<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/Top-AI-CEOs-experts-raise-risk-of-extinction-from-AI-Reuters-820x547.jpg" alt="" class="wp-image-425166" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/Top-AI-CEOs-experts-raise-risk-of-extinction-from-AI-Reuters-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/Top-AI-CEOs-experts-raise-risk-of-extinction-from-AI-Reuters-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/Top-AI-CEOs-experts-raise-risk-of-extinction-from-AI-Reuters-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/Top-AI-CEOs-experts-raise-risk-of-extinction-from-AI-Reuters-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/Top-AI-CEOs-experts-raise-risk-of-extinction-from-AI-Reuters-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/Top-AI-CEOs-experts-raise-risk-of-extinction-from-AI-Reuters-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">The logo of OpenAI is displayed near a response by its AI chatbot ChatGPT on its website, in this illustration picture taken February 9, 2023. REUTERS/Florence Lo/Illustration/File Photo</figcaption></figure>



Artificial intelligence may lead to human extinction and reducing the risks associated with the technology should be a global priority, industry experts and tech leaders stated in an open letter.



“Mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war,” the statement on Tuesday read.



Sam Altman, CEO of ChatGPT-maker OpenAI, as well as executives from Google’s AI arm DeepMind and Microsoft were among those who supported and signed the short statement from the Center for AI Safety.



The technology has gathered pace in recent months after chatbot ChatGPT was released for public use in November and subsequently went viral. In just two months after its launch, it reached 100 million users. ChatGPT has amazed researchers and the general public with its ability to generate humanlike responses to users’ prompts, suggesting that AI could replace jobs and imitate humans.



The statement Tuesday said that there has been increasing discussion about a “broad spectrum of important and urgent risks from AI.”



But it said it can be “difficult to voice concerns about some of advanced AI’s most severe risks” and had the aim of overcoming this obstacle and opening up the discussions.



ChatGPT has arguably sparked much more awareness and adoption of AI as major firms around the world have raced to develop rival products and capabilities.



Altman had admitted in March that he is a “little bit scared” of AI as he worries that authoritarian governments would develop the technology. Other tech leaders such as Tesla’s Elon Musk and former Google CEO Eric Schmidt have cautioned about the risks AI poses to society.



In an open letter in March, Musk, Apple co-founder Steve Wozniak and several tech leaders urged AI labs to stop training systems to be more powerful than GPT-4 — which is OpenAI’s latest large language model. They also called for a six-month pause on such advanced development.



“Contemporary AI systems are now becoming human-competitive at general tasks,” said the letter.



“Should we automate away all the jobs, including the fulfilling ones? Should we develop nonhuman minds that might eventually outnumber, outsmart, obsolete and replace us? Should we risk loss of control of our civilization?” the letter asked.



Last week, Schmidt also separately warned about the “existential risks” associated with AI as the technology advances.

Illustration picture of ChatGPT

A.I. poses human extinction risk on par with nuclear war, Sam Altman and other tech leaders warn

<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/XWKI2BKQCRIARPZUPJLEWZYQLY-1-820x547.jpg" alt="" class="wp-image-425137" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/XWKI2BKQCRIARPZUPJLEWZYQLY-1-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/XWKI2BKQCRIARPZUPJLEWZYQLY-1-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/XWKI2BKQCRIARPZUPJLEWZYQLY-1-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/XWKI2BKQCRIARPZUPJLEWZYQLY-1-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/XWKI2BKQCRIARPZUPJLEWZYQLY-1-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/XWKI2BKQCRIARPZUPJLEWZYQLY-1-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: U.S. Secretary of State Antony Blinken testifies during a Senate hearing on Capitol Hill in Washington, D.C., U.S., May 16, 2023. REUTERS/Elizabeth Frantz/File Photo</figcaption></figure>



WASHINGTON, May 29 (Reuters)&nbsp;&#8211;&nbsp;U.S. Secretary of State Antony Blinken on Monday said his government would consider visa restrictions against Ugandan officials and others for the abuse of human rights following the implementation of one of the world&#8217;s toughest anti-gay laws.



Blinken said he has instructed the State Department to update travel guidance to U.S. citizens and businesses over travel to Uganda.



The measures follow President Joe Biden&#8217;s condemnation of the Ugandan legislation.



Biden said the United States may impose sanctions and would evaluate the implications of the law &#8220;on all aspects of U.S. engagement with Uganda.&#8221;



Ugandan President Yoweri Museveni on Monday signed the anti-LGBTQ laws, which includes the death penalty for &#8220;aggravated homosexuality,&#8221; drawing Western condemnation and raising the risk of sanctions by aid donors.



&#8220;This shameful act is the latest development in an alarming trend of human rights abuses and corruption in Uganda,&#8221; Biden said in a statement.



He said he had directed the White House National Security Council to evaluate the implications of the law on all aspects of U.S. engagement with Uganda, including the ability to safely deliver services under the Emergency Plan for AIDS Relief and other forms of assistance and investment.



Biden said the U.S. government would consider the impact of the law as part of its review of Uganda’s eligibility for the African Growth and Opportunity Act, which provides duty-free access to goods of designated sub-Saharan African countries.



&#8220;And we are considering additional steps, including the application of sanctions and restriction of entry into the United States against anyone involved in serious human rights abuses or corruption,&#8221; said Biden.



Same-sex relations were already illegal in Uganda, as in more than 30 African countries but the new law goes further.



(Reporting By Steve Holland; additional reporting by Jasper Ward in Washington; Editing by Leslie Adler, Robert Birsel)

FILE PHOTO: Senate Appropriations Committee hearing in Washington

Blinken says US to consider visa restrictions over Ugandan anti-gay law

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="577" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107099617-16597042182022-08-05t125602z_730858418_rc2cqv9tfc59_rtrmadp_0_ukraine-crisis-turkey-russia-820x577.jpeg" alt="" class="wp-image-425131" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107099617-16597042182022-08-05t125602z_730858418_rc2cqv9tfc59_rtrmadp_0_ukraine-crisis-turkey-russia-820x577.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107099617-16597042182022-08-05t125602z_730858418_rc2cqv9tfc59_rtrmadp_0_ukraine-crisis-turkey-russia-300x211.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107099617-16597042182022-08-05t125602z_730858418_rc2cqv9tfc59_rtrmadp_0_ukraine-crisis-turkey-russia-128x90.jpeg 128w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107099617-16597042182022-08-05t125602z_730858418_rc2cqv9tfc59_rtrmadp_0_ukraine-crisis-turkey-russia-768x540.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107099617-16597042182022-08-05t125602z_730858418_rc2cqv9tfc59_rtrmadp_0_ukraine-crisis-turkey-russia-1536x1081.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107099617-16597042182022-08-05t125602z_730858418_rc2cqv9tfc59_rtrmadp_0_ukraine-crisis-turkey-russia-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Turkish President Tayyip Erdogan meets with his Russian counterpart Vladimir Putin in Sochi, Russia August 5, 2022. Turkish Presidential Press Office | Reuters</figcaption></figure>



Turkey on Sunday voted for another five years of the leadership of Recep Tayyip Erdogan, the powerful, nationalist president who now enters his third decade in power.



Russian President Vladimir Putin was among the leaders that congratulated Erdogan on his win on Monday, calling him a “dear friend,” according to the Kremlin.



Turkey’s historical election is highly consequential for its population of 85 million, in terms of the future of the country’s democracy, economy and foreign relations. But it’s also deeply significant for many parts of the world beyond Turkey’s borders.



“Turkey is a vital, vital NATO ally for the United States and for the other NATO partners,” David Satterfield, former U.S. ambassador to Turkey, told CNBC just before the final presidential vote. Turkey has been a member of NATO since 1952, boasts the alliance’s second-largest military after the U.S. and houses 50 American nuclear warheads and a major air base used by NATO forces.



It’s a manufacturing powerhouse at the crossroads of Asia and Europe, as well as an important agricultural exporter for many countries around the world. Turkey also hosts more than 4 million refugees.



More recently, Erdogan’s government is playing a leading diplomatic role between Russia and Ukraine and mediating the crucial Black Sea grain deal, which unlocks vital Ukrainian produce exports blocked by Russia’s full-scale invasion.



Erdogan has also stood in the way of some of the major goals of Turkey’s Western allies, such as aggressively pushing back on Russia for its war in Ukraine, and allowing Sweden into the NATO alliance. Erdogan’s friendly relationship with Putin and refusal to impose sanctions on Russia, as well as his government’s purchase of Russian weapons systems, makes many Western officials uneasy.



Putin, in his congratulatory message Monday, praised Erdogan’s efforts to “conduct an independent foreign policy,” according to his spokespeople.&nbsp;“We highly appreciate your personal contribution to the strengthening of friendly Russian-Turkish relations and mutually beneficial cooperation in various areas,”&nbsp;he said.



With Erdogan at the helm of such a strategically vital country for a fresh new presidential term, many are asking: what does this mean for NATO and Western geopolitical goals?



<h2 class="wp-block-heading" id="h-a-threat-to-nato-cohesion"><a></a>A threat to NATO cohesion?</h2>



The outlook is mixed among political and economic analysts inside and outside of Turkey whether Erdogan is bad news for the future of NATO.



Mike Harris,&nbsp;founder of advisory firm Cribstone Strategic Macro, believes the Turkish strongman’s extended rule is decidedly negative for the 74-year-old alliance.



“Putin clearly wants NATO to fragment, and Erdogan in charge increases the likelihood of NATO fragmenting,” Harris said after the election’s first round in mid-May. He pointed to Erdogan’s staunch refusal to cut ties with Putin and to his frequent criticism of Western governments.



But Turkey has so far benefitted significantly from its commitment to an independent foreign policy, when it comes to Russia.



Turkey’s trade with Russia doubled to $68.19 billion in 2022 from $34.73 billion in 2021, according to the Turkish Statistical Institute. Turkey now receives 7% of Russian exports, up from 2% in 2021. Russian tourists and expatriates, including billionaire oligarchs escaping sanctions, have poured into the country as their options for travel became severely limited. Earlier in 2023, Putin waived the cost of Russian gas exports to Turkey, a move broadly seen as an effort to help Erdogan’s election chances.



This begs the question of what leverage NATO allies might try to use to change that, if any.



While maintaining good relations with Russia, Turkey has simultaneously supported Ukraine with weapons and aid — including the powerful and deadly Turkish-made Bayraktar drones — and facilitated prisoner swaps between the warring countries, which Western officials have praised.



<h2 class="wp-block-heading"><a></a>Will Turkey allow Sweden into NATO?</h2>



Many analysts expect that Erdogan’s opposition to Sweden joining the alliance was largely a strategy to gain pre-election clout and that his stance will change following his victory. Turkey takes issue with Sweden over what it says is the country’s support of Kurdish groups that Ankara considers to be terrorists.



For Timothy Ash, an emerging markets strategist and Turkey expert at BlueBay Asset Management, a continued pushback against NATO goes against Turkey’s best interests.



“If Erdogan continues to stall sign off (on Swedish NATO membership), I expect a major crisis in relations with the West,” he said Monday.



“Because of pressure on the lira I expect Erdogan to compromise on Sweden’s NATO bid,” Ash said, referring to the Turkish currency that’s lost some 80% of its value against the dollar in the last five years, largely due to unorthodox monetary policies directed by Erdogan.



“He extracted whatever political capital he could from this (Sweden pushback) pre-election, now he has won there is only downside by delaying the inevitable,” he added. “So I expect Sweden to get NATO membership at the NATO summit next month.”



Harris agrees. “He’s already achieved his objective,” he said of Erdogan. “So is Sweden going to get into NATO? I would put money on that, guaranteed. Why would he fight that battle anymore? That was an election issue.”



Already, Sweden’s foreign ministry on Monday said the Swedish and Turkish foreign ministers will meet “soon” to discuss Stockholm’s potential accession to NATO, according to Reuters.



CNBC has contacted the Turkish presidency’s office for comment.



<h2 class="wp-block-heading"><a></a>Russia relationship ‘vital’</h2>



Ultimately, Erdogan’s foreign policy decisions will be made with the intent to primarily benefit Turkey, not its Western allies. In the words of former U.S. ambassador to Turkey David Satterfield, Ankara’s relationship with Russia is “vital” — whether positive for NATO or not.



“Turkey has been a critical partner for the NATO alliance and for the broader international coalition opposing Putin’s war in Ukraine &#8230; I think ‘supporting Russia’ is not the term I would use,” Satterfield told CNBC’s Dan Murphy on Friday. “Turkey has a vital relationship with Russia, its relationship that has generated both good and bad for Turkey in the past,” he said.



“We welcome, welcome the dialogue that President Erdogan has with President Putin, when the subject is stabilization, when the subject is the ability to access grain and other products through the Black Sea from Ukraine, that has been extremely useful and extremely important,” the ambassador said.



“And we do not see this as a pivot or an alignment of some kind with Russia. We see it as the conduct of necessary relations with a very important, for good or ill, neighbor of Turkey.”

107099617-16597042182022-08-05t125602z_730858418_rc2cqv9tfc59_rtrmadp_0_ukraine-crisis-turkey-russia

Putin congratulates ‘dear friend’ Erdogan as NATO’s Turkey challenge looks set to stay

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/104399900-Turkey_flag-820x462.jpg" alt="" class="wp-image-425112" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/104399900-Turkey_flag-820x462.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/104399900-Turkey_flag-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/104399900-Turkey_flag-160x90.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/104399900-Turkey_flag-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/104399900-Turkey_flag.jpg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A man holding a Turkish flag. Uriel Sinai | Getty Images</figcaption></figure>



The Turkish lira sank to a fresh record low Monday as incumbent Recep Tayyip Erdogan secured his victory in the 2023 presidential election, extending his rule into a third decade in power.



The currency briefly touched 20.0608 against the greenback at around 11 a.m. Monday morning local time, surpassing a low seen last week.



“We have a pretty pessimistic outlook on the Turkish Lira as a result of Erdogan retaining office after the election,” Wells Fargo’s Emerging Markets Economist and FX Strategist Brendan McKenna told CNBC’s “Squawk Box Asia.”



McKenna forecasts that the lira will reach a new record low of 23 against the dollar by end of the second quarter, and then 25 as early as next year. It has lost some 77% of its value against the dollar over the last five years. He expects Turkey’s unorthodox monetary and economic policy frameworks to remain in place going forward.



Turkey’s monetary policy places an emphasis on the pursuit of growth and export competition rather than taming inflation, and Erdogan endorses the unconventional view that raising interest rates increases inflation.



“The current set up is just not sustainable,” said BlueBay Asset Management’s Senior EM Sovereign Strategist Timothy Ash via email.



“With limited FX reserves and massively negative real interest rates the pressure on the lira is heavy,” Ash continued.



<h2 class="wp-block-heading">Read: <a href="https://www.cnbcafrica.com/2023/turkeys-president-erdogan-seals-election-victory-to-enter-third-decade-in-power/">Turkey’s President Erdogan seals election victory to enter third decade in power</a></h2>



Istanbul’s main index, the Turkey ISE National 100 gained roughly 2% in its first hour of trade.



Credit default swaps, which measure the cost of insuring exposure to Turkish debt, also spiked.



Five-year CDS were trading at around 664.18 basis points, marking a 20% climb from the 550 basis point level prior to the run-offs, according to Refinitiv data.



These developments reflect market participants’ belief that orthodox policies, which were promised by the political opposition, were the only way to get the Turkish economy out of a potential crisis, said Selva Demiralp, a professor of economics at Koç University.



Meanwhile, MarketVector’s CEO Steven Schoenfeld wrote in an e-mail. “If the Lira continues to plunge and inflation surges again due to the policy of inappropriately-low interest rates, we could see a repeat of the ‘flight to safety’ allocation to Turkish equities by local investors which moved the market sharply higher in 2022.”



<h2 class="wp-block-heading" id="h-bleak-economic-outlook-ahead"><a></a>‘Bleak economic outlook’ ahead</h2>



“It’s a very bleak economic and markets outlook for Turkey,” Wells Fargo’s McKenna added.



He noted that the “one silver lining” in the whole scenario could be the Turkish central bank’s ability to secure currency reserve swap lines with countries in the Middle East and China.



“If they can continue to draw on those lines and possibly extend and enhance those reserve currency lines, maybe there’s some support in the central bank FX intervention,” he added.

104399900-Turkey_flag

Turkey’s lira sinks to fresh record low after Erdogan re-election

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="534" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107063093-1652876994961-gettyimages-1240741318-AFP_32AD3JZ-820x534.jpeg" alt="" class="wp-image-425108" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107063093-1652876994961-gettyimages-1240741318-AFP_32AD3JZ-820x534.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107063093-1652876994961-gettyimages-1240741318-AFP_32AD3JZ-300x195.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107063093-1652876994961-gettyimages-1240741318-AFP_32AD3JZ-138x90.jpeg 138w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107063093-1652876994961-gettyimages-1240741318-AFP_32AD3JZ-768x500.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107063093-1652876994961-gettyimages-1240741318-AFP_32AD3JZ-1536x1000.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107063093-1652876994961-gettyimages-1240741318-AFP_32AD3JZ-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Turkey’s President and leader of the Justice and Development (AK) Party Recep Tayyip Erdogan delivers a speech during his partys group meeting at the Turkish Grand National Assembly (TGNA) in Ankara, on May 18, 2022. Adem Altan | AFP | Getty Images</figcaption></figure>



Turkey’s Election Board on Sunday confirmed that Recep Tayyip Erdogan has won Turkey’s 2023 presidential election, extending his rule into its third decade in power after facing the tightest race of his career.



Erdogan won Turkey’s presidency in a runoff election with 52.14% of the votes, the High Election Board head Ahmet Yener said, making the results official.



With 99.43% of ballot boxes opened, Erdogan’s rival Kilicdaroglu received 47.86% of the votes, Yener said. With a gap of more than 2 million votes between candidates, the rest of the uncounted votes will not change the result, he added.



Earlier Sunday, Turkish public broadcaster TRT had called the presidential election for incumbent Erdogan.



Analysts saw the 69-year-old Erdogan’s victory as all but in the bag after the first vote on May 14, which saw him come out five percentage points ahead of his rival, in a giant blow to the opposition.



Kilicdaroglu and his party CHP had pledged change, economic improvement, the salvaging of democratic norms and closer ties with the West — something many expected to take them to victory, especially as years of Erdogan’s economic policies helped create a cost-of-living crisis in Turkey. But in the end, it wasn’t enough.



The AK Party leader’s popularity remains alive and well, even despite public anger at a slow government response following a series of devastating earthquakes in February that killed more than 50,000 people.



Many in Turkey — and the Muslim world more widely — see Erdogan as a protector of faithful Muslims who elevates Turkey globally and pushes back against the West, despite being a longtime Western ally.



By contrast Kilicdaroglu’s party, the CHP, strives for the fiercely secular model of leadership first established by Mustafa Kemal Ataturk, founder of the modern Turkish state. It’s known for being historically more hostile to practicing Muslims, who form an enormous part of the Turkish electorate, although the CHP under Kilicdaroglu has softened its stance and was even joined by former Islamist party members.



<h2 class="wp-block-heading" id="h-big-decisions-ahead"><a></a>Big decisions ahead</h2>



Erdogan has no shortage of work ahead of him — and his decisions will continue to have impacts far beyond Turkey’s borders. The country of 85 million people boasts NATO’s second-largest military, houses 50 American nuclear warheads, hosts 4 million refugees and has taken up a key role in Russia-Ukraine mediation. Western allies will also now be waiting to see whether Erdogan finally agrees to accept Sweden’s application to join NATO.



Erdogan served as Turkey’s prime minister from 2003 to 2014 and president from 2014 onward. He came to prominence as mayor of Istanbul in the 1990s, and was celebrated in the first decade of the new millennium for transforming Turkey’s economy into an emerging market powerhouse. 



Recent years, however, have been far less rosy for the religiously conservative leader, whose own economic policies have contributed to inflation surpassing 80% in 2022 and Turkey’s currency, the <a href="https://www.cnbc.com/quotes/TRY=/">lira</a>, losing some 77% of its value against the dollar over the last five years.



International and domestic voices alike also sound the alarm that Turkey’s democracy under Erdogan is looking less democratic by the day.



The frequent arrests of journalists, forced closures of many independent media outlets and heavy crackdowns on past protest movements — as well as a 2017 constitutional referendum that vastly expanded Erdogan’s presidential powers — signal what many say is a slide toward autocracy.&nbsp;



The Turkish president rejects the criticisms. But with a fresh mandate to lead and previous reforms consolidating presidential power, very little stands in the way of a stronger Erdogan than ever before.



—&nbsp;Reuters contributed to this report.

107063093-1652876994961-gettyimages-1240741318-AFP_32AD3JZ

Turkey’s President Erdogan seals election victory to enter third decade in power

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107245391-1684857280396-gettyimages-1257503956-US_DEBT_LIMIT-820x462.jpeg" alt="" class="wp-image-425102" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107245391-1684857280396-gettyimages-1257503956-US_DEBT_LIMIT-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107245391-1684857280396-gettyimages-1257503956-US_DEBT_LIMIT-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107245391-1684857280396-gettyimages-1257503956-US_DEBT_LIMIT-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107245391-1684857280396-gettyimages-1257503956-US_DEBT_LIMIT-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107245391-1684857280396-gettyimages-1257503956-US_DEBT_LIMIT.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">The US Capitol building in Washington, DC, US, on Tuesday, May 23, 2023. Debt-limit negotiators will meet this morning in Washington as President Joe Biden and House Speaker Kevin McCarthy remained without an agreement to avert a catastrophic US default with time running short. Nathan Howard | Bloomberg | Getty Images</figcaption></figure>



With days to spare before a potential first-ever government default, President Joe Biden and House Speaker Kevin McCarthy reached final agreement Sunday on a deal to raise the nation’s debt ceiling and worked to ensure enough Republican and Democratic votes to pass the measure in the coming week.



The Democratic president and Republican speaker spoke with each other Sunday evening as negotiators rushed to draft the bill text so lawmakers can review compromises that neither the hard-right or left flank is likely to support. Instead, the leaders are working to gather backing from the political middle as Congress hurries toward votes before a June 5 deadline to avert a damaging federal default.



“Good news,” Biden declared Sunday evening at the White House.



“The agreement prevents the worst possible crisis, a default, for the first time in our nation’s history,” he said. “Takes the threat of a catastrophic default off the table.”



The president urged both parties in Congress to come together for swift passage. “The speaker and I made clear from the start that the only way forward was a bipartisan agreement,” he said.



The compromise announced late Saturday includes spending cuts but risks angering some lawmakers as they take a closer look at the concessions. Biden told reporters at the White House upon his return from Delaware that he was confident the plan will make it to his desk.



McCarthy, too, was confident in remarks at the Capitol: “At the end of the day, people can look together to be able to pass this.”



The days ahead will determine whether Washington is again able to narrowly avoid a default on U.S. debt, as it has done many times before, or whether the global economy enters a potential crisis.



In the United States, a default could cause financial markets to freeze up and spark an international financial crisis. Analysts say millions of jobs would vanish, borrowing and unemployment rates would jump, and a stock-market plunge could erase trillions of dollars in household wealth. It would all but shatter the $24 trillion market for Treasury debt.



Anxious retirees and others were already making contingency plans for missed checks, with the next Social Security payments due soon as the world watches American leadership at stake.



McCarthy and his negotiators portrayed the deal as delivering for Republicans though it fell well short of the sweeping spending cuts they sought. Top White House officials were briefing Democratic lawmakers and phoning some directly to try to shore up support.



As Sunday dragged on, negotiators labored to write the bill text and lawmakers raised questions.



McCarthy told reporters at the Capitol on Sunday that the agreement “doesn’t get everything everybody wanted,” but that was to be expected in a divided government. Privately, he told lawmakers on a conference call that Democrats “got nothing” they wanted.



A White House statement from the president, issued after Biden and McCarthy spoke by phone Saturday evening and an agreement in principle followed, said the deal “prevents what could have been a catastrophic default.”



Support from both parties will be needed to win congressional approval before a projected June 5 government default on U.S. debts. Lawmakers are not expected to return to work from the Memorial Day weekend before Tuesday, at the earliest, and McCarthy has promised lawmakers he will abide by the rule to post any bill for 72 hours before voting.



Negotiators agreed to some Republican demands for increased work requirements for recipients of food stamps that House Democrats had called a nonstarter.



With the outlines of an agreement in place, the legislative package could be drafted and shared with lawmakers in time for House votes as soon as Wednesday, and later in the coming week in the Senate.



Central to the compromise is a two-year budget deal that would essentially hold spending flat for 2024, while boosting it for defense and veterans, and capping increases at 1% for 2025. That’s alongside raising the debt limit for two years, pushing the volatile political issue past the next presidential election.



Driving hard to impose tougher work requirements on government aid recipients, Republicans achieved some of what they wanted. It ensures people ages 49 to 54 with food stamp aid would have to meet work requirements if they are able-bodied and without dependents. Biden was able to secure waivers for veterans and homeless people.



The deal puts in place changes in the landmark National Environmental Policy Act designating “a single lead agency” to develop environmental reviews, in hopes of streamlining the process.



It halts some funds to hire new Internal Revenue Service agents as Republicans demanded, and rescinds some $30 billion for coronavirus relief, keeping $5 billion for developing the next generation of COVID-19 vaccines.



The deal came together after Treasury Secretary Janet Yellen told Congress that the United States could default on its debt obligations by June 5 — four days later than previously estimated — if lawmakers did not act in time. Lifting the nation’s debt limit, now at $31 trillion, allows more borrowing to pay bills already insurred.



McCarthy commands only a slim Republican majority in the House, where hard-right conservatives may resist any deal as insufficient as they try to slash spending. By compromising with Democrats, he risks losing support from his own members, setting up a career-challenging moment for the new speaker.



“I think you’re going to get a majority of Republicans voting for this bill,” McCarthy said on “Fox News Sunday,” adding that because Biden backed it, “I think there’s going to be a lot of Democrats that will vote for it, too.”



House Democratic leader Hakeem Jeffries of New York said on CBS’ “Face the Nation” that he expected there will be Democratic support but he declined to provide a number. Asked whether he could guarantee there would not be a default, he said, “Yes.”



A 100-strong group of moderates in the New Democratic Coalition gave a crucial nod of support on Sunday, saying in a statement it was confident that Biden and his team “delivered a viable, bipartisan solution to end this crisis” and were working to ensure the agreement would receive support from both parties.



The coalition could provide enough support for McCarthy to make up for members in the right flank of his party who have expressed opposition before the bill’s wording was even released.



It also takes pressure off Biden, facing criticism from progressives for giving into what they call hostage-taking by Republicans.



Democratic Rep. Pramila Jayapal of Washington state, who leads the Congressional Progressive Caucus, told CBS that the White House and Jeffries should worry about whether caucus members will support the agreement.

107245391-1684857280396-gettyimages-1257503956-US_DEBT_LIMIT

Biden, McCarthy reach final deal to prevent default, now must sell to Congress

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107243047-1684379482574-gettyimages-1490951116-dsc00150_wydzrwkm-820x547.jpeg" alt="" class="wp-image-424904" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107243047-1684379482574-gettyimages-1490951116-dsc00150_wydzrwkm-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107243047-1684379482574-gettyimages-1490951116-dsc00150_wydzrwkm-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107243047-1684379482574-gettyimages-1490951116-dsc00150_wydzrwkm-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107243047-1684379482574-gettyimages-1490951116-dsc00150_wydzrwkm-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107243047-1684379482574-gettyimages-1490951116-dsc00150_wydzrwkm-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107243047-1684379482574-gettyimages-1490951116-dsc00150_wydzrwkm-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">HIROSHIMA, JAPAN &#8211; MAY 17: People walk beneath a banner promoting the Group of 7 (G7) summit at a shopping street on May 17, 2023 in Hiroshima, Japan. The G7 summit will be held in Hiroshima from 19-22 May. (Photo by Tomohiro Ohsumi/Getty Images) Tomohiro Ohsumi | Getty Images News | Getty Images</figcaption></figure>



The global debt pile grew by $8.3 trillion in the first quarter to a near-record high of $305 trillion as the global economy faced a “crisis of adaptation” to rapid monetary policy tightening by central banks, according to a closely-watched report from the Institute of International Finance.



The finance industry body said the combination of such high debt levels and rising interest rates has driven up the cost of servicing that debt, triggering concerns about leverage in the financial system.



Central banks around the world have been hiking interest rates for over a year in a bid to rein in sky-high inflation. The U.S. Federal Reserve earlier this month lifted its fed funds rate to a target range of 5%-5.25%, the highest since August 2007.



“With financial conditions at their most restrictive levels since the 2008-09 financial crisis, a credit crunch would prompt higher default rates and result in more ‘zombie firms’ — already approaching an estimated 14% of U.S.-listed firms,” the IIF said in its quarterly Global Debt Monitor report late Wednesday.



The sharp increase in the global debt burden in the three months to the end of March marked a second consecutive quarterly increase following two quarters of steep declines during last year’s run of aggressive monetary policy tightening. Non-financial corporates and the government sector drove much of the rebound.



“At close to $305 trillion, global debt is now $45 trillion higher than its pre-pandemic level and is expected to continue increasing rapidly: Despite concerns about a potential credit crunch following the recent turmoil in the banking sectors of the U.S. and Switzerland, government borrowing needs remain elevated,” the IIF said.



The Washington, D.C.-based organization said aging populations, rising health care costs and substantial climate finance gaps are exerting pressure on government balance sheets. National defense spending is expected to increase over the medium term due to heightened geopolitical tensions, which would potentially affect the credit profile of both governments and corporate borrowers, the IIF projected.



“If this trend continues, it will have significant implications for international debt markets, particularly if interest rates remain higher for longer,” the report noted.



Total debt in emerging markets hit a new record high of more than $100 trillion, around 250% of GDP, up from $75 trillion in 2019. China, Mexico, Brazil, India and Turkey were the largest upward contributors.



In developed markets, Japan, the U.S., France and the U.K. posted the sharpest increases over the quarter.



<h3 class="wp-block-heading" id="h-banking-turmoil-and-a-crisis-of-adaptation">Banking turmoil and a ‘crisis of adaptation’</h3>



The rapid monetary policy tightening exposed frail liquidity positions in a number of small and mid-sized banks in the U.S. and led to a series of collapses and bailouts in recent months. The ensuing market panic eventually spread to Europe and forced the emergency sale of Swiss giant Credit Suisse to UBS.



The IIF suggested that corporations have undergone a “crisis of adaptation” to what it termed a “new monetary regime.”



“Although recent bank failures appear more idiosyncratic than systemic — and U.S. financial institutions carry much less debt (78% of GDP) than in the run-up to the 2007/8 crisis (110% in 2006) — fear of contagion has prompted significant deposit withdrawals from U.S. regional banks,” the IIF said.



“Given the central role of regional banks in credit intermediation in the U.S., worries about their liquidity positions could result in a sharp contraction in lending to some segments, including underbanked households and businesses.”



This contraction of credit conditions could particularly affect small businesses, the IIF said, along with causing higher default rates and more “zombie firms across the board.”



Zombie firms are companies with earnings that are sufficient to allow it to continue operating and pay the interest on its debt, but not to pay off the debt, meaning any cash generated is immediately spent on debt. The company is therefore “neither dead nor alive.”



“We estimate that around 14% of U.S. companies can be considered zombies, with a substantial portion of these in the healthcare and information technology sectors.”

107243047-1684379482574-gettyimages-1490951116-dsc00150_wydzrwkm

Global debt nears record highs as rate hikes trigger ‘crisis of adaptation,’ top trade body 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/2022/09/GettyImages-1240090144-820x547.jpg" alt="" class="wp-image-419915" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1240090144-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1240090144-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1240090144-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1240090144-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1240090144-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1240090144-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">The World Bank Group headquarters in Washington, D.C., U.S., on Tuesday, April 19, 2022. The International Monetary Fund (IMF) slashed its world growth forecast by the most since the early months of the Covid-19 pandemic, and projected even faster inflation, after Russia invaded Ukraine and China renewed virus lockdowns. Photographer: Al Drago/Bloomberg via Getty Images</figcaption></figure>



KINSHASA, May 16 (Reuters) &#8211; The World Bank has suspended funding for humanitarian and development projects in Democratic Republic of Congo worth more than $1 billion after the government dissolved the project fund without warning, the lender said.



The suspension will affect more than 600,000 beneficiaries, including victims of sexual violence, the World Bank told Congo&#8217;s finance minister last week in a letter seen by Reuters. A World Bank spokesperson confirmed its authenticity.



The letter also said that the bank was still waiting for documentation on the status of $91 million which had already been advanced for the projects out of the total $1.04 billion.



On May 4, Congolese President Felix Tshisekedi dissolved the structure, the &#8220;Social Fund of the Democratic Republic of Congo&#8221;, by presidential order and created another public fund.



The change was due to &#8220;the evolution of the legal framework governing public institutions,&#8221; according to his statement.



In the letter dated May 12, the World Bank&#8217;s director of operations for the country, Albert Zeufack, said the institution had found out about the decision in the press.



&#8220;Before being able to continue to commit the project funds, the government and the World Bank should agree on transitional measures… in order to ensure that the funds are used for the intended purposes,&#8221; he said in the letter.



A spokesperson for Congo&#8217;s finance ministry said he was waiting for the go-ahead from the presidency before he could comment.



Presidential spokesperson Tina Salama denied any suspension of funding and said there would be transitional management of the fund. &#8220;I think arrangements have been made,&#8221; she said. She did not respond to questions about the $91 million.



One of the fund&#8217;s beneficiaries was the Panzi Foundation led by Denis Mukwege, a Congolese gynaecologist who won the 2018 Nobel Peace Prize for his work with victims of sexual violence.



&#8220;It&#8217;s a catastrophe for the victims,&#8221; Mukwege told Reuters. He said he had been warned a few days before that expenses incurred on his programme would stop being reimbursed. A programme coordinator said that he had had to turn victims away.



The abrupt decision to change the financing structure was an example of poor governance, said Valery Madianga, the director of a Congolese organisation specialising in public finance auditing.



&#8220;How can it be … that a public service, which signed a $1 billion programme contract with the World Bank, has been dissolved or has changed its social purpose without the latter being aware of it?&#8221; he said.



Four of Congo&#8217;s main opposition politicians wrote to the leaders of the International Monetary Fund, the World Bank and the African Development Bank last week asking them to conduct an audit of their funds in Congo, saying they suspected misuse. (Additional reporting by Stanis Bujakera and Ange Kasongo; Editing by Nellie Peyton, Alessandra Prentice and Nick Macfie)

IMF And World Bank Headquarters During Virtual Spring Meetings

World Bank suspends $1 bln worth of project funding in Congo

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107241466-1684194445176-gettyimages-1487089704-vcg111434684090-820x462.jpeg" alt="" class="wp-image-424825" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107241466-1684194445176-gettyimages-1487089704-vcg111434684090-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107241466-1684194445176-gettyimages-1487089704-vcg111434684090-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107241466-1684194445176-gettyimages-1487089704-vcg111434684090-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107241466-1684194445176-gettyimages-1487089704-vcg111434684090-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107241466-1684194445176-gettyimages-1487089704-vcg111434684090.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">YANGZHOU, CHINA &#8211; MAY 02: Aerial view of tourists visiting the Dongguan street during the May Day holiday on May 2, 2023. Vcg | Visual China Group | Getty Images</figcaption></figure>



China’s economic data for April broadly missed expectations as the economy continued to show an uneven path of recovery from the impact of its stringent Covid restrictions.



Industrial production for April rose by 5.6% year-on-year, compared to the 10.9% expected by economists surveyed in a Reuters poll. The figure was up 3.9% in March following a muted start to the year.



Retail sales rose by 18.4% – lower than economists’ forecast a surge of 21%



Fixed asset investment rose by 4.7%, against expectations of 5.5%. The reading rose 5.1% the previous month.



“China is in the stage of recovering, compared to last year, the numbers are positive as we just saw, but is the recovery good enough for the market, is the recovery good enough to meet investors’ expectations – that’s the big question here,” BofA Securities China equity strategist Winnie Wu told CNBC’s “Street Signs Asia.”



“It’s not good enough to meet with investors’ expectations – that’s a problem,” Wu said, adding that the momentum from China’s pent-up demand seems to be fading away.



“The recovery of income, of job security, and confidence will take time,” she said.



China stocks have pared most of the gains seen this year. The Shenzhen Component was down 4.67% quarter-to-date and up only 1.48% year-to-date, and notching a 9.5% drop from its peak in early February.



China’s latest data follows a mixed picture in the country’s growth trajectory, with services remaining a bright spot in the economy despite factory data falling into contractionary territory in April.



The Caixin China general manufacturing purchasing managers’ index fell to 49.5 in April, marking the first reading below the 50-mark in three months. The 50-point mark separates growth from contraction.



The National Bureau of Statistics’ manufacturing PMI also fell to 49.2 in April from March’s reading of 51.9.



Imports for the month also plunged further by 7.9%, missing estimates – exports rose 8.5%.



“Market sentiment remains very weak in our client conversations,” Goldman Sachs economist Hui Shan wrote in a Sunday report.



She expects more measures from the government rather than a change in interest rates to improve market confidence.



“Symbolic measures that aim at boosting confidence, such as RRR cuts, seem more likely to us, especially around quarter-end when liquidity demand is high,” she wrote, referring to banks’ reserve requirement ratio — the amount of funds banks need to hold as reserves.



<h2 class="wp-block-heading" id="h-record-high-youth-unemployment"><a></a>Record-high youth unemployment</h2>



The latest data included a 20.4% youth jobless rate, the unemployment rate between ages 16 and 24. The reading in April marked a record high.



“Many people, investors see this as a leading indicator. If the younger people are unable to get jobs, don’t have the income security, where is the confidence, where is the consumption recovery coming from?” said Wu.



She said the question of confidence is resonated in weakened markets sentiment as well as other high-frequency data, including new home sales.



Citi economists said youth unemployment “remains a headache” despite an overall steady labor market – the headline surveyed jobless rate dipped to 5.2% in April from 5.3% in March.



“With the graduate season approaching, the number could easily go up instead of going down,” Citi’s chief China economist Xiangrong Yu wrote in a Tuesday note.



Yu noted there is a likelihood of the government turning to “decisive” actions to boost the economy.



“With China now out of the sweet spot of reopening, hope of further sentiment repair could be diminishing in the absence of decisive government actions,” he wrote.



“We reckon that policymakers need to move from the wait-and-see mode to proactive easing and expect 20bps policy rate cut in the remainder of the year.”

107241466-1684194445176-gettyimages-1487089704-vcg111434684090

China’s economic data misses expectations as economy continues to show uneven recovery

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="555" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-820x555.jpg" alt="" class="wp-image-420644" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-820x555.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-300x203.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-133x90.jpg 133w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-768x519.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-1536x1039.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: Representations of cryptocurrencies are seen in this illustration, August 10, 2022. REUTERS/Dado Ruvic/Illustration</figcaption></figure>



Cryptocurrency companies are playing a game of poker with the Securities and Exchange Commission, making bold threats to leave the U.S. as the regulator steps up pressure on the industry to toe the line.



Major players are hoping that the SEC and Washington takes, what crypto watchers see as bluffs, seriously and soften the hard line that regulators have taken on the industry.



Executives at firms including crypto exchange Coinbase and blockchain services company Ripple have piled on with comments laying into the SEC and signaling plans to shift business overseas, in a bid to rally support and send a message to U.S. politicians concerned that the country may miss out on a key technological innovation.



Coinbase CEO Brian Armstrong said last week that the SEC was on a “lone crusade” with its tough actions against certain crypto companies. He added that Chair Gary Gensler had taken an “anti-crypto view,” despite earlier being a supporter of the industry during his time as an economics professor at the MIT Sloan School of Management.



“The SEC is a bit of an outlier here,” Armstrong told CNBC’s Dan Murphy in an interview in Dubai. “I don’t think [Gensler is] necessarily trying to regulate the industry as much as maybe curtail it. But he’s created some lawsuits, and I think it’s quite unhelpful for the industry in the U.S. writ large.”



Brad Garlinghouse, CEO of Ripple, also tore into the SEC this week. When asked for his message to Gensler as the company announced an expansion into Dubai, he quipped, “Who?” before later saying Ripple will have spent $200 million defending itself against a lawsuit initiated by the regulator by the time it is over.



“I find it as a company that started in the United States and as somebody who is a U.S. citizen, it’s sad. I have sadness about this. The U.S. is getting passed not just by a little bit but by a lot,” Garlinghouse said.



“The tough thing about this is you have a country that I think has put politics ahead of policy and that’s not a good decision if you’re trying to invest in the economy.”



Dubai and Europe have proven to be much more favorable markets with their virtual asset regulatory frameworks, Garlinghouse said, adding: “The United States is definitely stuck.”



Garlinghouse, Armstrong and other crypto bosses have made threats to leave the U.S., highlighting concern from the industry that the SEC’s crackdown is becoming too harsh. The regulator has taken strong enforcement actions against companies including Ripple, Coinbase, Kraken and Paxos, accusing each of flouting securities laws.



The SEC’s contention is that most tokens in the market may qualify as securities, which would subject them to much stricter requirements around registration and disclosure. Crypto firms, naturally, have denied assets they issue or list on their platforms should be treated as securities.



Will they stay or will they go?



 The question is: could they actually leave? It looks pretty unlikely.



“The U.S. is one of the largest markets for crypto, and hence it is highly unlikely that they will leave,” Larisa Yarovaya, associate professor of finance at Southampton University, told CNBC via email.



“The biggest fear of crypto companies is that regulation will cause panic among crypto investors and prices will go down. To look confident (even arrogant) is a common tactic of crypto company CEOs. They think this will translate into investors’ confidence, overconfidence in some cases, and will encourage further irrational behaviour among investors, e.g. HODL [hold on for dear life] even when markets are falling.”



Ripple’s Garlinghouse has been threatening to move his company’s headquarters overseas since 2020. In October that year, he said the U.K., Switzerland, Singapore, Japan and the United Arab Emirates were under consideration for Ripple’s potential move abroad.



That hasn’t happened yet.



Coinbase’s chief, meanwhile, suggested at a London fintech conference in April that the firm would consider options of investing more abroad, including relocating from the U.S. to elsewhere, if the exchange doesn’t get regulatory clarity in the U.S.



A month later, Armstrong said Coinbase “is not going to relocate overseas.”



“We’re always going to have a U.S. presence … But the U.S. is a little bit behind right now,” he told CNBC.



The U.S. is a huge market for the industry, with over 50 million Americans saying they own some crypto, according to a survey conducted by Morning Consult for Coinbase.



“There’s a much greater focus on the international markets for those firms. But at the top end of the market, personally I just can’t see that ever happening that you leave the United States market completely,” Jonathan Levin, co-founder of Chainalysis, told CNBC in an interview in London.



“It’s more about how much do you invest in new international expansion where maybe that wasn’t as high up on the agenda, but now it’s let’s look at France, let’s look at the U.K.”



On top of this, the practicalities of moving these already large companies out of the U.S. would be tough.



“Although these industries are virtual by their nature, they still need people, and people have families, mortgages, and preferences on where they live. Replacing them with local talent in the new place may be easier said than done,” George Weston, a partner at global offshore law firm Harneys, told CNBC via email.



Regulatory certainty outside the U.S.



 Crypto bosses are playing up to some officials’ concerns that the U.S. has become shrouded in regulatory uncertainty while other jurisdictions, like the European Union and U.K., have charged forward with proposed regulatory frameworks for digital assets.



Hester Peirce, a commissioner at the SEC, said at a Financial Times conference last week that the U.S. was “shooting ourselves in the foot by not having a regulatory regime in the U.S.”



She praised the EU on its progress with waving through laws for the crypto industry.



The EU is expected to bring in the first comprehensive set of regulations for digital assets, known as Markets in Crypto Assets (MiCA), sometime in 2024.



“It’s really commendable that Europe was able to get that done so quickly,” Peirce said, according to Reuters. “If we built a good regulatory regime, people would come. I think you will see that with MiCA.”



Diego Ballo Ossio, a partner at law firm Clifford Chance, said other jurisdictions including the U.K. and EU are changing their legislative frameworks to create clear regulatory regimes for exchanges.



“This means that other countries are effectively providing US based exchanges an option – a place to move to. It is not unthinkable that a U.S. exchange decided to create operational hubs in non-U.S. jurisdictions where the product can be safely innovated and enhanced,” he told CNBC.



Binance, the world’s largest crypto exchange, recently said it has become more difficult for the company to operate into the U.S. and that it was minded to establish a regulated operation in the U.K.



Patrick Hillman, the company’s chief strategy officer, said the U.S. “has been very confusing over the past six months,” pointing to the SEC’s actions against Coinbase as a sign of how the country is in a “weird place.”



While the U.S. crypto industry might currently be throwing out empty threats right now, there could be a real issue if regulators in America don’t move forward with thoughtful regulation.



“My conclusion is that I think it is more sabre rattling than a genuine desire to up and leave the U.S., but if the SEC continues down the path it is on, many firms will have no choice but to try another way of doing business. It is existential,” Daniel Csefalvay, a partner at BCLP law firm, told CNBC via email.

Illustration shows representations of cryptocurrencies

Crypto companies are playing poker with the SEC as agency cracks down on the industry

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106228510-1573065003737rtx77mmt-820x462.jpg" alt="" class="wp-image-424708" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106228510-1573065003737rtx77mmt-820x462.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106228510-1573065003737rtx77mmt-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106228510-1573065003737rtx77mmt-160x90.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106228510-1573065003737rtx77mmt-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/106228510-1573065003737rtx77mmt.jpg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /></figure>



NEW YORK — New York Federal Reserve President John Williams on Tuesday cautioned that interest rate increases will take a while to work their way through the economy before inflation returns to an acceptable level.



The central bank official gave no forecast for where he sees policy headed but said he doesn’t expect inflation to return to the Fed’s 2% goal until the next two years. Should inflation not come down, he said the Fed always has the option to raise rates.



He added that unemployment is likely to rise to a 4%-4.5% range, from its current 54-year low of 3.4%.



“Because of the lag between policy actions and their effects, it will take time for the [Federal Open Market Committee’s] actions to restore balance to the economy and return inflation to our 2% target,” Williams said in prepared remarks at the Economic Club of New York.



Williams spoke six days after the FOMC voted to raise its benchmark rate another quarter percentage point to a target range of 5%-5.25%. In its post-meeting statement, the committee hinted it could pause rate hikes, though it said officials will be taking a variety of factors into account when determining how to proceed.



The committee removed a key phrase from the statement that had indicated additional rate hikes would be appropriate. Williams, an FOMC voter, said that decision is now a matter of what the incoming data says.



“First of all, we haven’t said we’re done raising rates,” Williams told CNBC’s Sara Eisen during a Q&amp;A session after his speech. “We’re going to make sure we’re going to achieve our goals and we’re going to assess what’s happening in our economy and make the decision based on that data.”



“I do not see in my baseline forecast, any reason to cut interest rates this year,” he said, adding that additional rate hikes would be possible if the data doesn’t cooperate.



The current problems in the banking industry and their impact will factor into Williams’ policy outlook, he said.



“I will be particularly focused on assessing the evolution of credit conditions and their effects on the outlook for growth, employment and inflation,” Williams said.



Some positive signs Williams cited include moderation in longer-term inflation expectations and a cooling in demand for labor that has heated the jobs market and put upward pressure on wages, which nonetheless have failed to keep up with cost-of-living increases.



He also said clogged labor chains, which have been a major inflation contributor, have “improved considerably” over time.

106228510-1573065003737rtx77mmt

Fed’s John Williams says rates could be increased if inflation doesn’t come down

<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>



LONDON, May 8 (Reuters) &#8211; Global shares edged up in light trading on Monday, ahead of U.S. inflation data this week that could prove instrumental in setting expectations for the outlook for monetary policy.



The dollar came under pressure as a deadline for lawmakers to resolve a standoff over the U.S. government&#8217;s borrowing limit drew ever closer.



The MSCI All-World index, meanwhile, rose 0.2% on the day.



Friday&#8217;s robust U.S. payrolls report has prompted investors to dial back their expectations for the timing and size of the Federal Reserve&#8217;s first rate cut. Wednesday&#8217;s consumer price data is expected to show core inflation slowed moderately.



&#8220;With the Fed having hiked by 25 basis points last week and signalled a pause, this week’s inflation report is more about how long the Fed will keep rates at 5.25% before cutting,&#8221; CityIndex analyst Matt Simpson said.



&#8220;A hot print would presumably be bullish for the U.S. dollar as traders push potential cuts further into the future.&#8221;



Money markets show investors expect U.S. rates to have now peaked and could end this year below 4.40%. Against that backdrop, the dollar is close to its lowest in a year against a basket of major currencies.



The dollar index was last down 0.3% on the day at 101.05, mainly due to gains in the euro, which rose 0.3% to $1.10495.



Sterling, which has gained 4.5% against the dollar this year, was up 0.3% at $1.2664, at 10-month highs, ahead of a Bank of England policy meeting later this week.



&#8220;While it is premature to get too &#8216;beared up&#8217; on the dollar until a clearer peak in U.S. rates is seen, the U.S. banking sector travails that have no easy/costless solutions, continue to make for a mildly bearish medium-term story,&#8221; said Alan Ruskin, head of global FX strategy at Deutsche Bank.



&#8220;Certainly it imposes more growth constraints and a greater stagflationary bias than for major competing economies.&#8221;



The dollar has fared better on the yen as the Bank of Japan remains the only central bank in the developed world to not have tightened policy. The dollar rose 0.1% against the yen to 134.98 yen.



HITTING THE CEILING



In Europe, the STOXX 600 index rose 0.4%, although activity was muted by a public holiday in Britain.



S&amp;P 500 futures rose 0.1%, while Nasdaq futures were roughly flat on the day, having jumped on Friday following Apple&#8217;s upbeat results.



Later on Monday, the Federal Reserve&#8217;s survey of loan officers will draw an unusual amount of attention as markets seek to gauge the impact of regional banking stress on lending.



&#8220;The survey should point to further broad-based tightening in bank lending standards,&#8221; said Bruce Kasman, head of economic research at JPMorgan.



&#8220;Continued stress in the banking system does, of course, increase concern that a disruptive financial market event is on the horizon,&#8221; he added. &#8220;Though our analysis suggests that the impact of a credit tightening against an otherwise healthy backdrop tends to be limited.&#8221;



Bond markets stabilised after having been rattled by Friday&#8217;s jobs numbers. Yields on the two-year note were last up 4 bps at 3.9575%, while those on 10-year debt were up 2 bps at 3.462%.



U.S. Treasury Secretary Janet Yellen on Sunday warned of a possible crisis should Congress not raise the debt ceiling before the deadline in early June, which has triggered a broad selloff in short-dated U.S. government debt in the past month.



Meanwhile, the prospect of a pause in U.S. rate hikes has pushed gold towards record highs above $2,000 an ounce. Because it bears no yield itself, higher interest rates undermine investor appetite for gold. Spot gold was up 0.4% at $2,025 an ounce, having topped $2,072 last week, close to 2020&#8217;s all-time high.



In other commodity markets, oil rose 2.2% to $76.97 a barrel. Brent crude futures have lost 10% in value so far this year, as concern bubbles about the outlook for global energy demand if the economy tilts towards recession.



(Additional reporting by Wayne Cole; Editing by Shri Navaratnam, Alison Williams and Christina Fincher)

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

Shares rise, but dollar sags ahead of inflation data

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="429" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/04/KLKFIIU4R5L7BLIL3XRC7LP2MM-820x429.jpg" alt="" class="wp-image-416302" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/04/KLKFIIU4R5L7BLIL3XRC7LP2MM-820x429.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/KLKFIIU4R5L7BLIL3XRC7LP2MM-300x157.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/KLKFIIU4R5L7BLIL3XRC7LP2MM-160x84.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/KLKFIIU4R5L7BLIL3XRC7LP2MM-768x402.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/KLKFIIU4R5L7BLIL3XRC7LP2MM.jpg 1200w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Equinor&#8217;s Johan Sverdrup oilfield platforms and accommodation jack-up rig Haven are pictured in the North Sea, Norway December 3, 2019. REUTERS/Ints Kalnins</figcaption></figure>



The recent slide in oil prices is starting to bottom out, according to analysts who predict that a more significant pickup in the coming quarters is in the cards.



Oil prices saw their third consecutive weekly decline last week, marking the longest losing run this year. However, that may soon come to pass, according to some market watchers.



“Now it definitely feels like they’re at the bottom — there are multiple signs of that,” said Citi’s Global Head of Commodities Research Ed Morse.



“Inventories built a lot during the first and second months of the year, and then they’ve come off. So that’s part of figuring that it’s at the bottom.”



He added that markets are currently facing the impact of OPEC+’s recent production cuts, and the world is moving into a higher demand season. Last month, the oil cartel announced it was slashing output by 1.16 million barrels per day. The cuts came into effect in May and will run until the end of 2023. The production declines prompted some analysts to warn prices could surge to triple digits, which failed to materialize.



“We’re looking more positively at the second and third quarter than what’s happened in the first quarter,” Morse said.



Financial services company ANZ also believes that the oil slump could bottom out soon, with global oil demand set to grow by 2 million barrels per day, keeping the market under-supplied throughout 2023.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
A tightening oil market in H2 2023 will now rely more heavily on OPEC+, particularly Russia.
<cite>Vivek Dhar COMMONWEALTH BANK OF AUSTRALIA</cite></blockquote>



 “OPEC+ output cuts and a rebound in China’s demand will likely offset slower demand elsewhere … Therefore, we expect prices to bottom out soon,” the bank wrote in a research report dated May 8.



Similarly, Goldman Sachs has maintained its forecasts for a higher crude oil price tag.



“Our forecast remains that Brent rises to $95 per barrel by December and $100 per barrel by April 2024 as we expect large deficits in H2,” the investment bank stated in a report released over the weekend.



Global benchmark Brent traded 1.74% higher at $76.61 a barrel Monday, while the U.S. West Texas Intermediate futures stood 1.92% at $72.71 per barrel.



Oil’s sharp slide



 Brent had slipped 8% year-to-date by last Friday. On Wednesday, the benchmark posted a close of $72.33, marking the lowest since December 2021, according to data from Refinitiv. On a similar vein, West Texas Intermediate has seen a 11% year-to-date fall.



The slip in prices is attributed to a confluence of economic concerns.



Last Wednesday, the U.S. Federal Reserve hiked interest rates by a quarter of a percentage point, raising investors’ concerns that slower economic growth could dent energy demand.



“Pressure from anti-inflationary action undertaken by both the U.S. Fed and the ECB [European Central Bank], have resulted in lackluster demand growth for most of the OECD, with recession risks lying ahead,” Morse wrote in an e-mail.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/04/1x-1-3-820x461.jpg" alt="" class="wp-image-400703" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/04/1x-1-3-820x461.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/1x-1-3-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/1x-1-3-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/1x-1-3-1536x864.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/1x-1-3.jpg 2000w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">An OPEC branded flag sits on a table ahead of the 169th Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Thursday, June 2, 2016. Saudi Arabia is ready to consider a surprise deal with fellow OPEC members, attempting to mend divisions that had grown so wide many dubbed the group as good as dead. Photographer: Akos Stiller/Bloomberg via Getty Images</figcaption></figure>



Additionally, a surprise contraction in China’s April manufacturing activity also threw a shade of doubt over the recovery of the country’s commodity demand.



“The narrative that oil markets will tighten later this year because of rising Chinese demand is being challenged,” Commonwealth Bank of Australia wrote in a daily note dated May 8.



“A tightening oil market in H2 2023 will now rely more heavily on OPEC+, particularly Russia,” CBA’s Vivek Dhar wrote.



And Moscow’s oil production has proved more resilient than expected.



“Russia’s oil production and exports have been resilient despite their announcement production cut of 500,000 barrels per day,” said Kang Wu, S&amp;P’s head of global demand and Asia analytics.



The recent slide is reminiscent of the downside volatility in March and “forces’ an evaluation of whether or not the OPEC will deliver another Saudi-led cut,” Mizuho’s Vishnu Varathan wrote in a note dated May 8.



But S&amp;P’s Wu reckons there is still a “big uncertainty” as to what the cartel’s next move will be.



“Unless they see real demand destruction either due to a weakening economy or surging prices, they probably will hold on a bit longer to decide what to do.”

KLKFIIU4R5L7BLIL3XRC7LP2MM

Oil’s sharp slide has surprised markets. But some traders now see a bottom for prices

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107223339-1681231339469-gettyimages-1251595250-AFP_33CZ7EN-820x547.jpeg" alt="" class="wp-image-424649" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107223339-1681231339469-gettyimages-1251595250-AFP_33CZ7EN-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107223339-1681231339469-gettyimages-1251595250-AFP_33CZ7EN-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107223339-1681231339469-gettyimages-1251595250-AFP_33CZ7EN-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107223339-1681231339469-gettyimages-1251595250-AFP_33CZ7EN-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107223339-1681231339469-gettyimages-1251595250-AFP_33CZ7EN-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/107223339-1681231339469-gettyimages-1251595250-AFP_33CZ7EN-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">U.S. Treasury Secretary Janet Yellen holds a press conference at the US Treasury Department in Washington, DC, on April 11, 2023. Stefani Reynolds | AFP | Getty Images</figcaption></figure>



Treasury Secretary Janet Yellen on Sunday said that failure to raise the debt ceiling will cause a “steep economic downturn” in the U.S., and she reiterated her warning that the Treasury Department may run out of measures to pay its debt obligations by June.



“Our current projection is that in early June, a day will come when we’re unable to pay our bills unless Congress raises the debt ceiling, and it’s something I strongly urge Congress to do,” Yellen told ABC’s “This Week.”



Yellen said the U.S. has already been using “extraordinary measures” to avoid default, and it’s not something the Treasury Department can continue to do. She said Congress needs to take action to avoid “economic calamity.”



“It’s widely agreed that financial and economic chaos will ensue,” Yellen said.



Lawmakers have been trying to find a path forward to raise or suspend the debt ceiling, which would enable the U.S. to pay its bills on time. But they’re currently at an impasse, raising the prospect of default.



Yellen has called for decisive action, and quickly. In a letter to House Speaker Kevin McCarthy, R-Calif., Monday, Yellen said new data on tax receipts forced the department to move up its estimate of when the Treasury Department “will be unable to continue to satisfy all of the government’s obligations” to potentially as early as June 1. This date is earlier than Wall Street economists were expecting.



On Monday, President Joe Biden called the “big four” congressional leaders — Senate Majority Leader Chuck Schumer, D-N.Y., Senate Minority Leader Mitch McConnell, R-Ky., McCarthy and House Democratic Leader Hakeem Jeffries, N.Y. — to invite them to a May 9 meeting at the White&nbsp;House&nbsp;to discuss the debt limit, a White House official told NBC.



Jeffries said Sunday that the meeting Biden has organized is “very important” and will help the U.S. find a way forward.



“We have to avoid default, period,” he told NBC’s “Meet the Press.”



But for Sen. James Lankford, R-Okla., the meeting about the debt ceiling should have happened much sooner. He said the issue was raised the week after the election in November, and that President Biden’s refusal to negotiate has been “stunning.”



“Everyone knew this was coming and the president’s refused to be able to negotiate about it,” he told ABC’s “This Week” on Sunday.

107223339-1681231339469-gettyimages-1251595250-AFP_33CZ7EN

Yellen warns of ‘economic chaos’ unless Congress raises the debt ceiling

<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.

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