243716934-AFP_32KN7PF-820x462.jpeg" alt="" class="wp-image-424042" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107130739-1665113367040-gettyimages-1243716934-AFP_32KN7PF-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107130739-1665113367040-gettyimages-1243716934-AFP_32KN7PF-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107130739-1665113367040-gettyimages-1243716934-AFP_32KN7PF-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107130739-1665113367040-gettyimages-1243716934-AFP_32KN7PF-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107130739-1665113367040-gettyimages-1243716934-AFP_32KN7PF.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">The logo of the OPEC is pictured at the OPEC headquarters on October 4, 2022. In October last year, the oil cartel announced its decision to cut output by two million barrels per day. Joe Klamar | Afp | Getty Images</figcaption></figure>



Several OPEC+ members are set to tighten global production by an additional 1.16 million barrels per day until the end of the year, further burdening central bank efforts to curtail global inflation — but critically protecting the alliance’s broader output strategy from political pressures.&nbsp;



Washington has stepped in to criticize Sunday’s announcement where eight OPEC+ producers — including group leader Saudi Arabia and key allies Kuwait and the UAE — said they would remove more than a combined 1 million barrels per day from global oil markets, as part of an independent initiative unlinked to the broader OPEC+ policy.



This adds to Russia’s existing intentions to trim 500,000 barrels per day of its own production from February output levels, now until the end of the year — bringing the combined voluntary cuts of OPEC+ members in excess of 1.6 million barrels per day.



“We don’t think cuts are advisable at this moment, given market uncertainty — and we’ve made that clear,” a spokesperson for the National Security Council said, according to Reuters.



U.S. President Joe Biden’s administration has repeatedly lambasted the OPEC+ group for its production cuts, citing the inflationary toll on households and flinging accusations of camaraderie with sanctions-struck Russia. Curbs in production lead to smaller supply, causing higher prices at the pump in importing countries which then provides a boost for headline inflation figures.



Relations devolved into a war of words with OPEC+ chair Saudi Arabia at the end of last year, when the oil group agreed a 2 million barrels per day cut until the end of 2023 — a decision upheld at ministerial and technical committees since.



One such technical council, the OPEC+ Joint Ministerial Monitoring Committee, is set to adjourn at midday Vienna time on Monday and could steer to recommend no production changes, several OPEC+ delegates told CNBC, preferring to remain anonymous due to professional restrictions.



Formal group action is arguably no longer required, with front-month June Brent futures prices up by $4.44 per barrel from the Friday settlement to $84.33 per barrel at nearly 10 a.m. London time. Some analysts now warn of prices soaring to $100 per barrel, while Goldman Sachs could drive up Brent forecasts by $5 per barrel to $95 per barrel for December 2023.



“The anticipated increase in oil prices for the rest of the year as a result of these voluntary cuts could fuel global inflation, prompting a more hawkish stance on interest rate hikes from central banks across the world. That would, however, lower economic growth and reduce oil demand expansion,” said Victor Ponsford of Rystad Energy in a research note.



Tamas Varga, of oil broker PVM, flagged the broader political risks of the organized voluntary cuts, telling CNBC that headline inflation should rise faster than anticipated.



“But central banks might not deviate from the course of slowing down the hike in borrowing as their views are chiefly shaped by core inflation figures, which will not be as much affected by stronger oil prices as headline data,” he said.



“The voices of the proponents of the NOPEC bill in the US Congress will also get louder and they will accuse OPEC+ to use oil as a weapon. The step is unreservedly bullish, for now macro worries are overtaken by supply concerns. The move will also lead to further souring of the Saudi-US relationship.”



The NOPEC — No Oil Producing and Exporting Cartels— bill refers to proposed U.S. legislation that would open OPEC+ countries to potential antitrust legal action.



The U.S. can attempt to combat price hikes by releasing further volumes from its Strategic Petroleum Reserves — with one anonymous OPEC+ delegate saying that Washington has encumbered its fight against inflation by blocking global access to Venezuela and Iranian volumes, while EU nations likewise refrain from Russian purchases out of solidarity with the invaded Ukraine.



OPEC+ delegates have previously also found fault with western nations’ windfall taxes on energy companies — which they claim received no consistent support when WTI futures traded in negative territory in April 2020 — and with the accelerated shift toward renewables that has reduced hydrocarbon investments without producing sufficient alternative green fuel to fully meet consumer demands.



Spare capacity has been at the heart of recent OPEC+ pronouncements, with the group stepping in to protect the appeal of stable return for long-term investments in oil projects. Nearly all of the countries participating in the recently-announced independent cuts possess additional capacity.



One anonymous OPEC+ source said discussions to coordinate further independent cuts gained traction toward the end of last week, when volatility in the banking sector following the failures of several U.S. and Swiss lenders eroded investor confidence in more historically volatile assets, such as oil. OPEC+ delegates have previously expressed that the oil impact of the banking turbulence would be short-lived, with longer-term questions lingering over the looming demand of a reopening China, the world’s largest consumer. &nbsp;



“What happened to the oil prices over the last three weeks was nothing to do with oil factors, it was everything to do with the banking crisis, and the fears that brings with it. We also had a huge, huge increase in [the] short market,&nbsp;and that is something that OPEC are very keen to stomp out,” Amrita Sen, co-founder and director of research at Energy Aspects, told CNBC’s Dan Murphy.



Investors generally assume short positions when they expect market or price declines.



“I do believe, if the market overtightens, or exogenous issues or shocks fade, they will reverse this cut along the line. So this isn’t set in stone for the rest of the year, but very clearly defending a floor.”



Voluntary production moves are easier to agree and unwind without staining domestic or external OPEC+ politics. Such cuts have previously been accepted by the group, provided they aligned with the spirit of existing OPEC+ policies — but they have typically expressed the initiative of a single country, barring temporary Saudi-Kuwaiti-UAE reductions organized during the Covid-19 pandemic.



A coordinated gesture of Sunday’s scale effectively creates a second, unofficial agreement on top of the existing formal OPEC+ strategy — one that does not command formal commitments and can be more readily defended when individual oil ministries face pressures from their own governments or state oil companies to increase output and short-term revenues. Independent cuts also bypass the need for unanimous OPEC+ member approval and tentatively avoid external accusations of organized anti-consumer behavior.



But the gesture will not bridge the growing political rift between OPEC+ kingpin Saudi Arabia and the Biden administration, whose influence has been increasingly supplanted by China in the Middle East. In the past month, Beijing brokered a resumption of relations between arch-rivals Tehran and Riyadh, with Saudi Arabia also taking steps to join the China-led Shanghai Cooperation Organization as a dialogue partner.



″[The organized voluntary cuts] certainly would play into the narrative that the U.S. is losing its influence in the region to either influence the actions of core OPEC producers like Saudi Arabia and the UAE, which have traditionally been client states of the U.S.,” Andy Critchlow, EMEA head of news at S&amp;P Global Platts, told CNBC.



“You can’t really look at this in isolation from the wider geopolitical situation in the Middle East, which is seeing these core oil producers shift closer to China, shift much closer to Russia. You know, they like operating in this multipolar world, instead of being completely tied to U.S. dependency.”

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OPEC+ just made the Fed’s job more complicated. Here’s why they did it — and what could be next

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="678" height="452" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/images-1.jpeg" alt="" class="wp-image-424037" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/images-1.jpeg 678w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/images-1-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/images-1-135x90.jpeg 135w" sizes="auto, (max-width: 678px) 100vw, 678px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



Oil prices surged as much as 8% at the open after OPEC+ announced it was slashing output by 1.16 million barrels per day.



Brent crude futures last jumped 5.07% to $83.95 a barrel on that news, and U.S. West Texas Intermediate crude futures soared 5.17% to $79.59 a barrel.



The voluntary cuts will start from May to end 2023, Saudi Arabia announced, saying it was a “precautionary measure” targeted toward stabilizing the oil market.



The move comes on the back of Russia’s decision to trim oil production by 500,000 barrels per day until the end of 2023, according to the country’s Deputy Prime Minister Alexander Novak.



Other member states have also pledged respective cuts, with OPEC Kingpin Saudi Arabia reducing 500,000 barrels per day and UAE cutting 144,000 barrels per day, amongst other cutbacks from Kuwait, Oman, Iraq, Algeria and Kazakhstan.



“The selected involvement of the largest OPEC+ members suggest that adherence to production cuts may be stronger than has been the case in the past,” Commonwealth Bank of Australia’s Vivek Dhar said in a note.



<h2 class="wp-block-heading" id="h-oil-at-100-per-barrel"><a></a>Oil at $100 per barrel?</h2>



“OPEC+‘s plan for a further production cut may push oil prices toward the $100 mark again, considering China’s reopening and Russia’s output cuts as a retaliation move against western sanctions,” CMC Markets’ analyst Tina Teng told CNBC.



Teng noted, however, that the cut could also reverse the decline in inflation, which would “complicate central banks’ rate decisions.”



In March, oil prices tumbled to their lowest since December 2021, as traders feared the banking rout could dent global economic growth.



The oil cartel and its allies are looking to avoid a repeat of the 2008 crash, one analyst said.



“They’re looking into the second half of this year and deciding they don’t want to relive 2008,” said Bob McNally, president of Rapidan Energy Group, citing oil prices crashing from $140 to $35 in six months in that year.



McNally added that while it’s not his base case, oil prices could “make a dash for $100 … if Chinese demand goes back to 16 million barrels a day second half of this year [and] if Russian supply starts to go off because of sanctions and so forth,”



“Then these cuts, if they stick with them, are going to super tighten the market,” he said.



According to Wood Mackenzie, China could make up 40% of the world’s demand recovery in 2023.



In October, the oil cartel announced its decision to cut output by two million barrels per day.



The White House said at that time that President Joe Biden was “disappointed by the shortsighted decision by OPEC+” to cut production quotas while the world was still grappling with the war in Ukraine.



<h2 class="wp-block-heading"><a></a>Significant, but not ‘set in stone’</h2>



However, some analysts say the latest cut is set to deliver a more significant impact than the one set last year.



“Most of the cuts will be made by countries that are producing at or above quotas, which implies a higher share of the announced cuts will translate into real supply reductions than in October 2022,” said Energy Aspects’ founder Amrita Sen, who also expects prices to hit $100 per barrel.



However, Sen holds the view that the output cut could potentially be reversed, hinging on easing global market pressures.



“I do believe if the market over tightens, exogenous issues or shocks fade, they will reverse this cut down the line so this isn’t set in stone for the rest of the year — but very clearly defending a [price] floor,” she said.



“Unlike [the cut in October], the momentum for global oil demand is up, not down with a strong China recovery,” Goldman Sachs also said in a note.



That could nudge up Goldman’s Brent forecasts by $5 per barrel to $95 per barrel for December 2023, the investment bank said in a note after the surprise decision overnight.



Goldman analysts led by Daan Struyven said the surprise cut is “consistent” with OPEC+’s doctrine to act preemptively.

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World Bank board elects US nominee Ajay Banga as president

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ECB must ‘carry on and act consistently’ with interest rate hikes, policymaker says

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