<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107284462-1691669243686-gettyimages-1603828834-dsc05449_ubrrozav-820x461.jpeg" alt="" class="wp-image-426720" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107284462-1691669243686-gettyimages-1603828834-dsc05449_ubrrozav-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107284462-1691669243686-gettyimages-1603828834-dsc05449_ubrrozav-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107284462-1691669243686-gettyimages-1603828834-dsc05449_ubrrozav-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107284462-1691669243686-gettyimages-1603828834-dsc05449_ubrrozav-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107284462-1691669243686-gettyimages-1603828834-dsc05449_ubrrozav-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107284462-1691669243686-gettyimages-1603828834-dsc05449_ubrrozav.jpeg 1920w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



The consumer price index rose 3.2% from a year ago in July, a sign that inflation has lost at least some of its grip on the U.S. economy.



Prices accelerated a seasonally adjusted 0.2% for the month, in line with the Dow Jones estimate, the Bureau of Labor Statistics reported Thursday. However, the annual rate was slightly below the 3.3% forecast though higher than June and the first increase in more than a year.



Excluding volatile food and energy prices so-called core CPI also increased 0.2% for the month, matching the estimate and equating to a 12-month rate of 4.7%, the lowest since October 2021. The annual rate for the core also was slightly below a Dow Jones consensus estimate for 4.8%.



Markets reacted positively to the report, with futures tied to the Dow Jones Industrial Average up more than 200 points and Treasury yields mostly lower.



“It is not quite ‘mission accomplished’ yet, but significant progress on the inflation front has been made,” said Sung Won Sohn, chief economist at SS Economics and professor of economics and finance at Loyola Marymount University. “On balance, the inflation picture has improved significantly. The Federal Reserve will stop raising the interest rate soon.”



Almost all of the monthly inflation increase came from shelter costs, which rose 0.4% and were up 7.7% from a year ago. Rents rose 0.4% The BLS said more than 90% of the increase came from that category, which accounts for about one-third of the CPI weighting.



Food prices climbed 0.2% on the month, and the BLS said energy increased just 0.1% even though crude oil prices surged during the month and prices at the pump jumped as well.



Used vehicle prices declined 1.3% and medical care services were off 0.4%. Airline fares fell 8.1% on the month, the same as in June, and are down 18.6% from a year ago after surging in the early days of the Covid pandemic.



“While it would be fair to describe prices as still relatively high in places such as shelter and used cars, we are witnessing a rate of change that is encouraging to consumers, as well as to Federal Reserve policymakers,” said Rick Rieder, chief investment officer of global fixed income at asset management giant BlackRock.



The comparatively tame inflation levels helped raise worker pay. Real wages increased 0.3% on the month and were up 1.1% from a year ago, the BLS said in a separate release.



The annual rate for headline inflation, while below expectations, actually marked an increase from the 3% level in June.



Together, the latest batch of data shows that while inflation has come well off its 40-year highs of mid-2022, it is still considerably above the 2% level where the Federal Reserve would like to see it and high enough that cuts in interest rates are unlikely anytime soon.



“While inflation is moving in the right direction, the still-elevated level suggests that the Fed is some distance from cutting rates,” said Seema Shah, chief global strategist at Principal Asset Management. “Indeed, disinflation is unlikely to be smooth and will require some additional economic pain before the 2% target comes sustainably into view.”



Decelerating levels, though, are at least taking some of the pressure off the Fed to keep tightening policy.



After hiking benchmark interest rates 11 times since March 2022, central bank officials are widely expected to take a break in September. However, it’s up for debate what happens from there, and public statements from policymakers have shown disparate opinions.



Earlier this week, regional Fed Presidents John Williams of New York and Patrick Harker of Philadelphia made comments indicating they could see the rate hikes at an end. However, Governor Michelle Bowman said she expects more increases, while fellow Governor Christopher Waller also has pointed toward the possible need for additional hikes ahead.



Regardless of whether the Fed approves any additional hikes, virtually all members have agreed that the higher rates are likely to stay in place for some time.



The elevated rates have yet to put a dent in economic growth: The first half of 2023 had seen GDP post gains of 2% and 2.4% in the first two quarters, respectively, and the Atlanta Fed is tracking third-quarter growth of 4.1%. Payroll gains have been slowing but are still solid, and unemployment is near its lowest since late in 1969.



Consumers have begun to be a bit stretched and increasingly are turning to credit cards and savings for their spending. Total credit card debt surpassed $1 trillion for the first time this year, according to New York Fed data.



However, more economists are beginning to expect the U.S. can avoid a recession despite the aggressive rate hikes. Bank of America, Goldman Sachs and JPMorgan Chase all recently have forecast that a contraction is becoming less likely.



Correction: The annual inflation rate was higher than June. An earlier version mischaracterized the historical relationship.

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July CPI report shows inflation gauge rose 3.2%, less than expected

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107283102-1691476516300-gettyimages-1236656647-INDIA-ASSAM-NAGAON-PADDY_HARVEST-820x461.jpeg" alt="" class="wp-image-426702" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107283102-1691476516300-gettyimages-1236656647-INDIA-ASSAM-NAGAON-PADDY_HARVEST-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107283102-1691476516300-gettyimages-1236656647-INDIA-ASSAM-NAGAON-PADDY_HARVEST-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107283102-1691476516300-gettyimages-1236656647-INDIA-ASSAM-NAGAON-PADDY_HARVEST-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107283102-1691476516300-gettyimages-1236656647-INDIA-ASSAM-NAGAON-PADDY_HARVEST-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107283102-1691476516300-gettyimages-1236656647-INDIA-ASSAM-NAGAON-PADDY_HARVEST-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107283102-1691476516300-gettyimages-1236656647-INDIA-ASSAM-NAGAON-PADDY_HARVEST.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /></figure>



Rice prices surged to their highest in almost 12 years on the back of India’s rice export ban and adverse weather conditions that could impact production, said the United Nations’ food agency.



The Food and Agriculture Organization All Rice Price Index for July rose by 2.8% to 129.7 points.



The figure is up 19.7% compared to a year ago, and the highest nominal value since September 2011, data from FAO showed. The sharpest increases in price came from Thailand.



“Concerns over the potential impacts of El Nino on production in some suppliers provided further underpinning to prices, as did rain-induced interruptions and quality variability in Vietnam’s ongoing summer-autumn harvest,” the report stated.



El Nino is&nbsp;a climate phenomenon marked by extreme temperatures and weather conditions that could interrupt lives and livelihoods.



India, the world’s leading rice exporter, banned exports of non-basmati white rice on Jul. 20, as the government seeks to keep a cap on soaring food prices at home, and ensure there are enough supplies domestically “at reasonable prices.” 



The country accounts for more than 40% of the global rice trade. Even if it affects a portion of India’s overall rice shipments, FAO noted that India’s export restriction “raises substantial food security concerns for a large swathe of the world population.”



Rice prices are hovering at decade highs, with rough rice futures were last trading at $16.02 per hundredweight (cwt).



And these prices could climb higher.



“We will most probably see a higher FAO rice price index for August 2023 vs July 2023,” Oscar Tjakra, senior analyst at global food and agriculture bank Rabobank, told CNBC.



He added that India’s non-basmati white rice export ban came at a time of seasonal low inventories in major global suppliers of rice, especially those in Asia.



Prices could surge further if other countries follow suit in implementing export restrictions.



“The prices can go even much higher if importing countries try to stockpile rice for domestic food security, and exporting countries put export restrictions,” said Samarendu Mohanty, Asian regional director at International Potato Center.



El Nino could further exacerbate risks on global production in other major Asian rice producers such as Thailand, Pakistan and Vietnam.



“For the next few months, global rice prices’ direction will be determined by the impact of El Nino,” Tjakra said in an email.



Rice, being a vulnerable crop, has the highest probability of simultaneous crop loss during an El Nino event, a scientific study showed.



To make matters worse, Thailand, the world’s second largest exporter of rice, is now encouraging its farmers to plant less of the crop in a bid to save water as a result of low rainfall.

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Global rice prices surge close to 12-year highs, and could rise even more

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/08/A-container-ship-from-China-owned-Cosco-Shipping-sits-in-the-Port-of-Oakland-in-California-on-Aug.-7-2023-820x462.jpg" alt="" class="wp-image-426671" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/08/A-container-ship-from-China-owned-Cosco-Shipping-sits-in-the-Port-of-Oakland-in-California-on-Aug.-7-2023-820x462.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/A-container-ship-from-China-owned-Cosco-Shipping-sits-in-the-Port-of-Oakland-in-California-on-Aug.-7-2023-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/A-container-ship-from-China-owned-Cosco-Shipping-sits-in-the-Port-of-Oakland-in-California-on-Aug.-7-2023-160x90.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/A-container-ship-from-China-owned-Cosco-Shipping-sits-in-the-Port-of-Oakland-in-California-on-Aug.-7-2023-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/A-container-ship-from-China-owned-Cosco-Shipping-sits-in-the-Port-of-Oakland-in-California-on-Aug.-7-2023.jpg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A container ship from China-owned Cosco Shipping sits in the Port of Oakland in California on Aug. 7, 2023. Justin Sullivan | Getty Images News | Getty Images</figcaption></figure>



BEIJING — China said Tuesday that exports fell by 14.5% in July from a year ago, while imports dropped by 12.4% in U.S. dollar terms.



That’s worse than what analysts had expected.



A Reuters poll predicted a 12.5% decline in exports in July from a year ago, in U.S. dollar terms. Imports were expected to have dropped by 5% during that time, according to the poll.



China’s exports to the U.S. plunged by 23.1% year-on-year in July, while those to the European Union fell by 20.6%, CNBC analysis of customs data showed. Exports to the Association of Southeast Asian Nations fell by 21.4%, according to the data.



China’s imports from Russia fell by 8.1% in July from a year ago, the data showed.



A slowdown in U.S. and other major economies’ growth has dragged down Chinese exports this year. Meanwhile, China’s domestic demand has remained lackluster.



Chinese imports of crude oil dropped by 20.8% in July from a year ago, while imports of integrated circuits fell by nearly 17%.



July’s decline in trade adds to recent weakness in China’s exports and imports.



On a year-to-date basis, China’s exports for the first seven months of the year fell by 5% from a year ago, while imports dropped by 7.6% during that time.



Among the few higher-value export categories that saw a significant increase in the first seven months of the year were cars, refined oil and bags, suitcases and similar receptacles.



For imports, paper pulp, coal products and edible vegetable oil were among the categories seeing significant growth in the January to July period from a year ago.



Chinese imports of crude oil dropped by 20.8% in July from a year ago, while imports of integrated circuits fell by nearly 17%.



July’s decline in trade adds to recent weakness in China’s exports and imports.



On a year-to-date basis, China’s exports for the first seven months of the year fell by 5% from a year ago, while imports dropped by 7.6% during that time.



Among the few higher-value export categories that saw a significant increase in the first seven months of the year were cars, refined oil and bags, suitcases and similar receptacles.



For imports, paper pulp, coal products and edible vegetable oil were among the categories seeing significant growth in the January to July period from a year ago.

A container ship from China-owned Cosco Shipping sits in the Port of Oakland in California on Aug. 7, 2023.

China reports double-digit plunge in July exports and imports, missing expectations

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/08/QYHOX6JU6ZP33IVMKVBRYCGM7Q-820x547.jpg" alt="" class="wp-image-426578" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/08/QYHOX6JU6ZP33IVMKVBRYCGM7Q-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/QYHOX6JU6ZP33IVMKVBRYCGM7Q-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/QYHOX6JU6ZP33IVMKVBRYCGM7Q-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/QYHOX6JU6ZP33IVMKVBRYCGM7Q-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/QYHOX6JU6ZP33IVMKVBRYCGM7Q-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/QYHOX6JU6ZP33IVMKVBRYCGM7Q-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: The offices of Fitch Ratings building appears empty in Canary Wharf, following the outbreak of the coronavirus disease (COVID-19), London, Britain, May 27, 2020. REUTERS/Dylan Martinez/File photo</figcaption></figure>



Aug 2 (Reuters)&nbsp;&#8211;&nbsp;Fitch’s downgrade of the U.S. credit rating is likely to exacerbate unease about the country’s debt position, political polarization and the global standing of the U.S. dollar, investors and analysts said.



Wall Street&#8217;s three major indexes ended lower on Wednesday, a day after Fitch unexpectedly stripped the U.S. of its top credit rating, with the ratings agency saying expected fiscal deterioration over the next three years and repeated debt ceiling disputes threaten the government&#8217;s ability to pay its bills.



The yield on the benchmark 10-year U.S. Treasury note&nbsp;US10YT=RR, which moves inversely to prices, gained and at one point reached its highest point since November.



The ratings agency on Wednesday evening also downgraded U.S. mortgage finance giants Fannie Mae and Freddie Mac Long-Term Issuer Default Ratings (IDR) and senior unsecured debt ratings to &#8216;AA+&#8217; from &#8216;AAA.&#8217;



Major brokerages said they did not expect sustained turbulence, especially since strong U.S. economic data has calmed fears of a recession.



Yet some market participants also said the ratings cut was a reminder that the country’s fiscal picture is becoming increasingly precarious, which could heighten worries for everyone from asset managers to global central banks and others holding massive amounts of U.S. government debt.



Fitch’s call will “cause people to stop and ask questions,&#8221; said Robert Tipp, PGIM Fixed Income&#8217;s chief investment strategist and head of global bonds. “The fiscal framework of the 1990s is gone, as is the budget surplus, replaced by alarmingly large deficits, along with more frequent threats of government closure, and default.”



Tipp pointed at the country’s soaring debt to GDP ratio, which stood at around 100% at the end of 2022. Just a decade ago, that level would have been considered a “danger zone” for sovereign credits, he said.



Strategists at Macquarie led by Thierry Wizman said the downgrade could lend ammunition to countries calling for alternatives to the U.S. dollar&#8217;s decades-long reign as the world’s premier reserve currency.



Fitch’s downgrade will likely be used at a summit of leaders from the BRICs trade bloc including Brazil, Russia, India, China and South Africa this month as a public relations ploy to help tout a new currency, they wrote in a Wednesday report.



“If that matters in shaping sentiment toward the USD in the &#8220;court of global public opinion then the status of the USD just took another notch downward,” he said.



The dollar share of official FX reserves fell to a 20-year low of 58% in the fourth quarter of 2022, according to International Monetary Fund data. Still, few believe the U.S. currency’s dominance will be challenged anytime soon.



Strategists at the BlackRock Investment Institute wrote that while Fitch’s action is unlikely to be a market driver, it “reinforces our view that rising inflation and debt burdens will prompt investors, over time, to demand more … compensation for the risk of holding long-term government debt.”



“We see that causing DM (developed market) bond yield curves to steepen over time as long-term yields rise,” they added.



For now, however, many investors focused on the near term outlook for the U.S. economy, as the country looks increasingly likely to avoid a recession that had been widely expected early this year.



Josh Frost, the U.S. Treasury’s assistant secretary for financial markets, said he did not expect Fitch&#8217;s announcement to hurt demand for Treasury debt.



“Treasuries remain the safest and most liquid assets in the world and we continue to see strong demand from our broad and diverse investor base,” he said.



Data released last week showed the U.S. economy grew faster than expected in the second quarter as a resilient labor market supported consumer spending, with markets now pricing in a soft-landing scenario for the economy despite rapid interest rate hikes by the Federal Reserve.



Markets also took comfort that Fitch did not adjust U.S. &#8220;country ceiling&#8221;, which it affirmed at AAA, showing strength in the ability of the corporate sector to convert local currency into a foreign currency for debt repayments.



&#8220;If Fitch had also lowered the country ceiling, it could have had negative implications for other AAA-rated securities issued by U.S. entities,&#8221; said Goldman Sachs economists led by Jan Hatzius.



Gennadiy Goldberg, head of U.S. rates strategy at TD Securities, said the downgrade &#8220;could make investors a bit more nervous in the near-term, but the lasting impact will be minimal.&#8221;



Steven Zeng, strategist at Deutsche Bank, said Friday’s U.S. employment report could trump the downgrade news for markets.



&#8220;Investors have lived through the&nbsp;S&amp;P downgrade&nbsp;in 2011 and remember coming away unscathed,” he said. Also, people may have “gotten used to an elevated level of deficit spending,&#8221; he said.



(Reporting by Susan Mathew in Bengaluru and Saeed Azhar in New York; Additional reporting by Davide Barbuscia, Tatiana Bautzer and Karen Brettell; Editing by Ira Iosebashvili and Stephen Coates)

Outbreak of the coronavirus disease (COVID-19) in London

Fitch downgrade highlights investor worries about US fiscal picture

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107266857-1688570168592-gettyimages-1514181637-_tk_8541_l7n0eeit-820x462.jpeg" alt="" class="wp-image-426552" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107266857-1688570168592-gettyimages-1514181637-_tk_8541_l7n0eeit-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107266857-1688570168592-gettyimages-1514181637-_tk_8541_l7n0eeit-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107266857-1688570168592-gettyimages-1514181637-_tk_8541_l7n0eeit-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107266857-1688570168592-gettyimages-1514181637-_tk_8541_l7n0eeit-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107266857-1688570168592-gettyimages-1514181637-_tk_8541_l7n0eeit.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Secret Service Police stand by as climate activists occupy Lafayette Park with a 120 foot banner demanding President Biden act on climate change near the White House on July 04, 2023 in Washington, DC. Tasos Katopodis | Getty Images</figcaption></figure>



Fitch Ratings downgraded the United States’ long-term foreign currency issuer default rating to AA+ from AAA on Tuesday, pointing to “expected fiscal deterioration over the next three years,” an erosion of governance and a growing general debt burden.



“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” said Fitch.



U.S. stock futures opened lower after the rating agency issued its downgrade, with Dow futures sliding about 100 points.



In May, the agency placed the nation’s AAA rating on negative watch, blaming the debt ceiling fight. At the time, lawmakers in Washington butted heads over an agreement that would keep the federal government from running out of money. President Joe Biden signed the debt ceiling bill on June 2, just days away from the “X-date” on June 5.



The country’s recent debt limit feud was mentioned again in Tuesday’s downgrade.



“In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the ratings agency said.



Fitch also highlighted the rising general government deficit, which it anticipates will rise to 6.3% of gross domestic product in 2023, from 3.7% in 2022. “Cuts to non-defense discretionary spending (15% of total federal spending) as agreed in the Fiscal Responsibility Act offer only a modest improvement to the medium-term fiscal outlook,” Fitch said.



The agency also noted that a combination of tightening credit conditions, weakening business investment and a slowdown in consumption could lead the economy into a “mild” recession in the fourth quarter of 2023 and first quarter of next year.



The White House disagreed with Fitch’s downgrade. “It defies reality to downgrade the United States at a moment when President Biden has delivered the strongest recovery of any major economy in the world,” press secretary Karine Jean-Pierre said.



This isn’t the first time a rating agency has downgraded the U.S. Standard &amp; Poor’s cut the nation’s credit rating to AA+ from AAA in 2011 after Washington managed to avoid a default. At the time, the agency highlighted political risk as part of its reasoning.



&#8211;CNBC’s Christina Wilkie contributed reporting.

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Fitch downgrades U.S. long-term rating to AA+ from AAA

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107277354-1690400137823-jerome-820x547.jpg" alt="" class="wp-image-426446" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107277354-1690400137823-jerome-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107277354-1690400137823-jerome-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107277354-1690400137823-jerome-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107277354-1690400137823-jerome-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107277354-1690400137823-jerome-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107277354-1690400137823-jerome-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



WASHINGTON – The Federal Reserve on Wednesday approved a much-anticipated interest rate hike that takes benchmark borrowing costs to their highest level in more than 22 years.



In a move that financial markets had completely priced in, the central bank’s Federal Open Market Committee raised its funds rate by a quarter percentage point to a target range of 5.25%-5.5%. The midpoint of that target range would be the highest level for the benchmark rate since early 2001.



Markets were watching for signs that the hike could be the last before Fed officials take a break to watch how the previous increases are impacting economic conditions. While policymakers indicated at the June meeting that two rate rises are coming this year, markets have been pricing in a better-than-even chance that there won’t be any more moves this year.



During a news conference, Chairman Jerome Powell said inflation has moderated somewhat since the middle of last year, but hitting the Fed’s 2% target “has a long way to go.” Still, he seemed to leave room to potentially hold rates steady at the Fed’s next meeting in September.



“I would say it’s certainly possible that we will raise funds again at the September meeting if the data warranted,” said Powell. “And I would also say it’s possible that we would choose to hold steady and we’re going to be making careful assessments, as I said, meeting by meeting.”



Powell said the FOMC will be assessing “the totality of the incoming data” as well as the implications for economic activity and inflation.



Markets initially bounced following the meeting but ended mixed. The Dow Jones Industrial Average continued its streak of higher closings, rising by 82 points, but the S&amp;P 500 and Nasdaq Composite were little changed. Treasury yields moved lower.



“It is time for the Fed to give the economy time to absorb the impact of past rate hikes,” said Joe Brusuelas, U.S. chief economist at RSM. “With the Fed’s latest rate increase of 25 basis points now in the books, we think that improvement in the underlying pace of inflation, cooler job creation and modest growth are creating the conditions where the Fed can effectively end its rate hike campaign.”



The post-meeting statement, though, offered only a vague reference to what will guide the FOMC’s future moves.



“The Committee will continue to assess additional information and its implications for monetary policy,” the statement said in a line that was tweaked from the previous months’ communication. That echoes a data-dependent approach – as opposed to a set schedule – that virtually all central bank officials have embraced in recent public statements.



&nbsp;The hike received unanimous approval from voting committee members.



&nbsp;The only other change of note in the statement was an upgrade of economic growth to “moderate” from “modest” at the June meeting despite expectations for at least a mild recession ahead. The statement again described inflation as “elevated” and job gains as “robust.”



The increase is the 11th time the FOMC has raised rates in a tightening process that began in March 2022. The committee decided to skip the June meeting as it assessed the impact that the hikes have had.



Since then, Powell has said he still thinks inflation is too high, and in late June said he expected more “restriction” on monetary policy, a term that implies more rate increases.



The fed funds rate sets what banks charge each other for overnight lending. But it feeds through to many forms of consumer debt such as mortgages, credit cards, and auto and personal loans.



The Fed has not been this aggressive with rate hikes since the early 1980s, when it also was battling extraordinarily high inflation and a sputtering economy.



News lately on the inflation front has been encouraging. The consumer price index rose 3% on a 12-month basis in June, after running at a 9.1% rate a year ago. Consumers also are getting more optimistic about where prices are headed, with the latest University of Michigan sentiment survey pointing to an outlook for a 3.4% pace in the coming year.



However, CPI is running at a 4.8% rate when excluding food and energy. Moreover, the Cleveland Fed’s CPI tracker is indicating a 3.4% annual headline rate and 4.9% core rate in July. The Fed’s preferred measure, the personal consumption expenditures price index, rose 3.8% on headline and 4.6% on core for May.



All of those figures, while well below the worst levels of the current cycle, are running above the Fed’s 2% target.



Economic growth has been surprisingly resilient despite the rate hikes.



Second-quarter GDP growth is tracking at a 2.4% annualized rate, according to the Atlanta Fed. Many economists are still expecting a recession over the next 12 months, but those predictions so far have proved at least premature. GDP rose 2% in the first quarter following a large upward revision to initial estimates.



Employment also has held up remarkably well. Nonfarm payrolls have expanded by nearly 1.7 million in 2023, and the unemployment rate in June was a relatively benign 3.6% – the same level as a year ago.



“It has been my view consistently, that &#8230; we will be able to achieve inflation moving back down to our target without the kind of really significant downturn that results in high levels of job losses,” Powell said.



Along with the rate hike, the committee indicated it will continue to cut the bond holdings on its balance sheet, which peaked at $9 trillion before the Fed began its quantitative tightening efforts.&nbsp;The balance sheet is now at $8.32 trillion as the Fed has allowed up to $95 billion a month in maturing bond proceeds to roll off.

107277354-1690400137823-jerome

Fed approves hike that takes interest rates to highest level in more than 22 years

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107260269-1687366990532-gettyimages-1500357905-wm_10827_pqptjyk0-820x547.jpeg" alt="" class="wp-image-426424" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107260269-1687366990532-gettyimages-1500357905-wm_10827_pqptjyk0-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107260269-1687366990532-gettyimages-1500357905-wm_10827_pqptjyk0-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107260269-1687366990532-gettyimages-1500357905-wm_10827_pqptjyk0-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107260269-1687366990532-gettyimages-1500357905-wm_10827_pqptjyk0-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107260269-1687366990532-gettyimages-1500357905-wm_10827_pqptjyk0-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107260269-1687366990532-gettyimages-1500357905-wm_10827_pqptjyk0-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">WASHINGTON, DC &#8211; JUNE 21: Federal Reserve Chairman Jerome Powell testifies before the House Committee on Financial Services June 21, 2023 in Washington, D.C. Powell testified on the Federal Reserve’s Semi-Annual Monetary Policy Report during the hearing. Win Mcnamee | Getty Images News | Getty Images</figcaption></figure>



Despite an improving inflation picture, the Federal Reserve is expected on Wednesday to approve what would be the 11th interest rate increase since March 2022.



Investors are hoping it will be the last one for a long time.



Markets are pricing in an absolute certainty that the Fed will approve a quarter percentage point hike that will take its benchmark borrowing rate to a target range of 5.25%-5.5%. That would push the upper boundary of the federal funds rate to its highest level since January 2001.



The more pressing matter will be whether Federal Open Market Committee officials feel they’ve gone far enough or if there’s still more work to do in the fight against pernicious inflation.



“The signal will probably be, yes, we’re hiking, but then we think we can sit here for a while and see,” said Kathy Jones, chief fixed income strategist at Charles Schwab. “But no promises. They can’t give up the option.”



Indeed, the Fed’s course is far less certain. Central bank policymakers almost unanimously believe inflation is too high, but hiking more from here carries risks to an economy that many think is heading for at least a mild recession.



<h2 class="wp-block-heading" id="h-the-fed-should-be-done"><a></a>‘The Fed should be done’</h2>



Jones is part of a growing market chorus that thinks the central bank has gone far enough. With the annual inflation rate declining to 3% in June — it was 9.1% a year ago — the danger is growing that the Fed could unnecessarily push the economy into contraction.



“The Fed should be done already,” Jones said. “They’re walking a difficult line here. To me, the decision would be, hey, we’ve done enough for now, and we can wait and see. But apparently the folks at the Fed think they need one more at least.”



In fact, Fed officials indicated strongly at their last meeting — the first one during this tightening cycle that didn’t see a rate increase — that they see at least two more hikes this year.



Since that meeting, policymakers have done little to dispel the likelihood of higher rates.



Markets, though, haven’t seemed to mind. Wall Street has been on a tear all year, with the Dow Jones Industrial Average jumping more than 5% over the past month alone. That could be because traders are ignoring the Fed’s rhetoric and pricing in just a 35% probability of another hike before the end of the year, according to CME Group’s FedWatch gauge of futures market pricing.



One key from the meeting will be whether Fed Chairman Jerome Powell indicates that, at the least, the FOMC will again skip a hike at its next meeting in September while it analyzes the impact the previous increases have had on the economy. Powell has said the Fed is not locked in to an every-other-meeting pattern of hikes, but he has indicated that a slower pace of hikes is likely.



“The hike that’s going to happen [Wednesday] is unnecessary, and probably the last couple were unnecessary,” said Luke Tilley, chief economist at Wilmington Trust Investment Advisors. “By the time we get to November, that’ll be even clearer.”



<h2 class="wp-block-heading"><a></a>Repeating history</h2>



Fed policy, though, has been informed by a belief that when it comes to fighting inflation, it’s better to do too much than too little. The current bout of price increases was the most severe the U.S., and many other developed nations, has had to face since the early 1980s.



That last period also is behind a lot of the Fed thinking, with a particular focus on how policymakers then backed off the inflation fight too soon and ended up having an even worse problem.



“It’s easy for me to say that I think they’re going too much,” Tilley said. “But I’m also quick to say that if I was in their seats, I might be doing the same thing, because they really are playing a game of risk management.”



That game is familiar by now: Retreating from the inflation fight soon could lead to a repeat of the 1970s-early 1980s stagflation of high prices and weak growth, while going too far risks tipping the country into a recession.



Recent indicators are showing that credit conditions are tightening significantly, with higher interest rates and tougher lending standards substantial headwinds to future growth.



“Recently softer core inflation will be welcomed by Powell, but he is likely to want several more months of softer inflation data before confidently terminating the hiking cycle,” Citigroup economist Andrew Hollenhorst said in a client note. “In our view the U.S. economy is not headed toward a soft landing. After a summer of projected softer core inflation data, we see upside inflation risks reemerging in the fall.”



Likewise, Steven Blitz, chief U.S. economist at Globaldata.TSLombard, said a “dovish hike and talk of soft landings” at Wednesday’s meeting would be a mistake for the Fed.



“Planes land, economies do not. Economies are an ongoing dynamic process, and no recession will prove more problematic for the Fed than not,” Blitz wrote. “The economy is heading into recession, but if it is somehow avoided, then the disinflation of this moment will prove fleeting, so too the Fed’s confidence that they are at the end of this hiking cycle.”

107260269-1687366990532-gettyimages-1500357905-wm_10827_pqptjyk0

Here’s what to expect from the Federal Reserve meeting Wednesday

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="728" height="485" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/5K52FDSDWFNOJEMWHZY6GIWIVY.jpg" alt="" class="wp-image-420053" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/5K52FDSDWFNOJEMWHZY6GIWIVY.jpg 728w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/5K52FDSDWFNOJEMWHZY6GIWIVY-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/5K52FDSDWFNOJEMWHZY6GIWIVY-135x90.jpg 135w" sizes="auto, (max-width: 728px) 100vw, 728px" /><figcaption class="wp-element-caption">The International Monetary Fund logo is seen at IMF headquarters in Washington, U.S., October 14, 2017. REUTERS/Yuri Gripas/File Photo</figcaption></figure>



WASHINGTON, July 25 (Reuters)&nbsp;&#8211;&nbsp;The International Monetary Fund on Tuesday raised its 2023 global growth estimates slightly given resilient economic activity in the first quarter, but warned that persistent challenges were dampening the medium-term outlook.



The IMF in its latest World Economic Outlook said inflation was coming down and acute stress in the banking sector had receded, but the balance of risks facing the global economy remained tilted to the downside and credit was tight.



The global lender said it now projected global real GDP growth of 3.0% in 2023, up 0.2 percentage point from its April forecast, but left its outlook for 2024 unchanged, also at 3.0%.



The 2023-2024 growth forecast remains weak by historical standards, well below the annual average of 3.8% seen in 2000-2019, largely due to weaker manufacturing in advanced economies, and it could stay at that level for years.



&#8220;We&#8217;re on track, but we&#8217;re not out of the woods,&#8221; IMF chief economist Pierre-Olivier Gourinchas told Reuters in an interview, noting that the upgrade was driven largely by first-quarter results. &#8220;What we are seeing when we look five years out is actually close to 3.0%, maybe a little bit above 3.0%. This is a significant slowdown compared to what we had pre-COVID.&#8221;



This was also related to the aging of the global population, especially in countries like China, Germany and Japan, he said. New technologies could boost productivity in coming years, but that in turn could be disruptive to labor markets.



The outlook is &#8220;broadly stable&#8221; in emerging market and developing economies for 2023-2024, with growth of 4.0% expected in 2023 and 4.1% in 2024, the IMF said. But it noted that credit availability is tight and there was a risk that debt distress could spread to a wider group of economies.



The world is in a better place now, the IMF said, noting the World Health Organization&#8217;s decision to end the global health emergency surrounding COVID-19, and with shipping costs and delivery times now back to pre-pandemic levels.



&#8220;But forces that hindered growth in 2022 persist,&#8221; the IMF said, citing still-high inflation that was eroding household buying power, higher interest rates that have raised the cost of borrowing and tighter access to credit as a result of the banking strains that emerged in March.



&#8220;International trade and indicators of demand and production in manufacturing all point to further weakness,&#8221; the IMF said, noting that excess savings built up during the pandemic are declining in advanced economies, especially in the United States, implying &#8220;a slimmer buffer to protect against shocks.&#8221;



While immediate concerns about the health of the banking sector &#8211; which were more acute in April &#8211; had subsided, financial sector turbulence could resume as markets adjust to further tightening by central banks, it said.



The impact of higher interest rates was especially evident in poorer countries, driving debt costs higher and limiting room for priority investments. As a result, output losses compared with pre-pandemic forecasts remain large, especially for the world’s poorest nations, the IMF said.



<h2 class="wp-block-heading" id="h-lower-inflation">LOWER INFLATION</h2>



The IMF forecast that global headline inflation would fall to 6.8% in 2023 from 8.7% in 2022, dropping to 5.2% in 2024, but core inflation would decline more gradually, reaching 6.0% in 2023 from 6.5% in 2022 and easing to 4.7% in 2024.



Gourinchas told Reuters it could take until the end of 2024 or early 2025 until inflation came down to central bankers&#8217; targets and the current cycle of monetary tightening would end.



The IMF warned that inflation could rise if the war in Ukraine intensified, citing concern about Russia&#8217;s withdrawal from the Black Sea grain initiative, or if more extreme temperature increases caused by the El Nino weather pattern&nbsp;pushed&nbsp;up commodity prices. That in turn could trigger further rate hikes.



The IMF said world trade growth is declining and will reach just 2.0% in 2023 before rising to 3.7% in 2024, but both growth rates are well below the 5.2% clocked in 2022.



The IMF raised its outlook for the United States, the world&#8217;s largest economy, forecasting growth of 1.8% in 2023 versus 1.6% in April as labor markets remained strong.



It left its forecast for growth in China, the world&#8217;s second-largest economy, unchanged at 5.2% in 2023 and 4.5% in 2024. But it warned that China&#8217;s recovery was underperforming, and a deeper contraction in the real estate sector remained a risk.



The fund cut its outlook for Germany, now forecast to contract 0.3% in 2023 versus a 0.1% contraction in April, but sharply upgraded its forecast for the UK, now expected to grow 0.4% versus a 0.3% contraction forecast in April.



Euro zone countries are expected to grow 0.9% in 2023 and 1.5% in 2024, both up 0.1 percentage point from April.



Japan&#8217;s growth was also revised upward by 0.1 percentage point to 1.4% in 2023, but the IMF left its outlook for 2024 unchanged at 1.0%.



<h2 class="wp-block-heading">INTEREST RATES STILL RISING</h2>



The rise in central bank policy rates to fight inflation continues to weigh on economic activity, the IMF said, adding that the U.S. Federal Reserve and the Bank of England were expected to raise rates by more than assumed in April, before cutting rates next year.



It said central banks should remain focused on fighting inflation, strengthening financial supervision and risk monitoring. If further strains appeared, countries should provide liquidity quickly, it said.



The fund also advised countries to build fiscal buffers to gird for further shocks and ensure support for the most vulnerable.



&#8220;We have to be very vigilant on the health of the financial sector &#8230; because we could have something that basically seizes up very quickly,&#8221; Gourinchas said. &#8220;There is always a risk that if financial conditions tighten, that can have a disproportionate effect on emerging market and developing economies.&#8221;



The IMF said unfavorable inflation data could trigger a sudden rise in market expectations regarding interest rates, which could further tighten financial conditions, putting stress on banks and nonbank institutions &#8211; especially those exposed to commercial real estate.



&#8220;Contagion effects are possible, and a flight to safety, with an attendant appreciation of reserve currencies, would trigger negative ripple effects for global trade and growth,&#8221; the IMF said.



Fragmentation of the global economy given the war in Ukraine and other geopolitical tensions remained another key risk,&nbsp;especially for developing economies, Gourinchas said. This could lead to more restrictions on trade, especially in strategic goods such as critical minerals, cross-border movements of capital, technology and workers, and international payments.



(Reporting by Andrea Shalal; Editing by Andrea Ricci)

FILE PHOTO: The International Monetary Fund logo is seen at IMF headquarters in Washington

IMF edges 2023 global economic growth forecast higher, sees persistent challenges

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="487" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/CP5F52WOSBIIFPWVTBYJA5DM2I-1-820x487.jpg" alt="" class="wp-image-426366" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/CP5F52WOSBIIFPWVTBYJA5DM2I-1-820x487.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/CP5F52WOSBIIFPWVTBYJA5DM2I-1-300x178.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/CP5F52WOSBIIFPWVTBYJA5DM2I-1-152x90.jpg 152w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/CP5F52WOSBIIFPWVTBYJA5DM2I-1-768x456.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/CP5F52WOSBIIFPWVTBYJA5DM2I-1-1536x912.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/CP5F52WOSBIIFPWVTBYJA5DM2I-1-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A view shows a model of a new Russian orbital space station at the international military-technical forum Army-2022 at Patriot Congress and Exhibition Centre in the Moscow region, Russia August 15, 2022. REUTERS/Maxim Shemetov/File Photo</figcaption></figure>



July 24 (Reuters)&nbsp;&#8211;&nbsp;The head of Russia&#8217;s space agency on Monday suggested Moscow&#8217;s partners in the BRICS group &#8211; Brazil, India, China and South Africa &#8211; could build a module for its planned orbital station, the Interfax news agency reported.



Reporting from a BRICS meeting on space cooperation in Hermanus, South Africa, Interfax said it was &#8220;assumed&#8221; that the first module of the Russian Orbital Station (ROS) would be launched in 2027, with construction completed by 2032.



By then, the International Space Station &#8211; one of the last forums of cooperation between Washington and Moscow as Russia&#8217;s invasion of Ukraine sent relations to a post-Cold War low &#8211; is likely to have been decommissioned.



&#8220;I would like to invite BRICS partners to &#8230; create a fully-fledged module that, being part of the ROS, would allow the BRICS countries to use the possibilities of low-Earth orbit to implement their national space programmes,&#8221; Interfax quoted Roscosmos Director-General Yuri Borisov as telling the meeting.



Roskosmos said last August that its new space station would consist of six modules and a service platform, to accommodate up to four cosmonauts, and be built in two phases. It gave no dates.



In September, Borisov said the station would orbit Earth around the poles, enabling it to look down on far more of Russia&#8217;s vast territory and gather new data on cosmic radiation.



(Writing by Kevin Liffey; Editing by Andrew Heavens)

CP5F52WOSBIIFPWVTBYJA5DM2I-1

Russia offers BRICS partners a module on its planned space station

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="549" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107275183-1690003700866-gettyimages-51643968-51613615CF012_oil-820x549.jpeg" alt="" class="wp-image-426355" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107275183-1690003700866-gettyimages-51643968-51613615CF012_oil-820x549.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107275183-1690003700866-gettyimages-51643968-51613615CF012_oil-300x201.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107275183-1690003700866-gettyimages-51643968-51613615CF012_oil-134x90.jpeg 134w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107275183-1690003700866-gettyimages-51643968-51613615CF012_oil-768x515.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107275183-1690003700866-gettyimages-51643968-51613615CF012_oil-1536x1029.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/107275183-1690003700866-gettyimages-51643968-51613615CF012_oil-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Oil prices are expected to increase in the second half of 2023, according to the International Energy Forum. Christopher Furlong | Getty Images News | Getty Images</figcaption></figure>



Oil prices are set to rise in the second half of the year as supply struggles to meet demand, according to the Secretary General of the International Energy Forum.&nbsp;



Oil demand bounced back to pre-Covid levels quickly, “but supply is having a tougher time in catching up,” said Joseph McMonigle, secretary general of the International Energy Forum, adding that the only factor moderating prices right now is the fear of a looming recession.&nbsp;



“So, for the second half of this year, we’re going to have serious problems with supply keeping up, and as a result, you’re going to see prices respond to that,” McMonigle told CNBC on the sidelines of a meeting of energy ministers from the group of the 20 leading industrial economies (G20) in Goa, India, on Saturday. 



McMonigle attributes the push in oil prices to increasing demand from China — the world’s largest importer of crude oil — and India.&nbsp;



“India and China combined will make up 2 million barrels a day of demand pick-up in the second half of this year,” the Secretary General said. 



Asked if oil prices could once again spike to $100 a barrel, he noted that prices are already at $80 per barrel and could potentially go higher from here.&nbsp;



“We’re going to see much more steep decreases in inventory, which will be a signal to the market that demand is definitely picking up. So you’re going to see prices respond to that,” McMonigle said.&nbsp;



However, McMonigle is confident that the Organization of the Petroleum Exporting Countries and its allies — collectively known as OPEC+ — will take action and increase supply, if the world eventually succumbs to a “big supply-demand imbalance.”



“They’re being very careful on demand. They want to see evidence that demand is picking up, and will be responsive to changes in the market.”&nbsp;



 Brent crude futures with September expiry last settled at $81.07 per barrel on the Friday close, while West Texas Intermediate crude with September delivery ended the trading day at $76.83. 



<h2 class="wp-block-heading" id="h-no-room-for-complacency"><a></a>No room for complacency&nbsp;</h2>



McMonigle also spoke about the liquified natural gas market, crediting the stability in Europe’s energy market to a warmer-than-expected winter in 2022.&nbsp;



“The weather was probably the luckiest thing to have happened,” he said, but warned that “it’s not just this winter, [but] the next couple of winters” that could be rocky.



Global policymakers cannot turn complacent just because LNG prices have fallen, and more investment in renewable energy is needed to ensure the lights continue to stay on, he said.



Once “whispered” about, energy security has now become the main focus of summits such as the G20, McMonigle signaled.



“We definitely have to keep pursuing the energy transition, and all options have to be on the table,” he highlighted, adding that prices and volatility in the energy markets has to be closely watched.&nbsp;



“I’m worried that if the public starts to connect high prices and volatility in energy markets to climate policies or the energy transition, we’re going to lose public support,” he said.&nbsp;



“We’re going to be asking the public to do a lot of difficult and challenging things in order to enable the energy transition. We need to keep them on board.”

107275183-1690003700866-gettyimages-51643968-51613615CF012_oil

Oil markets will face ‘serious problems’ as demand from China and India ramps up, IEF secretary general says

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/leaving-job-820x547.jpg" alt="" class="wp-image-426297" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/leaving-job-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/leaving-job-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/leaving-job-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/leaving-job-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/leaving-job.jpg 1024w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via Gettyimages</figcaption></figure>



Fears about artificial intelligence-powered technologies and tools taking over work currently done by humans have intensified since ChatGPT went viral late last year.



As it soared in popularity, the capabilities and potential of AI became increasingly clear and more well known among the public. Alongside this, a debate has erupted over how the tech might impact people’s careers.



And while experts say that AI will undoubtedly have an impact on jobs and at least partially automate them, they also point out that technological advancements often create new roles.



How concerned workers should really be is therefore still unclear. And technological developments like the growth of A.I. might not even be the biggest factor behind jobs disappearing in the future, according to a new HSBC report.



Using data from the World Economic Forum’s “Report on Jobs 2023,” HSBC notes that just four macroeconomic trends are expected to lead to the displacement of jobs.



The most common factor companies expect to lead to the loss of jobs is slower economic growth.



Indeed, just last month the World Bank said it expected the global economy to grow at a much slower rate than last year with 2.1% expected for 2023 compared to 3.1% last year.



“The challenges are clear – weaker economic growth and general shortages in supply or demand mean that many firms expect to operate with fewer workers,” analysts at HSBC said in the report.



“But it’s important to remember that not all changes in the economy are expected to mean fewer workers,” it added. Companies expect for example the green transition and use of Environmental, Social and Governance (ESG) standards to lead to more jobs.



<h2 class="wp-block-heading" id="h-tech-s-impact-on-jobs"><a></a>Tech’s impact on jobs</h2>



The “increased adoption of new technologies” is another pattern that companies expect to lead to job creation — and AI is part of this. A net share of over 20% of companies expect AI to add jobs rather than replace them, according to the World Economic Forum’s data.



Just two tech-related factors are expected to lead to roles becoming redundant: the emergence of both humanoid and non-humanoid robots.



“While AI gets most of the attention nowadays, it’s worth fully considering the impact that a wide range of technologies could have on the labour market,” HSBC said.



Especially when it comes to technology, the effect of new developments may also be broader than jobs simply being replaced.



“The question is whether we can have enough workers and the right skills of workers to fill these new needs,” HSBC added.



Alongside slower economic growth leading to the loss of jobs, HSBC identified supply shortages and rising costs for businesses, the rising cost of living for consumers and ongoing impacts of the coronavirus pandemic.



The findings come as inflation on both a consumer and wholesale level remains high in many countries around the world, despite some indication that pressures from rising prices may be easing. The most recent U.S. consumer and producer price index reports came in lower than expected, with the consumer price index hitting the lowest level since March 2021 on an annual basis in June — but issues persist.

leaving-job

Here are the biggest reasons jobs could disappear — and A.I. isn’t one of them

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="540" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/JKK4U4FI75J2VM5E4QCERD5FFA-820x540.jpg" alt="" class="wp-image-426244" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/JKK4U4FI75J2VM5E4QCERD5FFA-820x540.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/JKK4U4FI75J2VM5E4QCERD5FFA-300x198.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/JKK4U4FI75J2VM5E4QCERD5FFA-137x90.jpg 137w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/JKK4U4FI75J2VM5E4QCERD5FFA-768x506.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/JKK4U4FI75J2VM5E4QCERD5FFA-1536x1011.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/JKK4U4FI75J2VM5E4QCERD5FFA-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: World Bank President Ajay Banga looks on after his visit to Vidya Samiksha Kendra at Gandhinagar, India, July 16, 2023. REUTERS/Amit Dave/</figcaption></figure>



July 18 (Reuters)&nbsp;&#8211;&nbsp;World Bank President Ajay Banga unveiled new plans on Tuesday to stretch the bank&#8217;s balance sheet and help countries tackle climate change and other challenges, but said a capital increase would still eventually be needed.



Banga, a former Mastercard CEO who took over the helm of the World Bank on June 2, announced the new proposals to &#8220;make our balance sheet work harder&#8221; during a meeting of finance officials from the Group of 20 major economies in Gandhinagar, India.



The new steps, still being discussed with shareholder countries, come on top of initial steps approved in April that will boost World Bank lending by up to $50 billion over the next decade.



The U.S., the bank&#8217;s biggest shareholder, kicked off the push for reforms in October, later nominating Banga to succeed former president David Malpass with a specific mandate to accelerate the evolution of the nearly 70-year-old institution.



U.S. Treasury Secretary Janet Yellen this week called for more work to reform the World Bank and other multilateral development banks, saying capital increases would be on the table only after they undertook changes to expand their capacity to help countries tackle climate change and other challenges.



&#8220;We are making quick progress,&#8221; Banga said in a prepared text of his remarks. &#8220;We are building a better bank, but eventually we will need a bigger bank.&#8221;



The plans could generate tens of billions of additional lending by allowing shareholders to guarantee loans if countries cannot repay them, a move the World Bank said would allow it to generate $6 in new lending for every $1 in guarantees over a 10-year period &#8211; or $30 billion for every $5 billion.



In another step, the bank could also issue a new hybrid capital instrument that would allow shareholders to invest in bonds, allowing it to boost lending by up to $6 billion.



It proposes to absorb more risk and expand lending by widening conditions for callable capital &#8211; money pledged by governments but not currently &#8220;paid-in.&#8221;



And it plans to expand very low or zero-interest lending, including through a new $6 billion crisis facility set up for the poorest countries through the International Development Association.



(Reporting by Andrea Shalal; Editing by Sonali Paul)

World Bank chief Banga unveils new plans to boost lending ‘firepower’

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="517" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/02/GNZ4EKIZHBJMHAHGTKTLUHIQ54-820x517.jpg" alt="" class="wp-image-415106" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/02/GNZ4EKIZHBJMHAHGTKTLUHIQ54-820x517.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/02/GNZ4EKIZHBJMHAHGTKTLUHIQ54-300x189.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/02/GNZ4EKIZHBJMHAHGTKTLUHIQ54-143x90.jpg 143w, https://cms.cnbcafrica.com/wp-content/uploads/2022/02/GNZ4EKIZHBJMHAHGTKTLUHIQ54-768x484.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/02/GNZ4EKIZHBJMHAHGTKTLUHIQ54.jpg 1200w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A 3D-printed oil pump jack is seen in front of displayed OPEC logo in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic/File Photo</figcaption></figure>



LONDON, July 13 (Reuters)&nbsp;&#8211;&nbsp;OPEC on Thursday raised its forecast for oil demand growth for 2023 and predicted only a slight slowdown in 2024 despite economic headwinds as China and India continue to drive the expansion in fuel use.



In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) said it expects world oil demand to rise by 2.25 million barrels per day (bpd) in 2024, a rise of 2.2%, compared with growth of 2.44 million bpd in 2023.



OPEC&#8217;s demand growth forecast for 2024 is double that of the International Energy Agency, another closely watched forecaster which updated its outlookearlier on Thursday.



Oil&nbsp;LCOc1&nbsp;added to an earlier gain after OPEC&#8217;s report was published.



Oil demand growth is an indication of likely oil market strength and forms part of the backdrop for policy decisions by OPEC and its allies, known as OPEC+. The group in June extended supply curbs into 2024 to support the market.



OPEC said in the report OPEC+&#8217;s pre-emptive approach and cuts had added stability to the market, &#8220;based on which the solid oil market fundamentals seen this year are expected to extend into 2024&#8221;.



&#8220;In 2024, solid global economic growth amid continued improvements in China is expected to boost consumption of oil,&#8221; OPEC said.



Also in the report OPEC raised its 2023 demand growth forecast by 90,000 bpd from last month. OPEC sources last week said OPEC would stick to an upbeat demand view for 2024 and see higher growth than the IEA.



OPEC forecast world economic growth of 2.5% next year compared with 2.6% in 2023, assuming &#8220;general inflation&#8221; eases in the second half and in 2024. It also assumes key interest rates will peak by the end of 2023.



<h2 class="wp-block-heading" id="h-more-opec-oil-needed">MORE OPEC OIL NEEDED</h2>



The outlook for 2024 suggests oil demand will rise more rapidly than supply from producers outside OPEC.



OPEC expects non-OPEC supply to rise by 1.4 million bpd, lagging demand growth and the same rate as 2023.



As a result, OPEC forecast the world will need 30.2 million bpd in 2024 from its members to balance the market, up 800,000 bpd from 2023.



For now, OPEC is pumping far less.



The report showed OPEC production rose by 91,000 bpd to 28.19 million bpd in June, led by Iran and Iraq. Iran is one of the OPEC members exempt from cutting output.



The United States is expected to make the biggest contribution to non-OPEC supply expansion next year although OPEC sees growth in U.S. tight oil, another term for shale, slowing to 500,000 bpd in 2024 from 730,000 bpd in 2023.



(Reporting by Alex Lawler; editing by David Evans and Jason Neely)

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OPEC sees 2.2% oil demand growth in 2024 despite headwinds

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="517" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106944604-16321717072021-09-20t205319z_656748898_rc2wtp9oerrm_rtrmadp_0_worldbank-ethics-report-820x517.jpeg" alt="" class="wp-image-416545" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106944604-16321717072021-09-20t205319z_656748898_rc2wtp9oerrm_rtrmadp_0_worldbank-ethics-report-820x517.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106944604-16321717072021-09-20t205319z_656748898_rc2wtp9oerrm_rtrmadp_0_worldbank-ethics-report-300x189.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106944604-16321717072021-09-20t205319z_656748898_rc2wtp9oerrm_rtrmadp_0_worldbank-ethics-report-143x90.jpeg 143w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106944604-16321717072021-09-20t205319z_656748898_rc2wtp9oerrm_rtrmadp_0_worldbank-ethics-report-768x484.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106944604-16321717072021-09-20t205319z_656748898_rc2wtp9oerrm_rtrmadp_0_worldbank-ethics-report-1536x969.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106944604-16321717072021-09-20t205319z_656748898_rc2wtp9oerrm_rtrmadp_0_worldbank-ethics-report-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A participant stands near a logo of World Bank at the International Monetary Fund &#8211; World Bank Annual Meeting 2018 in Nusa Dua, Bali, Indonesia, October 12, 2018.
Johannes Christo | Reuters</figcaption></figure>



WASHINGTON, July 10 (Reuters)&nbsp;&#8211;&nbsp;The World Bank on Monday named 15 chief executive officers including financiers and asset managers&nbsp;to a&nbsp;group launched by the lender&#8217;s president, Ajay Banga,&nbsp;aiming to&nbsp;marshal more private capital to combat climate change&nbsp;and boost investment in developing countries.



The &#8220;Private Sector Investment Lab&#8221; will begin work in the coming weeks, initially focusing on expanding financing for the transition to renewable energy and associated infrastructure, the bank said in a statement released at a climate meeting in Britain attended by U.S. President Joe Biden and King Charles.



Banga announced the initiative at a global finance summit in Paris last month alongside Mark Carney, the U.N. special envoy on climate action, and Shriti Vadera, chair of Prudential Plc&nbsp;PRU.L. Monday&#8217;s announcement identified other participants.



The World Bank and the CEOs will work &#8220;to develop, test, implement and ultimately scale financing structures that can most effectively mobilize private capital,&#8221; Carney said in a statement.



The other CEOs are: Thomas Buberl of AXA&nbsp;AXAF.PA; Larry Fink of BlackRock&nbsp;BLK.N; Noel Quinn of HSBC&nbsp;HSBC.L; Shemara Wikramanayake of Macquarie; Hironori Kamezawa of Mitsubishi UFJ Financial Group&nbsp;8306.T; Hendrik du Toit of Ninety One&nbsp;N91.L; Jessica Tan of Ping An Group&nbsp;601318.SS; Feike Sijbesma of Royal Philips&nbsp;PHG.AS; Sim Tshabalala of Standard Bank&nbsp;SBKJ.J; Bill Winters of Standard Chartered&nbsp;STAN.L; Damilola Ogunbiyi of Sustainable Energy for All; Natarajan Chandrasekaran of Tata Sons; Dilhan Pillay Sandrasegara of Temasek; and Mark Gallogly of Three Cairns Group.



&#8220;Results won&#8217;t come overnight, but if successful, this group has the potential to unlock significant investment that will deliver jobs and better quality of life for people living throughout the Global South &#8211; the surest way to drive a nail into the coffin of poverty,&#8221; Banga said.



Banga, the former Mastercard CEO who took office in June, is working to boost the World Bank&#8217;s lending resources to expand its work beyond traditional development projects to tackle climate change, pandemics and other global challenges.



He said in a statement that the Private Investment Lab CEOs were a &#8220;crucial piece of the puzzle&#8221; to devise ways to pull more private sector investment into the intertwined challenges of poverty, climate and fragility.



(Reporting by David Lawder; Editing by Will Dunham and David Gregorio)

106944604-16321717072021-09-20t205319z_656748898_rc2wtp9oerrm_rtrmadp_0_worldbank-ethics-report

World Bank names CEOs to help bring private funds to climate, development finance

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Countries-repatriating-gold-in-wake-of-sanctions-against-Russia-study-2-820x547.jpg" alt="" class="wp-image-426114" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Countries-repatriating-gold-in-wake-of-sanctions-against-Russia-study-2-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Countries-repatriating-gold-in-wake-of-sanctions-against-Russia-study-2-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Countries-repatriating-gold-in-wake-of-sanctions-against-Russia-study-2-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Countries-repatriating-gold-in-wake-of-sanctions-against-Russia-study-2-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Countries-repatriating-gold-in-wake-of-sanctions-against-Russia-study-2.jpg 960w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Ingots of 99.99 percent pure gold are placed in a workroom at Krastsvetmet precious metals plant in the Siberian city of Krasnoyarsk, Russia, January 31, 2023. REUTERS/Alexander Manzyuk/File photo</figcaption></figure>



LONDON, July 10 (Reuters) &#8211; An increasing number of countries are repatriating gold reserves as protection against the sort of sanctions imposed by the West on Russia, according to an Invesco survey of central bank and sovereign wealth funds published on Monday.



The financial market rout last year caused widespread losses for sovereign money managers who are &#8220;fundamentally&#8221; rethinking their strategies on the belief that higher inflation and geopolitical tensions are here to stay.



Over 85% of the 85 sovereign wealth funds and 57 central banks that took part in the annual Invesco Global Sovereign Asset Management Study believe that inflation will now be higher in the coming decade than in the last.



Gold and emerging market bonds are seen as good bets in that environment, but last year&#8217;s freezing of almost half of Russia&#8217;s $640 billion of gold and forex reserves by the West in response to the invasion of Ukraine also appears to have triggered a shift.



The survey showed a &#8220;substantial share&#8221; of central banks were concerned by the precedent that had been set. Almost 60% of respondents said it had made gold more attractive, while 68% were keeping reserves at home compared to 50% in 2020.



One central bank, quoted anonymously, said: &#8220;We did have it (gold) held in London… but now we&#8217;ve transferred it back to own country to hold as a safe haven asset and to keep it safe.&#8221;



Rod Ringrow, Invesco&#8217;s head of official institutions, who oversaw the report, said that is a broadly-held view.



&#8220;&#8216;If it&#8217;s my gold then I want it in my country&#8217; (has) been the mantra we have seen in the last year or so,&#8221; he said.



DIVERSIFY



Geopolitical concerns, combined with opportunities in emerging markets, are also encouraging some central banks to diversify away from the dollar.



A growing 7% believe rising U.S. debt is also a negative for the greenback, although most still see no alternative to it as the world&#8217;s reserve currency. Those that see China&#8217;s yuan as a potential contender fell to 18%, from 29% last year.



Nearly 80% of the 142 institutions surveyed see geopolitical tensions as the biggest risk over the next decade, while 83% cited inflation as a concern over the next 12 months.



Infrastructure is now seen as the most attractive asset class, particularly those projects involving renewable energy generation.



Concerns over China mean India remains one of the most attractive countries for investment for a second year running, while the &#8220;near-shoring&#8221; trend, where companies build factories closer to where they sell their products, is boosting the likes of Mexico, Indonesia and Brazil.



As well as China, Britain and Italy are seen as less attractive, while rising interest rates coupled with work-from-home and online shopping habits which became embedded during the COVID-19 outbreak meant property is now the least attractive private asset.



Ringrow said the wealth funds that performed better last year were those that recognised the risks posed by inflated asset prices and were willing to make substantial portfolio changes. It would be the same going forward.



&#8220;The funds and the central banks are now trying to get to grips with higher inflation,&#8221; he said. &#8220;It&#8217;s a big sea change.&#8221;



(Reporting by Marc Jones; Editing by Mike Harrison)

Countries-repatriating-gold-in-wake-of-sanctions-against-Russia-study-2

Countries repatriating gold in wake of sanctions against Russia – study

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Goldman-Sachs-says-India-will-overtake-the-U.S.-to-become-the-worlds-second-largest-economy-by-2075.png" alt="" class="wp-image-426106" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Goldman-Sachs-says-India-will-overtake-the-U.S.-to-become-the-worlds-second-largest-economy-by-2075.png 740w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Goldman-Sachs-says-India-will-overtake-the-U.S.-to-become-the-worlds-second-largest-economy-by-2075-300x169.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Goldman-Sachs-says-India-will-overtake-the-U.S.-to-become-the-worlds-second-largest-economy-by-2075-160x90.png 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption class="wp-element-caption">India’s Taj Mahal At Sunrise. Wolfgang Kaehler | Lightrocket | Getty Images</figcaption></figure>



India is poised to become the world’s second-largest economy by 2075, leapfrogging not just Japan and Germany, but the U.S. too, says Goldman Sachs.



Currently, India is the world’s fifth-largest economy, behind Germany, Japan, China and the U.S.



On top of a burgeoning population, driving the forecast is the country’s progress in innovation and technology, higher capital investment and rising worker productivity, the investment bank wrote in a recent report.



“Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies,” said Goldman Sachs Research’s India economist, Santanu Sengupta.



A country’s dependency ratio is measured by the number of dependents against the total working-age population. A low dependency ratio indicates that there are proportionally more working age adults who are able to support the youth and elderly.



Sengupta added that the key to drawing out the potential of India’s rapidly growing population is to boost the participation of its labor force. And Sengupta forecasts that India will have one of the lowest dependency ratios among large economies for the next 20 years.



“So that really is the window for India to get it right in terms of setting up manufacturing capacity, continuing to grow services, continuing the growth of infrastructure,” he said.



India’s government has placed a priority on infrastructure creation, especially in the setting up of roads and railways. The country’s recent budget aims to continue the 50-year interest free loan programs to state governments in order to spur investments in infrastructure.



Goldman Sachs believes that this is an appropriate time for the private sector to scale up on creating capacity in manufacturing and services in order to generate more jobs and absorb the large labor force.



<h2 class="wp-block-heading" id="h-tech-and-investments">Tech and investments</h2>



Spearheading India’s economic trajectory is also its progress in technology and innovation, the investment bank said.



India’s technology industry revenue is <a href="https://nasscom.in/sites/default/files/sr-2023-press-release.pdf" target="_blank" rel="noreferrer noopener">expected to increase by $245 billion</a> by the end of 2023, according to Nasscom, India’s non-governmental trade association. That growth will come from across the IT, business process management and software product streams, Nasscom’s report indicated.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Employees-at-work-inside-the-Realme-factory-in-Greater-Noida-India.jpg" alt="" class="wp-image-426107" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Employees-at-work-inside-the-Realme-factory-in-Greater-Noida-India.jpg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Employees-at-work-inside-the-Realme-factory-in-Greater-Noida-India-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/07/Employees-at-work-inside-the-Realme-factory-in-Greater-Noida-India-160x90.jpg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption class="wp-element-caption">Employees at work inside the Realme factory in Greater Noida, India. Bloomberg | Bloomberg | Getty Images</figcaption></figure>



Additionally, Goldman predicted capital investment will be another significant driver of India’s growth.



“India’s savings rate is likely to increase with falling dependency ratios, rising incomes, and deeper financial sector development, which is likely to make the pool of capital available to drive further investment,” Goldman’s report stated.



<h2 class="wp-block-heading"><a></a>Downside risks?</h2>



The Achilles heel to the bank’s projection is the labor force participation rate — and whether it increases at the rate which Goldman projects.



“The labor force participation rate in India has declined over the last 15 years,” the report noted, underlining that women’s participation rate in the labor force is “significantly lower” than men’s.



“A mere 20% of all working-age women in India are in employment,” the investment bank wrote in a separate report in June, citing that the low figure could be due to women being primarily engaged in piecework, which is not accounted for by the economic measures of formal employment.



Net exports have also been a drag on India’s growth, because India runs a current account deficit, Goldman said. The bank highlighted, however, that services exports have been cushioning current account balances.



India’s economy is driven by domestic demand, unlike many more export-dependent economies in the region, with up to 60% of its growth mainly attributed to domestic consumption and investments, according to Goldman’s report.



<a href="https://www.spglobal.com/marketintelligence/en/mi/research-analysis/outlook-for-indias-economic-growth-and-policy-platforms.html" target="_blank" rel="noreferrer noopener">S&amp;P Global</a>&nbsp;and Morgan Stanley have also predicted that India is on course to become the third-largest economy by 2030.



India’s&nbsp;<a href="https://www.mospi.gov.in/sites/default/files/press_release/PressNoteQ4_FY2022-23_31may23.pdf" target="_blank" rel="noreferrer noopener">first-quarter GDP</a>&nbsp;expanded 6.1% year-on-year, handily beating Reuters’ expectations of 5% growth. The&nbsp;<a href="https://pib.gov.in/PressReleseDetailm.aspx?PRID=1928682" target="_blank" rel="noreferrer noopener">country’s full-year growth</a>&nbsp;is estimated to come in at 7.2%, compared with 9.1% growth in the 2021-2022 fiscal year.

Goldman-Sachs-says-India-will-overtake-the-U.S.-to-become-the-worlds-second-largest-economy-by-2075

Goldman Sachs says India will overtake the U.S. to become the world’s second-largest economy by 2075

<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/Investment-management-820x547.jpg" alt="" class="wp-image-424734" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/Investment-management-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/Investment-management-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/Investment-management-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/Investment-management-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/Investment-management.jpg 1200w" sizes="auto, (max-width: 820px) 100vw, 820px" /></figure>



July 7 (Reuters) &#8211; Emerging market stocks hit a one-month low on Friday as bets of a higher U.S. rate regime lasting for longer stifled risk appetite, while Hungary&#8217;s forint dwindled ahead of an S&amp;P debt rating review and on expectations of continued rate cuts.



With the heavily-weighted Hong Kong&#8217;s Hang Seng index losing 0.9% amid a wait for substantial economic support and cues on Sino-U.S. relations, the MSCI index of emerging market (EM) stocks shed 0.7% and was on track for a third straight weekly decline.



Traders monitored developments around U.S. Treasury Secretary Janet Yellen&#8217;s visit to China, where she criticised the world&#8217;s No. 2 economy on Friday for its recent &#8220;punitive&#8221; actions against U.S. companies and new export controls on some critical minerals.



After resilient U.S. jobs data aggravated bets that the Federal Reserve has more ground to cover in monetary policy tightening, the focus has shifted to the more comprehensive U.S. non-farms payroll data during the day.



The MSCI index for EM currencies slipped 0.2%, and was on track for its steepest three-week percentage drop since late February.



The Hungarian forint lost 0.5% against the euro on expectations of continued gradual rate cuts sparked by a slowdown in headline and core inflation in June.



Traders awaited a scheduled review of the country&#8217;s debt rating by S&amp;P later in the day, with mounting risks over the 2023 budget and a threat to consumption-linked tax revenues also pressuring the forint.



&#8220;After experiencing one of the most severe inflation shocks globally in 2022 and sinking into recession, Hungary&#8217;s economy now seems to be turning a corner,&#8221; said Gareth Leather, senior emerging markets economist at Capital Economics.



&#8220;We still think that rates will need to stay firm for longer than most expect and that expectations for a strong recovery in activity are overdone.&#8221;



Hungary&#8217;s central bank began easing monetary policy in May by reducing its one-day deposit rate to 16% in June. Its base rate of 13% still remains the highest in the EU.



Traders will monitor a press conference from Poland&#8217;s central bank after it left its interest rate on hold on Thursday and reinforced expectations of rate cuts after summer, a day after the Romanian central bank kept interest rate unchanged.



The polish zloty was unchanged following a 0.4% fall the previous day.



Given the zloty&#8217;s high-beta relationship to the euro, Commerzbank analysts see the former rising towards 4.75 as inflation disappoints once again in 2024.



Meanwhile, data showed Romania&#8217;s economy grew 2.4% year-on-year in the first quarter, revising a preliminary estimate, while domestic consumption grew 6.9%. The leu was marginally down.



Further, Czech Republic&#8217;s industrial output rose by a higher-than-expected 1.4% year-on-year in May. The crown was flat.



Russia&#8217;s rouble bounced back after Thursday&#8217;s slump to a more than 15-month low with the currency under pressure from domestic political concerns and strong FX demand.



Elsewhere, Sri Lankan shares continued their upward movement, up 1% on Friday, following the island nation&#8217;s rate cut for the second month the prior day.

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Here’s what to expect from the Federal Reserve meeting Wednesday

IMF edges 2023 global economic growth forecast higher, sees persistent challenges

Russia offers BRICS partners a module on its planned space station

Oil markets will face ‘serious problems’ as demand from China and India ramps up, IEF secretary general says

Here are the biggest reasons jobs could disappear — and A.I. isn’t one of them

World Bank chief Banga unveils new plans to boost lending ‘firepower’

OPEC sees 2.2% oil demand growth in 2024 despite headwinds

World Bank names CEOs to help bring private funds to climate, development finance

Countries repatriating gold in wake of sanctions against Russia – study

Goldman Sachs says India will overtake the U.S. to become the world’s second-largest economy by 2075

EMERGING MARKETS – Stocks touch 1-month low; Hungary’s forint falls ahead of S&P ratings review

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International

July CPI report shows inflation gauge rose 3.2%, less than expected

Global rice prices surge close to 12-year highs, and could rise even more

China reports double-digit plunge in July exports and imports, missing expectations

Fitch downgrade highlights investor worries about US fiscal picture

Fitch downgrades U.S. long-term rating to AA+ from AAA

Fed approves hike that takes interest rates to highest level in more than 22 years

Here’s what to expect from the Federal Reserve meeting Wednesday

IMF edges 2023 global economic growth forecast higher, sees persistent challenges

Russia offers BRICS partners a module on its planned space station

Oil markets will face ‘serious problems’ as demand from China and India ramps up, IEF secretary general says

Here are the biggest reasons jobs could disappear — and A.I. isn’t one of them

World Bank chief Banga unveils new plans to boost lending ‘firepower’

OPEC sees 2.2% oil demand growth in 2024 despite headwinds

World Bank names CEOs to help bring private funds to climate, development finance

Countries repatriating gold in wake of sanctions against Russia – study

Goldman Sachs says India will overtake the U.S. to become the world’s second-largest economy by 2075

EMERGING MARKETS – Stocks touch 1-month low; Hungary’s forint falls ahead of S&P ratings review

News Tips

Advertise With Us

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