<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107094949-16589488462022-07-27t185755z_1401356456_rc2ikv9v3blg_rtrmadp_0_usa-fed-820x547.jpeg" alt="" class="wp-image-419969" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107094949-16589488462022-07-27t185755z_1401356456_rc2ikv9v3blg_rtrmadp_0_usa-fed-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107094949-16589488462022-07-27t185755z_1401356456_rc2ikv9v3blg_rtrmadp_0_usa-fed-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107094949-16589488462022-07-27t185755z_1401356456_rc2ikv9v3blg_rtrmadp_0_usa-fed-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107094949-16589488462022-07-27t185755z_1401356456_rc2ikv9v3blg_rtrmadp_0_usa-fed-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107094949-16589488462022-07-27t185755z_1401356456_rc2ikv9v3blg_rtrmadp_0_usa-fed-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107094949-16589488462022-07-27t185755z_1401356456_rc2ikv9v3blg_rtrmadp_0_usa-fed-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Federal Reserve Board Chairman Jerome Powell speaks during a news conference following a two-day meeting of the Federal Open Market Committee (FOMC) in Washington, July 27, 2022.
Elizabeth Frantz | Reuters</figcaption></figure>



WASHINGTON — The Federal Reserve on Wednesday enacted a quarter percentage point interest rate increase, expressing caution about the recent banking crisis and indicating that hikes are nearing an end. Along with its ninth hike since March 2022, the rate-setting Federal Open Market Committee noted that future increases are not assured and will depend largely on incoming data. “The Committee will closely monitor incoming information and assess the implications for monetary policy,” the FOMC’s post-meeting statement said. “The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.“ That wording is a departure from previous statements which indicated “ongoing increases” would be appropriate to bring down inflation.



While comments Fed Chair Jerome Powell made during a news conference were taken to mean that the central bank may be nearing the end of its rate-hiking cycle, he qualified that the inflation fight isn’t over.



“The process of getting inflation back down to 2% has a long way to go and is likely to be bumpy,” the central bank leader said.



Also, Powell acknowledged that the recent events in the banking system were likely to result in tighter credit conditions, and that was likely why the central bank’s tone had softened.



Still, he said that despite market pricing to the contrary, “rate cuts are not in our base case” for the remainder of 2023.



Stocks initially rose after the Fed’s decision, but slumped following Powell’s remarks.



“The U.S. banking system is sound and resilient,” the committee said, in its prepared statement. “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks.”



During the news conference, Powell said the FOMC considered a pause in rate hikes in light of the banking crisis, but ultimately unanimously approved the decision to raise rates due to intermediate data on inflation and the strength of the labor market.



“We are committed to restoring price stability and all of the evidence says that the public has confidence that we will do so, that will bring inflation down to 2% over time. It is important that we sustain that confidence with our actions, as well as our words,” Powell said.



The increase takes the benchmark federal funds rate to a target range between 4.75%-5%. The rate sets what banks charge each other for overnight lending but feeds through to a multitude of consumer debt like mortgages, auto loans and credit cards.



Projections released along with the rate decision point to a peak rate of 5.1%, unchanged from the last estimate in December and indicative that a majority of officials expect only one more rate hike ahead.



Data released along with the statement shows that seven of the 18 Fed officials who submitted estimates for the “dot plot” see rates going higher than the 5.1% “terminal rate.“



The next two years’ worth of projections also showed considerable disagreement among members, reflected in a wide dispersion among the “dots.” Still, the median of the estimates points to a 0.8 percentage point reduction in rates in 2024 and 1.2 percentage points worth of cuts in 2025.



The statement eliminated all references to the impact of Russia’s invasion of Ukraine.



Markets had been closely watching the decision, which came with a higher degree of uncertainty than is typical for Fed moves.



Earlier this month, Powell had indicated the central bank may have to take a more aggressive path to tame inflation. But a fast-moving banking crisis thwarted any notion of a more hawkish move – and contributed to general market sentiment that the Fed will be cutting rates before the year comes to a close.



Estimates released Wednesday of where Federal Open Market Committee members see rates, inflation, unemployment and gross domestic product underscored the uncertainty for the policy path.



Officials also tweaked their economic projections. They slightly increased their expectations for inflation, with a 3.3% rate pegged for this year, compared with 3.1% in December. Unemployment was lowered a notch to 4.5%, while the outlook for GDP nudged down to 0.4%.



The estimates for the next two years were little changed, except the GDP projection for 2024 came down to 1.2% from 1.6% in December.



The forecasts come amid a volatile backdrop.



Despite the banking turmoil and volatile expectations around monetary policy, markets have held their ground. The Dow Jones Industrial Average is up some 2% over the past week, though the 10-year Treasury yield has risen about 20 basis points, or 0.2 percentage points, during the same period. While late 2022 data had pointed to some softening in inflation, recent reports have been less encouraging. The personal consumption expenditures price index, a favorite inflation gauge for the Fed, rose 0.6% in January and was up 5.4% from a year ago – 4.7% when stripping out food and energy. That’s well above the central bank’s 2% target, and the data prompted Powell on March 7 to warn that interest rates likely would rise more than expected.



But the banking issues have complicated the decision-making calculus as the Fed’s pace of tightening has contributed to liquidity problems. Closures of Silicon Valley Bank and Signature Bank, and capital issues at Credit Suisse and First Republic, have raised concerns about the state of the industry. While big banks are considered well capitalized, smaller institutions have faced liquidity crunches due to the rapidly rising interest rates that have made otherwise safe long-term investments lose value. Silicon Valley, for instance, had to sell bonds at a loss, triggering a crisis of confidence. The Fed and other regulators stepped in with emergency measures that seem to have stemmed immediate funding concerns, but worries linger over how deep the damage is among regional banks. At the same, recession concerns persist as the rate increases work their way through the economic plumbing. An indicator that the New York Fed produces using the spread between 3-month and 10-year Treasurys put the chance of a contraction in the next 12 months at about 55% as of the end of February. The yield curve inversion has increased since then. However, the Atlanta Fed’s GDP tracker puts first-quarter growth at 3.2%. Consumers continue to spend – though credit card usage is on the rise – and unemployment was at 3.6% while payroll growth has been brisk.

107094949-16589488462022-07-27t185755z_1401356456_rc2ikv9v3blg_rtrmadp_0_usa-fed

Fed hikes rates by a quarter percentage point, indicates increases are near an end

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209502-16789175212023-03-15t213821z_882336725_rc2kos9j9oyu_rtrmadp_0_global-markets-view-asia-820x462.jpeg" alt="" class="wp-image-423750" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209502-16789175212023-03-15t213821z_882336725_rc2kos9j9oyu_rtrmadp_0_global-markets-view-asia-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209502-16789175212023-03-15t213821z_882336725_rc2kos9j9oyu_rtrmadp_0_global-markets-view-asia-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209502-16789175212023-03-15t213821z_882336725_rc2kos9j9oyu_rtrmadp_0_global-markets-view-asia-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209502-16789175212023-03-15t213821z_882336725_rc2kos9j9oyu_rtrmadp_0_global-markets-view-asia-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209502-16789175212023-03-15t213821z_882336725_rc2kos9j9oyu_rtrmadp_0_global-markets-view-asia.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">The logo of Swiss bank Credit Suisse is seen at an office building in Zurich, Switzerland February 21, 2022. Arnd Wiegmann | Reuters</figcaption></figure>



Credit Suisse received a liquidity lifeline from the Swiss National Bank this week after its share price plunged to an all-time low, but the embattled lender’s path to the brink has been a long and tumultuous one.



The announcement that Credit Suisse would borrow up to 50 billion Swiss francs ($54 billion) from the central bank came after consecutive sessions of steep drops in its share price. It made Credit Suisse the first major bank to receive such an intervention since the 2008 Global Financial Crisis.



The bank’s shares ended Wednesday at 1.697 Swiss francs — down almost 98% from the stock’s all-time high in April 2007, while credit default swaps, which insure bondholders against a company defaulting, soared to new record highs this week.



It comes after years of investment banking underperformance and a litany of scandals and risk management failures.



<h3 class="wp-block-heading" id="h-scandals">Scandals</h3>



Credit Suisse is currently undergoing a massive strategic overhaul in a bid to address these chronic issues. Current CEO and Credit Suisse veteran Ulrich Koerner took over from Thomas Gottstein in July, as poor investment bank performance and mounting litigation provisions continued to hammer earnings.



Gottstein took the reins in early 2020 following the resignation of predecessor Tidjane Thiam in the wake of a bizarre spying scandal, in which UBS-bound former wealth management boss Iqbal Khan was tailed by private contractors allegedly at the direction of former COO Pierre-Olivier Bouee. The saga also saw the suicide of a private investigator and the resignations of a slew of executives.



The former head of Credit Suisse’s flagship domestic bank widely perceived as a steady hand, Gottstein sought to lay to rest an era plagued by scandal. That mission was short-lived.



In early 2021, he found himself dealing with the fallout from two huge crises. The bank’s exposure to the collapses of U.S. family hedge fund Archegos Capital and British supply chain finance firm Greensill Capital saddled it with massive litigation and reimbursement costs.



These oversight failures resulted in a massive shakeup of Credit Suisse’s investment banking, risk and compliance and asset management divisions.



In April 2021, former Lloyds Banking Group CEO Antonio Horta-Osorio was brought in to clean up the bank’s culture after the string of scandals, announcing a new strategy in November.



But in January 2022, Horta-Osorio was forced to resign after being found to have twice violated Covid-19 quarantine rules. He was replaced by UBS executive Axel Lehmann.



In February 2022, the bank faced fresh scrutiny after leaked data purported to show it had served human rights abusers, corrupt politicians and sanctioned businessmen for decades.



Legacy compliance skeletons also continued to emerge from the closet. In June 2022, Credit Suisse was found guilty in Switzerland’s Federal Criminal Court of failing to prevent an alleged Bulgarian cocaine trafficking gang from laundering profits via the bank between 2004 and 2008.



With litigation provisions mounting and performance still trailing its peers, the losses deepened in both the company’s earnings and its share price. After a 1.593 billion Swiss franc loss in the second quarter of 2022, and two months after Lehmann staunchly denied talks of a change in leadership, Credit Suisse announced that Gottstein would be replaced with Koerner.



The bank began another costly sweeping transformation project as Koerner and Lehmann set out to return the embattled lender to long-term stability and profitability.



This included the spin-off of Credit Suisse’s investment banking division to form U.S.-based CS First Boston, a significant cut in exposure to risk-weighted assets and a $4.2 billion capital raise, which saw the Saudi National Bank take a 9.9% stake to become the largest shareholder.



<h3 class="wp-block-heading">March madness</h3>



Credit Suisse reported a full-year net loss of 7.3 billion Swiss francs for 2022, predicting another “substantial” loss in 2023 before returning to profitability in 2024.



Reports of liquidity concerns late in the year led to huge outflows of assets under management, which hit 110.5 billion Swiss francs in the fourth quarter.



After yet another sharp share price fall on the back of its annual results in early February, Credit Suisse shares entered March 2023 trading at a paltry 2.85 Swiss francs per share, but things were about to get worse still.



On March 9, the company was forced to delay its 2022 annual report after a late call from the U.S. Securities and Exchange Commission relating to a “technical assessment of previously disclosed revisions to the consolidated cash flow statements” in 2019 and 2020.



The report was eventually published the following Tuesday, and Credit Suisse noted that “material weaknesses” were found in its financial reporting processes for 2021 and 2022, though it confirmed that its previously announced financial statements were still accurate.



Having already suffered the global risk-off jolt resulting from the collapse of U.S.-based Silicon Valley Bank, the combination of these remarks and confirmation that outflows had not reversed compounded Credit Suisse’s share price losses.



And on Wednesday, it went into freefall, as top investor the Saudi National Bank said it was not able to provide any more cash to Credit Suisse due to regulatory restrictions. Despite the SNB clarifying that it still believed in the transformation project, shares dived 24% to an all-time low.



On Wednesday evening, Credit Suisse announced that it would exercise its option to borrow up to 50 billion Swiss francs from the Swiss National Bank under a covered loan facility and a short-term liquidity facility.



The Swiss National Bank and the Swiss Financial Market Supervisory Authority said in a statement Wednesday that Credit Suisse “meets the capital and liquidity requirements imposed on systemically important banks.”



The support from the central bank and reassurance on Credit Suisse’s financial position led to a 20% pop in the share price on Thursday, and may have reassured depositors for now.



However, analysts suggest questions will remain as to where the market will place the stock’s true value for shareholders in the absence of this buffer from the Swiss authorities.

107209502-16789175212023-03-15t213821z_882336725_rc2kos9j9oyu_rtrmadp_0_global-markets-view-asia

From spying to Swiss bailout: How years of turbulence at Credit Suisse came to a head

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209603-1678928783663-gettyimages-1473731745-dscf8092_424f6227-dc3d-4a53-85c5-5ca722db69e8-820x461.jpeg" alt="" class="wp-image-423718" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209603-1678928783663-gettyimages-1473731745-dscf8092_424f6227-dc3d-4a53-85c5-5ca722db69e8-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209603-1678928783663-gettyimages-1473731745-dscf8092_424f6227-dc3d-4a53-85c5-5ca722db69e8-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209603-1678928783663-gettyimages-1473731745-dscf8092_424f6227-dc3d-4a53-85c5-5ca722db69e8-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209603-1678928783663-gettyimages-1473731745-dscf8092_424f6227-dc3d-4a53-85c5-5ca722db69e8-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209603-1678928783663-gettyimages-1473731745-dscf8092_424f6227-dc3d-4a53-85c5-5ca722db69e8-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107209603-1678928783663-gettyimages-1473731745-dscf8092_424f6227-dc3d-4a53-85c5-5ca722db69e8.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



Credit Suisse announced it will be borrowing up to 50 billion Swiss francs ($53.68 billion) from the Swiss National Bank under a covered loan facility and a short-term liquidity facility.



The decision comes shortly after shares of the lender fell sharply Wednesday, hitting an all-time low for a second consecutive day after its top investor Saudi National Bank was quoted as saying it won’t be able to provide further assistance.



The latest steps will “support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs,” the company said in an announcement.



In addition, the bank is making a cash tender offer in relation to ten U.S. dollar denominated senior debt securities for an aggregate consideration of up to $2.5 billion – as well as a separate offer to four Euro denominated senior debt securities for up to an aggregate 500 million euros, the company said.



“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” Credit Suisse CEO Ulrich Koerner said.



“We thank the SNB and FINMA as we execute our strategic transformation,” he said, referring to the Swiss Financial Market Supervisory Authority.



“My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs.”



U.S. futures climbed, with the Dow Jones Industrial Average futures gaining by more than 100 points after the announcement. S&amp;P 500 futures also rose 0.45% and Nasdaq 100 futures climbed 0.54%.



<h2 class="wp-block-heading" id="h-little-bit-of-panic"><a></a>‘Little bit of panic’</h2>



Saudi National Bank told CNBC that Credit Suisse has not asked for financial assistance and that Wednesday’s panic was unwarranted.



“There has been no discussions with Credit Suisse about providing assistance,” said Ammar Al Khudairy, chairman of Saudi National Bank, Credit Suisse’s largest shareholder.



“I don’t know where the word ‘assistance’ came from, there has been no discussions whatsoever since October,” he told CNBC’s Hadley Gamble.



He added that the latest market turmoil in the banking sector is “isolated” and stems from “a little bit of panic.”



“If you look at how the entire banking sector has dropped, unfortunately, a lot of people were just looking for excuses &#8230; it’s panic, a little bit of panic,” he said on CNBC’s “Capital Connection.”



<h2 class="wp-block-heading"><a></a>‘Interconnected’ banks</h2>



In the wake of the Credit Suisse saga, Tabbush Report founder Daniel Tabbush emphasized that a wider concern for the banking sector is trust.



“The obvious problem is a restoration of trust, and to stop the deposit flight, which maybe this has been partly or wholly addressed by the central bank,” he told CNBC’s “Street Signs Asia.”



“But what is more difficult is not simply containing its issues, is really how this feeds through to so many interconnected banks, where there are Credit Swiss contracts – where there are derivatives, where there are facilities – which is really the next order issue,” he said.



Banks in the Asia-Pacific also pared some earlier losses – Japan’s Topix earlier plunged by more than 2% and last traded 1.4% lower.



The Commonwealth Bank of Australia pared most of its losses in volatile trading – it traded 0.15% lower after falling as much as 1.97% earlier. Westpac Banking and National Australia Bank fell as much as 2.35% and 1.81% respectively before erasing some declines. They were last down 1.34% and 0.58% lower, respectively.



Some South Korean banks also fell as much as 2% earlier before partially reversing declines.



The Swiss franc remained volatile following the announcement, strengthening 0.17% to 0.9315 against the U.S. dollar. The Japanese yen also strengthened further to trade at 132.86 against the greenback.



Earlier this week, Credit Suisse chairman Axel Lehmann told CNBC’s Hadley Gamble that the recent collapse of Silicon Valley Bank is “local and contained.”



When asked if he would rule out some kind of government assistance in the future, Lehmann said, “We are regulated, we have strong capital ratios, very strong balance sheet. We are all hands on deck. So that’s not the topic whatsoever.”



– CNBC’s Lim Hui Jie contributed to this report.

107209603-1678928783663-gettyimages-1473731745-dscf8092_424f6227-dc3d-4a53-85c5-5ca722db69e8

Credit Suisse to borrow up to nearly $54 billion from Swiss National Bank

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107204371-1678203690205-gettyimages-1247857616-powell_hearing610_030723-820x461.jpeg" alt="" class="wp-image-423684" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107204371-1678203690205-gettyimages-1247857616-powell_hearing610_030723-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107204371-1678203690205-gettyimages-1247857616-powell_hearing610_030723-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107204371-1678203690205-gettyimages-1247857616-powell_hearing610_030723-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107204371-1678203690205-gettyimages-1247857616-powell_hearing610_030723-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107204371-1678203690205-gettyimages-1247857616-powell_hearing610_030723-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107204371-1678203690205-gettyimages-1247857616-powell_hearing610_030723.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



When the Federal Reserve starts to raise interest rates, it generally keeps doing so until something breaks, or so goes the collective Wall Street wisdom.



So with the second- and third-largest bank failures ever in the books happening just over the past few days, and worries of more to come, that would seem to qualify as significant breakage and reason for the central bank to back off.



Not so fast.



Even with the failure over the past several days of Silicon Valley Bank and Signature Bank that forced regulators to spring into action, markets still expect the Fed to keep up its inflation-fighting efforts. Surging bond yields played into the demise of SVB in particular as the bank faced some $16 billion in unrealized losses from held-to-maturity Treasurys that had lost principal value due to higher rates.



Still, the dramatic events may not even technically qualify as something breaking in the collective Wall Street mind.



“No, it doesn’t,” said Quincy Krosby, chief global strategist at LPL Financial. “Is this enough to qualify as the kind of break that would have the Fed pivot? The market overall doesn’t think so.”



While market pricing was volatile Monday, the bias was toward a Fed that would continue tightening monetary policy. Traders assigned an 85% probability of a 0.25 percentage point interest rate increase when the Federal Open Market Committee meets March 21-22 in Washington, D.C., according to a CME Group estimate. For a brief period last week, markets were expecting a 0.50-point move, following remarks from Fed Chair Jerome Powell indicating the central bank was concerned about recent hot inflation data.



<h2 class="wp-block-heading" id="h-pondering-a-pivot"><a></a>Pondering a pivot</h2>



Goldman Sachs on Monday said it does not expect the Fed to hike rates at all this month, though there were few, if any, other Wall Street forecasters who shared that view. Both Bank of America and Citigroup said they expect the Fed to make the quarter-point move, likely followed by a few more.



Moreover, even though Goldman said it figures the Fed will skip a hike in March, it still is looking for quarter-point increases in May, June and July.



“We think Fed officials are likely to prioritize financial stability for now, viewing it as the immediate problem and high inflation as a medium-term problem,” Goldman told clients in a note.



Krosby said the Fed is at least likely to discuss the idea of holding off on an increase.



Next week’s meeting is a big one in that the FOMC not only will make a decision on rates but also will update its projections for the future, including its outlook for GDP, unemployment and inflation.



“Undoubtedly, they’re discussing it. The question is, will they be worried perhaps that that nurtures fear?” she said. “They should telegraph [before the meeting] to the market that they’re going to pause, or that they’re going to continue fighting inflation. This is all up for discussion.”



<h2 class="wp-block-heading" id="h-managing-the-message"><a></a>Managing the message</h2>



Citigroup economist Andrew Hollenhorst said pausing — a term Fed officials generally dislike — now would send the wrong message to the market.



The Fed has sought to burnish its credentials as an inflation fighter after it spent months disavowing rising prices as nothing more than a “transitory” effect from the early days of the Covid pandemic. Powell repeatedly has said the Fed will stay the course until it makes significant progress in getting inflation down to its 2% target.



Citi, in fact, sees the Fed continuing to raise its benchmark funds rate to a target range of 5.5%-5.75%, compared to the current 4.5%-4.75% and well above the market pricing of 4.75%-5%.



“Fed officials are unlikely to pivot at next week’s meeting by pausing rate hikes, in our view,” Hollenhorst said in a client note. “Doing so would invite markets and the public to assume that the Fed’s inflation fighting resolve is only in place up to the point when there is any bumpiness in financial markets or the real economy.”



Bank of America said it remains “watchful” for any signs that the current banking crisis is spreading, a condition that could change the forecast.



“If the Fed is successful at corralling the recent market volatility and ringfencing the traditional banking sector, then it should be able to continue its gradual pace of rate hikes until monetary policy is sufficiently restrictive,” Michael Gapen, BofA’s chief U.S. economist, told clients. “Our outlook for monetary policy is always data dependent; at present it is also dependent on stresses in financial markets.”



Powell also has emphasized the importance of using data to determine the direction in which he wants to steer policy.



The Fed will get its final look at inflation metrics this week when the Labor Department releases its February consumer price index on Tuesday and the producer price counterpart on Wednesday. A New York Fed survey released Monday showed that one-year inflation expectations plummeted during the month.

107204371-1678203690205-gettyimages-1247857616-powell_hearing610_030723

Something broke, but the Fed is still expected to go through with rate hikes

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107207453-1678708903371-gettyimages-1247997171-FIRST_REPUBLIC_BANK-820x547.jpeg" alt="" class="wp-image-423668" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107207453-1678708903371-gettyimages-1247997171-FIRST_REPUBLIC_BANK-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107207453-1678708903371-gettyimages-1247997171-FIRST_REPUBLIC_BANK-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107207453-1678708903371-gettyimages-1247997171-FIRST_REPUBLIC_BANK-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107207453-1678708903371-gettyimages-1247997171-FIRST_REPUBLIC_BANK-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107207453-1678708903371-gettyimages-1247997171-FIRST_REPUBLIC_BANK-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107207453-1678708903371-gettyimages-1247997171-FIRST_REPUBLIC_BANK-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A First Republic Bank branch in New York, US, on Friday, March 10, 2023. Jeenah Moon | Bloomberg | Getty Images</figcaption></figure>



First Republic Bank led a decline in bank shares Monday that came even after regulators’ extraordinary actions Sunday evening to backstop all depositors in failed Silicon Valley Bank and Signature Bank and offer additional funding to other troubled institutions.



San Francisco’s First Republic shares lost 65% in premarket trading Monday after declining 33% last week. PacWest Bancorp dropped 24%, and Western Alliance Bancorp lost 61% in the premarket. Zions Bancorporation shed 21%, while KeyCorp fell 12%. Bank of America lost 4% in premarket trading, while Charles Schwab tumbled 8% early Monday.



This is a developing story&#8230;

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First Republic drops 60%, leads decline in bank stocks despite government’s backstop of SVB

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/106852435-1615457889957-gettyimages-1227655367-_dsc5275-820x547.jpeg" alt="" class="wp-image-423660" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/106852435-1615457889957-gettyimages-1227655367-_dsc5275-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/106852435-1615457889957-gettyimages-1227655367-_dsc5275-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/106852435-1615457889957-gettyimages-1227655367-_dsc5275-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/106852435-1615457889957-gettyimages-1227655367-_dsc5275-768x513.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/106852435-1615457889957-gettyimages-1227655367-_dsc5275-1536x1025.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/106852435-1615457889957-gettyimages-1227655367-_dsc5275-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Goldman Sachs logo displayed on a smartphone. Omar Marques | SOPA Images | LightRocket via Getty Images</figcaption></figure>



Goldman Sachs no longer sees a case for the Federal Reserve to deliver a rate hike at its meeting next week, citing “recent stress” in the financial sector.



Earlier Sunday, U.S. regulators announced measures to stem contagion fears following the collapse of Silicon Valley Bank. Regulators also closed Signature Bank, citing systemic risk.



“In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22,” Goldman economist Jan Hatzius said in a Sunday note.



The firm had previously expected the Federal Reserve to hike rates by 25 basis points. Last month, the rate-setting Federal Open Market Committee boosted the federal funds rate by a quarter percentage point to a target range of 4.5% to 4.75%, the highest since October 2007.



Goldman Sachs economists said the package of relief measures announced Sunday stops short of similar moves made during the 2008 financial crisis. The Treasury designated SVB and Signature as systemic risks, while the Fed created a new Bank Term Funding Program to backstop institutions hit by market instability following the SVB failure.



“Both of these steps are likely to increase confidence among depositors, though they stop short of an FDIC guarantee of uninsured accounts as was implemented in 2008,” they wrote.



“Given the actions announced today, we do not expect near-term actions in Congress to provide guarantees,” the economists wrote, adding that they expect the latest measures to “provide substantial liquidity to banks facing deposit outflows.”



Goldman Sachs added that they still expect to see 25 basis point hikes in May, June and July, reiterating their terminal rate expectation of 5.25% to 5.5%.



— CNBC’s Michael Bloom, Jeff Cox contributed to this post

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Goldman Sachs no longer expects the Fed to hike rates in March, cites stress on banking system

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="609" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/u-s-government-steps-in-and-says-people-with-funds-deposited-at-svb-will-be-able-to-access-their-money-scaled-1-820x609.jpg" alt="" class="wp-image-423656" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/u-s-government-steps-in-and-says-people-with-funds-deposited-at-svb-will-be-able-to-access-their-money-scaled-1-820x609.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/u-s-government-steps-in-and-says-people-with-funds-deposited-at-svb-will-be-able-to-access-their-money-scaled-1-300x223.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/u-s-government-steps-in-and-says-people-with-funds-deposited-at-svb-will-be-able-to-access-their-money-scaled-1-121x90.jpg 121w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/u-s-government-steps-in-and-says-people-with-funds-deposited-at-svb-will-be-able-to-access-their-money-scaled-1-768x571.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/u-s-government-steps-in-and-says-people-with-funds-deposited-at-svb-will-be-able-to-access-their-money-scaled-1-1536x1141.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/u-s-government-steps-in-and-says-people-with-funds-deposited-at-svb-will-be-able-to-access-their-money-scaled-1-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A man walks by the headquarters of Silicon Valley Bank on March 10, 2023 in Santa Clara, California. Liu Guanguan | Getty Images</figcaption></figure>



Banking regulators devised a plan Sunday to backstop depositors with money at Silicon Valley Bank, a critical step in stemming a feared systemic panic brought on by the collapse of the tech-focused institution.



Depositors at both failed SVB and Signature Bank in New York, which was shuttered Sunday over similar systemic contagion fears, will have full access to their deposits as part of multiple moves that officials approved over the weekend. Signature had been a popular funding source for cryptocurrency companies.



Those with money at the bank will have full access starting Monday.



The Treasury Department designated both SVB and Signature as systemic risks, giving it authority to unwind both institutions in a way that it said “fully protects all depositors.” The FDIC’s deposit insurance fund will be used to cover depositors, many of whom were uninsured due to the $250,000 cap on guaranteed deposits.



Along with that move, the Federal Reserve also said it is creating a new Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the SVB failure.



A joint statement from the various regulators involved said there would be no bailouts and no taxpayer costs associated with any of the new plans. Shareholders and some unsecured creditors will not be protected and will lose all of their investments.



“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” said a joint statement from Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen and FDIC Chair Martin Gruenberg.



The Fed facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral such as Treasurys, agency debt and mortgage-backed securities.



“This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy,” the Fed said in a statement. “The Federal Reserve is prepared to address any liquidity pressures that may arise.”



The Treasury Department is providing up to $25 billion from its Exchange Stabilization Fund as a backstop for any potential losses from the funding program. A senior Fed official said the Treasury program likely won’t be needed and will exist only as a safeguard.



The same official expressed confidence the various moves would shore up confidence in the financial system, providing funding guarantees and liquidity considered essential during financial crises.



Along with the facility, the Fed said it will ease conditions at its discount window, which will use the same conditions as the BTFP. However, the new facility offers more favorable terms, with a longer duration of loans of one year vs. 90 days. Also, securities will be valued at par value rather than the market value assessed at the discount window.



The haircut, or reduction in principal, issue is critical as there are estimated to be some $600 billion in unrealized losses that institutions possess in held-to-maturity Treasurys and mortgage-backed securities.



“This should be enough to stop any contagion from spreading and taking down more banks, which can happen in the blink of an eye in the digital age,” Paul Ashworth, chief North America economist at Capital Economics, said in a client note. “But contagion has always been more about irrational fear, so we would stress that there is no guarantee this will work.”



Markets reacted positively to the developments, with futures tied to the Dow Jones Industrial Average leaping more than 300 points in early trading. Cryptocurrency prices also rallied strongly, with bitcoin up more than 7%.



The rescue plans rekindled memories of the financial crisis, but Yellen said Sunday morning that there would be no SVB bailout.



“We’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs,” Yellen said on CBS’ “Face the Nation.”



President Joe Biden praised Sunday’s initiatives but indicated there would be consequences from the crisis.



“I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again,” Biden said.



The SVB failure was the nation’s largest collapse of a financial institution since Washington Mutual went under in 2008.



The dramatic moves come just days after SVB, a key financing hub for tech companies, reported that it was struggling, triggering a run on the bank’s deposits.



Authorities had spent the weekend looking for a larger institution to buy SVB, but came up short. PNC was one interested buyer but backed out, a source told CNBC’s Sara Eisen.



A senior Treasury official said Sunday evening that a sale is still possible for Silicon Valley Bank. The initiatives Sunday were done to head off further potential problems.



The scenario harkened back to the Sept. 15, 2008 collapse of investment banking giant Lehman Brothers, which also found itself insolvent and in search of a buyer. The government also was unsuccessful in that case following a weekend of wrangling, triggering the worst of the Global Financial Crisis.

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U.S. government steps in and says people with funds deposited at SVB will be able to access their money

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107202762-1677839435526-gettyimages-1247623523-UK_LSEG-820x462.jpeg" alt="" class="wp-image-423618" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107202762-1677839435526-gettyimages-1247623523-UK_LSEG-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107202762-1677839435526-gettyimages-1247623523-UK_LSEG-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107202762-1677839435526-gettyimages-1247623523-UK_LSEG-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107202762-1677839435526-gettyimages-1247623523-UK_LSEG-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107202762-1677839435526-gettyimages-1247623523-UK_LSEG.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">City workers in Paternoster Square, where the headquarters of the London Stock Exchange is based, in the City of London, UK, on Thursday, March 2, 2023. Bloomberg | Bloomberg | Getty Images</figcaption></figure>



LONDON — The U.K. economy grew by 0.3% in January, official figures showed on Friday, exceeding expectations as it continues to fend off what economists see as an inevitable recession.



Economists polled by Reuters had projected a 0.1% monthly increase in GDP. GDP was flat over the three months to the end of January, the Office for National Statistics said.



“The services sector grew by 0.5% in January 2023, after falling by 0.8% in December 2022, with the largest contributions to growth in January 2023 coming from education, transport and storage, human health activities, and arts, entertainment and recreation activities, all of which have rebounded after falls in December 2022,” the ONS found.



Production output fell by 0.3% in January after growing 0.3% in December, while the construction sector dropped 1.7% in January after flatlining the previous month.



The U.K. economy showed no growth in the final quarter of 2022 to narrowly avoid a recession — commonly defined as two quarters of negative growth — but shrunk by 0.5% in December.



The U.K. remains the only country in the G-7 (Group of Seven) major economies that has yet to fully recover its lost output during the Covid-19 pandemic. The ONS said Friday that monthly GDP is now estimated to be 0.2% below its pre-pandemic levels.



Both the Bank of England and the Office for Budget Responsibility have forecast a five-quarter recession beginning in the first quarter of 2023, but the data has so far exceeded expectations.



Despite the better-than-expected January print, economists still broadly believe activity is on a downward trajectory, as high inflation eats into household incomes and business activity.



U.K. inflation slowed to an annual 10.1% in January, continuing to shrink after hitting a 41-year high of 11.1% in October but staying well above the Bank of England’s 2% target.



Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said that the “modest” January rebound suggests the economy is still on a “downbeat path.”



“We’re likely to continue flirting with recession throughout much of 2023, as high inflation, tax rises and the lagged effect of rising interest rates shrinks consumer spending power, despite a boost from easing energy costs,” Thiru said.



Finance Minister Jeremy Hunt will deliver the government’s budget on Wednesday and is expected to announce further measures to manage the country’s cost of living crisis.



“The Spring Budget could have a significant impact on the U.K.’s near-term growth prospects. While extending energy support will provide some relief to struggling households, aggressive tax rises would risk eliminating any lingering momentum from the economy,” Thiru said.



Tom Hopkins, portfolio manager at BRI Wealth Management, noted that monthly figures are difficult to read at the moment, given distortions over the last six months — such as the funeral of Queen Elizabeth II and the World Cup — which partially affected consumer services.



“The underlying trend in the economy appears to be one of gradual contraction, thanks in part to an ongoing downtrend in retail spending,” he said. “We’re expecting a technical recession in the UK in the first half of this year, albeit one that’s not as bad as first feared.”



This is a breaking news story and will be updated shortly.

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UK economy rebounds with stronger-than-expected January GDP print

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="720" height="405" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107206288-1678407487077-gettyimages-1435835173-25.jpeg" alt="" class="wp-image-423614" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107206288-1678407487077-gettyimages-1435835173-25.jpeg 720w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107206288-1678407487077-gettyimages-1435835173-25-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107206288-1678407487077-gettyimages-1435835173-25-160x90.jpeg 160w" sizes="auto, (max-width: 720px) 100vw, 720px" /><figcaption class="wp-element-caption">Chinese President Xi Jinping is pictured here on Oct. 23, 2022, after consolidating his control of the ruling Communist Party of China. Kevin Frayer | Getty Images News | Getty Images</figcaption></figure>



BEIJING — Chinese leader Xi Jinping gained an unprecedented third term as president of the country on Friday.



Xi was widely expected to stay on as president in this month’s largely ceremonial parliamentary meeting, known as the “Two Sessions.” The annual gathering marks the meetings of an advisory group and a legislature, the National People’s Congress.



Delegates to the congress on Friday also formally reappointed Xi as chairman of the Central Military Commission.



Xi rose through China’s political ranks, becoming president in 2013 and abolishing term limits in 2018.



At the Chinese Communist Party’s 20th National Congress in October, Xi consolidated his control of the ruling party by filling the highest circle of leadership with loyalists.



Zhao Leji, a member of that core group who’s overseen party discipline, on Friday formally became the chairman of the National People’s Congress’ standing committee.



After twice-a-decade party congresses, top leaders of the Chinese Communist Party then go on to fill government positions such as president and premier.



Delegates are set to approve China’s new premier on Saturday.



Xi is scheduled to speak at the parliamentary meeting’s closing ceremony on Monday. The new premier is set to speak with the press later that day.



Han Zheng, previously executive vice premier, on Friday formally became vice president. Wang Qishan previously held the role.



Delegates on Friday approved a proposal to restructure the State Council, the Chinese government’s top executive body.



A draft of the plan was released earlier this week, and comes as the ruling Communist Party of China is expected to significantly increase its direct control of the government.

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China’s Xi gains unprecedented third term as president

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="546" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107203332-1678067196337-gettyimages-1247778710-MDM20230305chain03JPG-820x546.jpeg" alt="" class="wp-image-423503" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107203332-1678067196337-gettyimages-1247778710-MDM20230305chain03JPG-820x546.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107203332-1678067196337-gettyimages-1247778710-MDM20230305chain03JPG-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107203332-1678067196337-gettyimages-1247778710-MDM20230305chain03JPG-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107203332-1678067196337-gettyimages-1247778710-MDM20230305chain03JPG-768x511.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107203332-1678067196337-gettyimages-1247778710-MDM20230305chain03JPG-1536x1022.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107203332-1678067196337-gettyimages-1247778710-MDM20230305chain03JPG-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">MADRID, SPAIN — A young girl holds a placard reading “Watch out I’m a feminist girl” standing in front of a feminist mural ahead of a a human chain performance to denounce violence against women and make visible the feminist struggle. Marcos Del Mazo | Lightrocket | Getty Images</figcaption></figure>



Narrowing the difference in wages between men and women in the labor force can boost the world’s economy by about 7% — or $7 trillion, according to a Moody’s Analytics report.



At this rate, it may take 132 years for the world to close the economic gender gap, Moody’s said.



The economic boost will come as more women join the labor force and there’s an increase in productivity. A greater share of women holding more productive managerial and professional roles will also help, the report said.



“Closing the gender gap in labour force participation and the gender gap in management in OECD countries can raise global economic activity by approximately 7%, or about $7 trillion in today’s dollars,” directors Dawn Holland and Katrina Ell wrote in the report.



The report said narrowing the pay gap in emerging markets, such as India, would raise that potential even further.



The calculation is based on the pay increment that women in OECD countries, between ages 25 and 64, would see if their pay was equal to their male counterparts of the same age range in 2021.



“This alone would raise potential output in the OECD by nearly 10% and global output by 6.2%,” Moody’s Analytics wrote.



<h2 class="wp-block-heading" id="h-family-responsibilities"><a></a>‘Family responsibilities’</h2>



The report pointed to “family responsibilities carried by women” and a lack of similar network connections among root causes of the wage gap between men and women. It highlighted that women were “less likely” to ask for promotions while being held to higher standards than men.



“Shifting social norms is a lengthy and complex process, but politics such as enforcing flexible working conditions, providing affordable childcare, and providing paid paternity and paternity leave help to drive change in the right direction,” Moody’s wrote.



The World Bank in a recent report added that discrimination has kept the gender wage gap in place.



“Gender biases and inequalities that have placed women in low-wage occupations, such as differences in jobs and hours worked, as well as women’s disproportionate caregiving responsibilities, contribute to the gender wage gap,” the World Bank said.



“The persistence of this income disparity between men and women negatively affects the growth of a country’s economy,” it said, adding that 119 economies in the world have room to improve their legal frameworks to reduce the gender wage gap.



The World Bank noted almost half of the world’s economies do not mandate equal pay by law.



<h2 class="wp-block-heading" id="h-overqualified-women"><a></a>Overqualified women</h2>



The number of women in OECD countries holding a master’s degree or equivalent exceeds that of men, Moody’s said — but that still remains significantly underrepresented in middle and senior management roles.



This results in what they call a consistent “underskilling” of women, referring to the underuse of women’s skills and time.



As a result, this could lead to “economic loss at the individual and macroeconomic levels,” as economies see “limited and divergent” progress in elevating women over the past 10 years, Moody’s said.



“On average, women make a higher upfront investment in education but tend to land in lower-level and lower-paid positions, employed below their skill level, as measured by their educational accomplishments,” the authors said.

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Gender pay gap could cost the world economy $7 trillion, Moody’s 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/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-820x547.jpg" alt="" class="wp-image-423316" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: A man walks past the International Monetary Fund (IMF) logo at its headquarters in Washington, U.S., May 10, 2018. REUTERS/Yuri Gripas/</figcaption></figure>



LONDON, March 2 (Reuters)&nbsp;&#8211;&nbsp;Countries in debt distress such as Zambia and Sri Lanka turning to the International Monetary Fund (IMF) for financial help are facing unprecedented delays to secure bailouts as China and Western economies clash over how to provide debt relief.



IMF funding is often the sole financial lifeline available to countries in a debt crunch, and key to unlocking other financing sources, with delays putting pressure on government finances, companies and populations.



For Zambia, it took 271 days between reaching a $1.3 billion staff-level agreement with the IMF – a preliminary financing deal usually agreed during a country visit – and the fund&#8217;s executive board signing off, a prerequisite for actual disbursements.



The first African country to default in the COVID-19 pandemic era in 2020, Zambia&#8217;s ongoing debt relief negotiations involving China have been closely watched by other countries as a test case for the major emerging market lender.



Though staff agreements can be reached without financing assurances, the IMF board needs them to approve the programme. These are guarantees that sovereign lenders &#8211; and to some extent commercial creditors &#8211; will negotiate a restructuring in line with the IMF&#8217;s debt sustainability analysis, providing relief and financing when needed.



Sri Lanka has been waiting for 182 days to finalize a bailout after a $2.9 billion September staff level deal while Ghana, having defaulted on its overseas debt in December following a preliminary IMF deal, has yet to get board approval 80 days later.



This compares to a median of 55 days it took low- and middle-income countries over the last decade to go from preliminary deal to board sign-off, according to public data from over 80 cases compiled by Reuters.



These delays have been caused by a number of reasons, but debt experts mainly point to the fact that China is still reluctant to offer debt relief in comparable terms with other external creditors.



&#8220;They are part of the reason why these negotiations are so painfully slow,&#8221; said Kevin Gallagher, director of the Boston University Global Development Policy Center. &#8220;It&#8217;s not just the Paris Club and a few New York banks anymore.&#8221;



China&#8217;s Ministry of Foreign Affairs didn&#8217;t immediately respond to a request for comment.



Chinese Premier Li Keqiang&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL4N3593BK&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">said on Wednesday</a>&nbsp;the country is willing to &#8220;constructively&#8221; participate in solving debt problems of relevant countries under a multilateral framework. But Beijing&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL4N3593BK&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">has always emphasised</a>&nbsp;all creditors should follow the principle of &#8220;joint action, fair burden&#8221; in debt settlements.



An IMF spokesperson said it was a &#8220;very small number of countries&#8221; that suffered &#8220;significant delays,&#8221; acknowledging this was in particular where there was a need to restructure debt owed to official bilateral lenders.



However, the time from staff level agreement to lending approval had remained &#8220;broadly consistent for a vast majority of countries,&#8221; the spokesperson added.



Besides members of the Paris Club of creditor nations such as the United States, France and Japan, cash-strapped nations now have to rework loans with lenders such as India, Saudi Arabia, South Africa and Kuwait &#8211; but first and foremost China.



Beijing is the largest bilateral creditor to developing nations, extending $138 billion in new loans between 2010 and 2021, according to&nbsp;<a href="https://openknowledge.worldbank.org/bitstream/handle/10986/38045/9781464819025.pdf?sequence=8&amp;isAllowed=y">World Bank</a>&nbsp;data.



For countries such as Sri Lanka facing shortages of food, fuel and medicines as well as painful reforms to alleviate a debt crisis after years of economic mismanagement, the delays can be devastating. The war in Ukraine added pressure as global commodity prices soared.



&#8220;Sri Lanka going beyond March without an IMF programme will be challenging for us,&#8221; said the country&#8217;s State Minister of Finance Sehan Semasinghe.



&#8220;We need the programme to justify the reforms that need to be made for the economic stabilization process.&#8221;



<h2 class="wp-block-heading" id="h-a-more-complex-debt-world">A MORE COMPLEX DEBT WORLD</h2>



After the COVID-19 pandemic raised pressure on highly-indebted economies, the Group of 20 economies launched in 2020 the Common Framework, a platform designed to help low-income nations restructure sovereign debt. For the first time, China joined a multilateral effort aimed at reworking sovereign debt.



Chad, Ethiopia and Zambia signed up in early 2021. Chad secured a deal in November with its creditors, including Swiss commodities trader Glencore, an outcome without debt reduction that some analysts said undermined the Common Framework efforts. Ethiopia&#8217;s progress was delayed by civil war, and Ghana joined the platform earlier this year.



In a recent letter sent to Sri Lanka, a non-Common Framework country due to its middle-income status, China&#8217;s Export-Import Bank offered a two-year debt moratorium, raising concerns over how much of a hit Beijing was prepared to take.



&#8220;The question remains whether China is willing to accept a real extension of maturities that locks in a concessional interest rate for a long period of time,&#8221; said Brad Setser, senior fellow for international economics at the Council on Foreign Relations (CFR), in Washington.



Gregory Smith, emerging markets fund manager at London-based M&amp;G Investments, said China had a legacy of providing debt relief &#8220;but it typically involves maturity extensions or temporary freeze in interest payments&#8221;, while face-value reductions in the principal are rare.



Unlike the Paris Club, Chinese lenders tackle restructuring or cancellation on a loan-by-loan basis rather than for the entire portfolio, according to a&nbsp;<a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3745021" target="_blank" rel="noreferrer noopener">working paper</a>&nbsp;of the China Africa Research Initiative (CARI), which found 1,000 Chinese loans commitments in 49 African countries since 2000.



Adding another layer of complexity to these debt talks, the Common Framework doesn&#8217;t lay out precise rules on how a debt restructuring with bilateral creditors should work.



The IMF recognized that &#8220;<a href="https://www.imf.org/en/Blogs/Articles/2021/12/02/blog120221the-g20-common-framework-for-debt-treatments-must-be-stepped-up" target="_blank" rel="noreferrer noopener">greater clarity</a>&nbsp;on the different steps and timelines&#8221; is vital, as well as clear mechanisms to enforce the comparability of treatment.



For Setser, time is slipping away for Zambia.



&#8220;If there isn&#8217;t an agreement at least on the basic outlines of the financial terms of restructuring in Zambia by this quarter, it&#8217;ll be time to declare the Common Framework a failure,&#8221; he said.



Cash-strapped nations face IMF bailout delays<a href="https://tmsnrt.rs/3Izo5cr" target="_blank" rel="noreferrer noopener">https://tmsnrt.rs/3Izo5cr</a>



China leads bilateral lending to poorer nations<a href="https://tmsnrt.rs/3xt2Rrj" target="_blank" rel="noreferrer noopener">https://tmsnrt.rs/3xt2Rrj</a>



(Reporting by Jorgelina do Rosario, additional reporting by Uditha Jayasinghe in Colombo and Joe Cash in Beijing, editing by Karin Strohecker and Emelia Sithole-Matarise)

FILE PHOTO: Man walks past the IMF logo at HQ in Washington

Cash-strapped countries face IMF bailout delays as debt talks drag on

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="422" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107198143-1677078557441-Amira_Rasool_1-820x422.jpeg" alt="" class="wp-image-423374" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107198143-1677078557441-Amira_Rasool_1-820x422.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107198143-1677078557441-Amira_Rasool_1-300x154.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107198143-1677078557441-Amira_Rasool_1-160x82.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107198143-1677078557441-Amira_Rasool_1-768x395.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107198143-1677078557441-Amira_Rasool_1-1536x790.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107198143-1677078557441-Amira_Rasool_1-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Amira Rasool. Courtesy Amira Rasool</figcaption></figure>



For Amira Rasool, fashion is a lifelong passion.



“I was always the person that laid out my first day of school outfit, like, two weeks before school,” she says. The South Orange, New Jersey, native ultimately started a fashion blog in high school and took on internships at magazines like Marie Claire and Women’s Wear Daily while studying at Rutgers University. She landed a role as a fashion assistant at V Magazine her final semester of college.



That same year, she also traveled to South Africa, discovering local clothing brands she’d never heard of in the States. When she got back, she realized there was no way to get them abroad. And “it wasn’t just a South African problem,” she says she realized. “It’s a problem with all of Africa.” Many brands didn’t have the technology, infrastructure to ship internationally or access to U.S. retailers to get their apparel outside of African borders.



The trip planted the seed of an idea for a company that would enable just that, and Rasool ultimately founded The Folklore Group. It includes a business-to-business platform connecting global retailers with brands from emerging markets such as Africa, South America, Asia and the Caribbean, a marketplace where consumers can discover these brands and a newsroom that writes about them.



“We’re specifically targeting brands that have been geographically or racially marginalized from being able to have this access to retailers,” she says. Rasool, now 27, raised $1.7 million in pre seed investments in July 2021 alone.



Here’s how she’s built her fashion empire.



After that initial visit to South Africa, Rasool sought out ways to return to the country to found her company. She decided to get a Masters in African Studies at the University of Cape Town and from there, she traveled to Ghana, Nigeria and Kenya to learn about other brands and to start building connections with business owners.



Rasool officially launched The Folklore in September 2018, a direct-to-consumer business selling men’s and women’s apparel and accessories as well as homeware brands from all over Africa. She also sold items from Black business owners in the diaspora.



She had $30,000 to begin with: $20,000 that she’d saved up working at V Magazine and doing some freelance writing and $10,000 from her father. She ran the site herself with the help of interns and “my mom would just ship the products from her place to customers,” she says. “It was very much a community effort.”



Rasool lived in Cape Town through her degree then moved back to the States in February 2020, first to New Jersey, then to Atlanta. As the company’s found investors, it’s been able to expand. The Folklore now employs 12 people altogether.



<h2 class="wp-block-heading" id="h-instead-of-competing-with-nordstrom-they-would-collaborate-with-them"><a></a>Instead of competing with Nordstrom, they would ‘collaborate with them’</h2>



After the murder of George Floyd in 2020, Rasool realized retailers were actively looking for Black-owned brands to start stocking and selling.



The Folklore didn’t quite have the reach of big retailers and could end up competing with them for the same clientele. But if the company was the connective tissue between brands and big retailers, “instead of competing with the Nordstroms and Saks that were now interested in these brands,” she says, they could “collaborate with them.”



She also “saw that we would be able to make a bigger impact on the brands if we are able to get them stocked in more stores than just The Folklore,” she says.



Rasool decided to put her efforts behind building a B2B version of the site and launched The Folklore Connect in 2022. The wholesale platform enables brands to sell their products in bulk to larger retailers.



<h2 class="wp-block-heading"><a></a>‘We know our problems better than anybody else’</h2>



Going forward, the goal is growth.



“We imagine being able to have thousands of brands from around the world using the platform,” she says, and “having hundreds of thousands of retailers.” They also want to expand their categories to hygiene and kids, for example, and expand their price points so they work for many types of retailers.



As far as advice for other Black entrepreneurs goes, “I would say to look at issues that we have within our community, like problems that we face, and create solutions,” she says.



Ultimately, she says, “we know our stories and we know our problems better than anybody else.”

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How a 27-year-old raised over $1 million to build a platform for African designers: ‘We know our problems better than anybody else’

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="800" height="532" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/download-61.jpg" alt="" class="wp-image-423323" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/download-61.jpg 800w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/download-61-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/download-61-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/download-61-768x511.jpg 768w" sizes="auto, (max-width: 800px) 100vw, 800px" /><figcaption class="wp-element-caption">G20 Finance Ministers, Central Bank Governors and head of delegates attend the G20 Finance Ministers and Central Bank Governors meeting on the outskirts of Bengaluru, India, February 24, 2023. India&#8217;s Press Information Bureau/Handout via REUTERS</figcaption></figure>



BENGALURU, Feb 24 (Reuters)&nbsp;&#8211;&nbsp;U.S. Treasury Secretary Janet Yellen accused Russian officials attending a G20 finance leaders meeting of being &#8220;complicit&#8221; in atrocities in Russia&#8217;s invasion of Ukraine, while host India avoided mentioning the year-long war in inaugural remarks.



Indian Prime Minister Narendra Modi urged the financial leaders to focus on the world&#8217;s &#8220;most vulnerable citizens&#8221;, making no direct reference to the war, although the conflict and its effect on the global economy are likely to dominate the two-day meeting.



Modi said the COVID-19 pandemic and &#8220;rising geo-political tensions in different parts of the world&#8221; had led to unsustainable debt levels in several countries, disruptions to global supply chains and threats to food and energy security.



&#8220;I would urge that your discussions should focus on the most vulnerable citizens of the world,&#8221; he said, adding that stability, confidence and growth had to be brought back to the world economy.



In remarks on the first anniversary of the Russian invasion, Yellen called on G20 counterparts to &#8220;redouble their efforts to support Ukraine and restrict Russia&#8217;s capacity to wage war.&#8221;



Leaders of the wealthy&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N35324X&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">G7 democracies</a>&nbsp;are expected to announce new sanctions against those aiding Russia&#8217;s war effort, following a virtual meeting with Ukrainian President Volodymyr Zelenskiy later on Friday.



And ahead of that meeting,&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL8N3541LT&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Britain</a>&nbsp;issued more sanctions against Russia, including export bans on every item it has used on the battlefield and import bans of iron and steel goods.



The G20 bloc includes the G7 countries, as well as Russia, China, India, Brazil and Saudi Arabia, among others. However, Russian Finance Minister Anton Siluanov and central bank governor Elvira Nabiullina were not at the G20 meeting in India, and Moscow was represented by deputies.



Yellen said Russian President Vladimir Putin&#8217;s &#8220;weaponisation&#8221; of food and energy has hurt not only Ukraine, but the global economy and especially developing countries.



&#8220;I urge the Russian officials here at the G20 to understand that their continued work for the Kremlin makes them complicit in Putin’s atrocities,&#8221; Yellen said. &#8220;They bear responsibility for the lives and livelihoods being taken in Ukraine and the harm caused globally.&#8221;



French Finance Minister Bruno Le Maire told Reuters that G20 financial leaders must condemn Russia&#8217;s aggression against Ukraine and that Europe was working on new sanctions against Moscow.



India, which holds the current G20 presidency, does not want the bloc to discuss additional sanctions on Russia and is also pressing to avoid using the word &#8220;war&#8221; in G20 communique language to describe the conflict, G20 officials told Reuters.



New Delhi has maintained a neutral stance on the conflict, vastly increasing its purchases of cheaper Russian oil. Russia calls its actions in Ukraine a &#8220;special military operation&#8221;.



Yellen said the communique was still under discussion and she hoped to see a strong condemnation of Russia&#8217;s invasion and the damage it has caused Ukraine and the global economy.



<h2 class="wp-block-heading" id="h-global-economy-improves">GLOBAL ECONOMY IMPROVES</h2>



The meeting comes amid signs that the global outlook has improved from the last G20 summit in October, when a number of economies were teetering on the brink of recession amid energy and food price spikes caused by the war.



Yellen&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N35308W&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">highlighted</a>&nbsp;the improvement, saying the global economy &#8220;is in a better place today than many predicted just a few months ago&#8221;.



The International Monetary Fund has&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AS0N33P02D&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">forecast global GDP growth</a>&nbsp;for 2023 at 2.9%, up from a 2.7% forecast in October, but still well below the 3.4% achieved in 2022.



Yellen attributed the improvement in part to cooperation among G20 central banks and governments over the past year in taking strong action to quell inflation, even at the expense of growth.



Inflation in the United States and other countries has eased alongside lower energy prices, but Yellen added that such efforts needed to continue and more work was needed to mitigate spillovers from the war, such as easing food shortages and holding down energy prices and Russian revenues.



The G20 meeting is also expected to hold talks on debt relief for distressed countries, with pressure building on China, the world&#8217;s largest bilateral creditor, and other nations to take a large haircut in loans.



In a video address to the meeting,&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N3540CZ&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Liu Kun</a>, China&#8217;s finance minister, reiterated Beijing&#8217;s position that the World Bank and other multilateral development banks participate in debt relief by taking haircuts alongside bilateral creditors.



International financial institutions and commercial creditors should follow the principle of &#8220;joint action, fair burden&#8221;, Liu said.



(Reporting by David Lawder, Aftab Ahmed, Shivangi Acharya, Sarita Singh, Swati Bhat, Christian Kraemer and Shilpa Jamkhandikar; Writing by Raju Gopalakrishnan; Editing by Simon Cameron-Moore)

download-61

At G20 meeting, U.S. accuses Russian finance officials of complicity in war

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107184415-1674739123002-gettyimages-1246549300-SOUTH_AFRICA_YELLEN-820x461.jpeg" alt="" class="wp-image-422818" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107184415-1674739123002-gettyimages-1246549300-SOUTH_AFRICA_YELLEN-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107184415-1674739123002-gettyimages-1246549300-SOUTH_AFRICA_YELLEN-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107184415-1674739123002-gettyimages-1246549300-SOUTH_AFRICA_YELLEN-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107184415-1674739123002-gettyimages-1246549300-SOUTH_AFRICA_YELLEN-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107184415-1674739123002-gettyimages-1246549300-SOUTH_AFRICA_YELLEN-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107184415-1674739123002-gettyimages-1246549300-SOUTH_AFRICA_YELLEN.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Janet Yellen, US Treasury secretary, during a news conference with Enoch Godongwana, South Africa’s finance minister, at the National Treasury in Pretoria, South Africa, on Thursday, Jan. 26, 2023.
Waldo Swiegers | Bloomberg | Getty Images</figcaption></figure>



BENGALURU, Feb 24 (Reuters)&nbsp;&#8211;&nbsp;U.S. Treasury Secretary Janet Yellen accused Russian officials attending a G20 finance leaders meeting on Friday of being &#8220;complicit&#8221; in atrocities in Russia&#8217;s invasion of Ukraine and for the damage the war has caused to the global economy.



In remarks to an opening session of the gathering on the&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL8N3534VQ&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">first anniversary</a>&nbsp;of the Russian invasion, Yellen called on G20 counterparts to &#8220;redouble their efforts to support Ukraine and restrict Russia&#8217;s capacity to wage war.&#8221;



She said Russian President Vladimir Putin&#8217;s &#8220;weaponisation&#8221; of food and energy has hurt not only Ukraine, but the global economy and especially developing countries.



&#8220;I urge the Russian officials here at the G20 to understand that their continued work for the Kremlin makes them complicit in Putin’s atrocities,&#8221; Yellen said. &#8220;They bear responsibility for the lives and livelihoods being taken in Ukraine and the harm caused globally.&#8221;



Russia was represented in the room by senior economic officials, according to a U.S. Treasury official. Russian Finance Minister Anton Siluanov and central bank governor Elvira Nabiullina were not in attendance.



Yellen added that ending the war was a &#8220;moral imperative&#8221; for the global economy and repeated that United States &#8220;will stand by Ukraine for as long as it takes.&#8221;



(Reporting by David Lawder; Editing by Raju Gopalakrishnan)

107184415-1674739123002-gettyimages-1246549300-SOUTH_AFRICA_YELLEN

Yellen says Russian officials at G20 meeting ‘complicit’ in war atrocities

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107193923-1676329356300-gettyimages-1465671707-img_7397_30f7e9f7-ec25-4ebc-ac2c-18e8045c64d1-820x461.jpeg" alt="" class="wp-image-423310" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107193923-1676329356300-gettyimages-1465671707-img_7397_30f7e9f7-ec25-4ebc-ac2c-18e8045c64d1-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107193923-1676329356300-gettyimages-1465671707-img_7397_30f7e9f7-ec25-4ebc-ac2c-18e8045c64d1-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107193923-1676329356300-gettyimages-1465671707-img_7397_30f7e9f7-ec25-4ebc-ac2c-18e8045c64d1-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107193923-1676329356300-gettyimages-1465671707-img_7397_30f7e9f7-ec25-4ebc-ac2c-18e8045c64d1-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107193923-1676329356300-gettyimages-1465671707-img_7397_30f7e9f7-ec25-4ebc-ac2c-18e8045c64d1-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107193923-1676329356300-gettyimages-1465671707-img_7397_30f7e9f7-ec25-4ebc-ac2c-18e8045c64d1.jpeg 1920w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">People shop near prices displayed in a supermarket on February 13, 2023 in Los Angeles, California.  Mario Tama | Getty Images News | Getty Images</figcaption></figure>



OECD Secretary-General Mathias Cormann said the global economic outlook is “slightly brighter” this year but inflation challenges remain.



“The outlook for the world is slightly brighter at the beginning of 2023 than what we thought it would be just two or three months ago,” he told CNBC’s “Street Signs Asia” on Friday.



“Indeed, energy and food prices are substantially lower than what they were at their peaks,” noted the OECD chief, ahead of a G-20 financial leaders meeting this week in Bengaluru, India.



Energy prices have fallen significantly because Europe was able to&nbsp;“successfully” diversify its sources of energy, Cormann noted. In addition, a “benign winter” helped to reduce energy demand which kept gas prices low, he said.



In November, the OECD said “Russia’s war of aggression against Ukraine has provoked a massive energy price shock not seen since the 1970s.”



“The global economy is projected to grow well below the outcomes expected before the war – at a modest 3.1% this year [2022], before slowing to 2.2% in 2023 and recovering moderately to a still sub-par 2.7% pace in 2024,” it added.



That report further highlighted Asian emerging-market economies are expected to account for close to three-quarters of global GDP growth in 2023, as Europe and the U.S. slow down sharply.



<h2 class="wp-block-heading" id="h-inflation-risks"><a></a>Inflation risks</h2>



Still, inflation risks continue to persist and need to be tackled well, said the OECD chief.



“Inflation is starting to tick down, but we are not on top of the inflation challenge yet. There is more work to be done to tackle inflation and that comes with risks,” noted Cormann. “And these are risks that will need to continue to be managed well over the weeks and months.”



The OECD chief highlighted&nbsp;the U.S. Federal Reserve took “aggressive action last year,” in terms of hiking interest rates to rein in surging price pressures.



Now the Fed continues to fight inflation in “a more steady fashion allowing the data to come through and allowing… the measures that are in the pipeline to take effect,” Cormann noted. “That is what we expect central banks around the world to do, to continue to monitor the data and to continue to adjust the decisions.”



In early February, the U.S. central bank raised its benchmark interest rate by a quarter percentage point and gave little indication it is nearing the end of this hiking cycle.



Last month, the OECD chief highlighted China’s reopening is “overwhelmingly positive” in the global fight to tackle surging inflation. In early December, Beijing suddenly shifted away from its zero-Covid policy.



“Over the medium to longer term, this is a very much a positive in terms of making sure that the supply chains function more efficiently and more effectively, making sure that demand in China and indeed trade more generally resumes in a more positive pattern,” Cormann told CNBC at the World Economic Forum in Davos, Switzerland.

107193923-1676329356300-gettyimages-1465671707-img_7397_30f7e9f7-ec25-4ebc-ac2c-18e8045c64d1

OECD says global economic outlook ‘slightly better’ for 2023 but inflation risks linger

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/12/107159296-1669841742367-jerome-820x547.jpg" alt="" class="wp-image-421727" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/12/107159296-1669841742367-jerome-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/12/107159296-1669841742367-jerome-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/12/107159296-1669841742367-jerome-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/12/107159296-1669841742367-jerome-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/12/107159296-1669841742367-jerome-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/12/107159296-1669841742367-jerome-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /></figure>



Inflation turned higher to start 2023, as rising shelter, gas and fuel prices took their toll on consumers, the Labor Department reported Tuesday.



The consumer price index, which measures a broad basket of common goods and services, rose 0.5% in January, which translated to an annual gain of 6.4%. Economists surveyed by Dow Jones had been looking for respective increases of 0.4% and 6.2%.



Excluding volatile food and energy, the core CPI increased 0.4% monthly and 5.6% from a year ago, against respective estimates of 0.3% and 5.5%.



Markets were volatile&nbsp;following the release, with the&nbsp;Dow Jones Industrial Average&nbsp;down about 200 points at the open.



Rising shelter costs accounted for about half the monthly increase, the Bureau of Labor Statistics said in the report. The component accounts for more than one-third of the index and rose 0.7% on the month and was up 7.9% from a year ago. The CPI had risen 0.1% in December.



Energy also was a significant contributor, up 2% and 8.7%, respectively, while food costs rose 0.5% and 10.1%, respectively.



Rising prices meant a loss in real pay for workers. Average hourly earnings fell 0.2% for the month and were down 1.8% from a year ago, according to a separate BLS report.



While price increases had been abating in recent months, January’s data shows inflation is still a force in a U.S. economy in danger of slipping into recession this year.



That has come despite Federal Reserve efforts to quell the problem. The central bank has hiked its benchmark interest rate eight times since March 2022 as inflation rose to its highest level in 41 years last summer.



“Inflation is easing but the path to lower inflation will not likely be smooth,” said Jeffrey Roach, chief economist at LPL Financial. “The Fed will not make decisions based on just one report but clearly the risks are rising that inflation will not cool fast enough for the Fed’s liking.”



In recent days, Fed Chairman Jerome Powell has talked about “disinflationary” forces at play, but January’s numbers show the central bank probably still has work to do.



There was some good news in the report. Medical care services fell 0.7%, airline fares were down 2.1% and used vehicle prices dropped 1.9%, according to seasonally adjusted prices.



The rise in housing prices is keeping a floor under inflation, though those numbers are widely expected to decelerate later in the year.



That’s why some Fed officials, including Powell, say they are looking more closely at core services inflation minus shelter prices — “super core” — in determining the course of policy. That number rose 0.2% in January and was up 4% from a year ago.



Markets expect the Fed over its next two meetings in March and May to raise its overnight borrowing rate another half a percentage point from its current target range of 4.5%-4.75%. That would give policymakers time to watch for the broader economic impacts of the monetary policy tightening before deciding how to proceed. Should inflation not fall back, that could mean more rate hikes.



The next big data point will be retail sales, which hits Wednesday morning at 8:30 a.m. ET.



“The strength of core inflation suggests that the Fed has a lot more work to do to bring inflation back to 2%,” said Maria Vassalou, co-chief investment officer of multi-asset solutions at Goldman Sachs Asset Management. “If retail sales also show strength tomorrow, the Fed may have to increase their funds rate target to 5.5% in order to tame inflation.”



There’s widespread belief that the economy could tip into at least a shallow recession later this year or early in 2023. However, the latest tracking data from the Atlanta Fed puts expected GDP growth at 2.2% for the first quarter, following a relatively strong finish for 2022.



January’s CPI report will take some time to analyze, as the BLS changed its methodology in how it reports the index. Some components, such as shelter, were given higher weightings, while others, such as food and energy now have slightly less influence.



The Fed also changed how it computes an important component called owners’ equivalent rent, a measure of how much property owners could get if they rented. The BLS is now placing a bit more emphasis on the pricing of stand-alone rentals rather than apartments.

107159296-1669841742367-jerome

U.S. Inflation rose 0.5% in January, more than expected and up 6.4% from a year ago

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="480" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/QX4CBDCRYNL3JGMQE5AH2PS35E-820x480.jpg" alt="" class="wp-image-423053" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/QX4CBDCRYNL3JGMQE5AH2PS35E-820x480.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/QX4CBDCRYNL3JGMQE5AH2PS35E-300x176.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/QX4CBDCRYNL3JGMQE5AH2PS35E-154x90.jpg 154w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/QX4CBDCRYNL3JGMQE5AH2PS35E-768x450.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/QX4CBDCRYNL3JGMQE5AH2PS35E-1536x899.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/QX4CBDCRYNL3JGMQE5AH2PS35E-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: A Boeing 737 Max aircraft during a display at the Farnborough International Airshow, in Farnborough, Britain, July 20, 2022. REUTERS/Peter Cziborra/File Photo</figcaption></figure>



Feb 10 (Reuters)&nbsp;&#8211;&nbsp;A U.S. judge in Texas late on Thursday denied a legal bid by families of the victims of two Boeing&nbsp;BA.N&nbsp;737 MAX crashes to reopen or reject a January 2021 deferred prosecution agreement.



Boeing won immunity from criminal prosecution as part&nbsp;ofthe&nbsp;$2.5 billion Justice Department agreement over a 737 MAX fraud conspiracy charge related to the plane&#8217;s flawed design.



The families had asked the court to strip Boeing of immunity from prosecution, toss out, revise or supervise the agreement and order disclosure of information about Boeing&#8217;s conduct.



U.S. District Judge Reed O&#8217;Connor ruled he did not have legal authority to grant the relatives&#8217; requests&nbsp;despite what he called &#8220;Boeing’s egregious criminal conduct.&#8221;



O&#8217;Connor ruled in October the 346 people killed in two Boeing 737 MAX crashes in 2018 and 2019 are legally &#8220;crime victims&#8221; and said the Justice Department had not complied with its obligations under the law.



O&#8217;Connor ordered Boeing arraigned on the 2021 felony fraud conspiracy charge. Boeing,&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N34B1TG&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">which pleaded not guilty</a>&nbsp;last month and had argued against reopening the plea deal, did not immediately comment. Boeing says it has fully complied with the agreement and made significant reforms.



&#8220;This court has immense sympathy for the victims and loved ones of those who died in the tragic plane crashes resulting from Boeing’s criminal conspiracy,&#8221; he said in his ruling. &#8220;Had Congress vested this court with sweeping authority to ensure that justice is done in a case like this one, it would not hesitate.&#8221;



But O&#8217;Connor said he did not the legal means &#8220;to remedy the incalculable harm that the victims’ representatives have suffered.&#8221;



Boeing&#8217;s best-selling 737 MAX was grounded worldwide in March 2019 for 20 months after two fatal crashes in Indonesia and Ethiopia &#8211; a move that cost Boeing more than $20 billion.



&#8220;Boeing’s crime may properly be considered the deadliest corporate crime in U.S. history,&#8221; O&#8217;Connor wrote.



The Justice Department settlement included a fine of $243.6 million, compensation to airlines of $1.77 billion and a $500 million fund for crash victims.



O&#8217;Connor also Thursday rejected requests by Polish national airline PLL LOT and Czech airline group Smartwings to deem them both victims in the Boeing 737 MAX criminal case, a move that could have made them eligible for compensation.



Both airlines separately sued Boeing and argued they should have gotten compensation from Boeing as part of the plea deal, as other airlines did. Those suits in Seattle are pending.



In September,&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AFWN30T27Y&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Boeing paid $200 million</a>&nbsp;to settle civil charges by the U.S. Securities and Exchange Commission that it misled investors about the safety of the 737 MAX.



(Reporting by David Shepardson; Editing by Muralikumar Anantharaman and Gerry Doyle)

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International

Fed hikes rates by a quarter percentage point, indicates increases are near an end

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U.S. Inflation rose 0.5% in January, more than expected and up 6.4% from a year ago

U.S. judge rejects family members’ bid to reopen Boeing 737 MAX plea deal

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