<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107134793-1665755603551-gettyimages-1243961516-69276121-820x462.jpeg" alt="" class="wp-image-420533" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107134793-1665755603551-gettyimages-1243961516-69276121-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107134793-1665755603551-gettyimages-1243961516-69276121-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107134793-1665755603551-gettyimages-1243961516-69276121-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107134793-1665755603551-gettyimages-1243961516-69276121-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107134793-1665755603551-gettyimages-1243961516-69276121.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /></figure>



LONDON — British Prime Minister Liz Truss on Friday scrapped another key tax-cutting policy after firing her finance minister, in a bid to placate markets after the government’s controversial “mini-budget.”



“It is clear that parts of our mini-budget went further and faster than markets were expecting,” Truss said in a brief press conference.



Truss scrapped the pledge to reverse predecessor Boris Johnson’s hike of corporation tax from 19% to 25%, a decision estimated to restore around £18 billion ($20.1 billion) to the U.K. Treasury’s coffers by 2026.



Finance Minister Kwasi Kwarteng was fired earlier on Friday after less than six weeks in the job, amid mounting political pressure and market chaos.



Jeremy Hunt — a former Health Secretary and Foreign Secretary — was announced as Kwarteng’s successor. Chris Philp, chief secretary to the Treasury, was also replaced by Edward Argar.



<h2 class="wp-block-heading" id="h-market-reaction"><a></a>Market reaction</h2>



U.K. government bonds — known as gilts — rallied sharply ahead of Truss’ news conference. The long-dated&nbsp;<a href="https://www.cnbc.com/quotes/UK30Y-GB/">30-year yield</a>&nbsp;briefly touched 4.261% during morning trade. Yields move inversely to prices.



However, bond prices gave back gains after the conference, with the 30-year yield returning to around 4.58% by around 3 p.m. U.K. time.



<a href="https://www.cnbc.com/quotes/GBP=/">Sterling</a>&nbsp;whipsawed during a volatile session and fell around 1.4% against the dollar after Truss’ speech, trading at around $1.1165.



In her press conference, Truss said she wanted to reassure markets of the government’s fiscal discipline, and that Hunt shared her “convictions and ambitions” for the country.



The government earlier this month&nbsp;<a href="https://www.cnbc.com/2022/10/03/british-pound-jumps-on-reports-uk-government-will-u-turn-on-cut-to-top-tax-rate.html">abolished its plan to scrap the top rate of income tax</a>&nbsp;after a substantial public backlash, but which failed to quell market turbulence.



<h2 class="wp-block-heading" id="h-kwarteng-letter"><a></a>Kwarteng letter</h2>



Kwarteng cut short a visit to Washington on Thursday to fly back to London as government ministers scrambled to address the market chaos unleashed in recent weeks.



This included a sell-off of long-dated government bonds that led the&nbsp;<a href="https://www.cnbc.com/2022/10/14/uk-cliff-edge-arrives-as-bank-of-england-prepares-to-end-bond-buying.html">Bank of England</a>&nbsp;to intervene in order to&nbsp;<a href="https://www.cnbc.com/2022/10/14/uk-cliff-edge-arrives-as-bank-of-england-prepares-to-end-bond-buying.html">save pension funds from collapse</a>, and a spike in mortgage rates for prospective homeowners.



Truss had been under immense pressure to rethink her economic policies, with&nbsp;<a href="https://www.reuters.com/world/uk/uk-labour-keeps-big-lead-over-pm-trusss-conservatives-poll-shows-2022-10-08/" target="_blank" rel="noreferrer noopener">opinion polls</a>&nbsp;showing support for the ruling Conservative Party collapsing and lawmakers from within her own party reportedly plotting to oust her after a tumultuous first five weeks in office.



Despite this, both she and Kwarteng had remained publicly resolute in recent days, accusing critics of the government’s



 radical fiscal plans of being part of an “anti-growth coalition.”



“The economic environment has changed rapidly since we set out the Growth Plan on 23 September. In response, together with the Bank of England and excellent officials at the Treasury we have responded to those events, and I comment my officials for their dedication,” Kwarteng said in his resignation letter after being asked to step down.



“It is important now as we move forward to emphasise your government’s commitment to fiscal discipline. The Medium-Term Fiscal Plan is crucial to this end, and I look forward to supporting you and my successor to achieve that from the backbenches.”



“As I have said many times in the past few weeks, following the status quo was simply not an option. For too long this country has been dogged by low growth rates and high taxation — and that must still change if this country is to succeed,” Kwarteng added in his letter.



“We have been colleagues and friends for many years. In that time, I have seen your dedication and determination. I believe your vision is the right one. It has been an honour to serve as your first Chancellor.”

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UK PM Liz Truss announces another huge U-turn and names Jeremy Hunt as finance minister

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White House is pushing ahead research to cool Earth by reflecting back sunlight

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107131633-1665395551867-gettyimages-1077072190-FED_ASSA_MEETING-820x462.jpeg" alt="" class="wp-image-420413" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107131633-1665395551867-gettyimages-1077072190-FED_ASSA_MEETING-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107131633-1665395551867-gettyimages-1077072190-FED_ASSA_MEETING-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107131633-1665395551867-gettyimages-1077072190-FED_ASSA_MEETING-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107131633-1665395551867-gettyimages-1077072190-FED_ASSA_MEETING-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107131633-1665395551867-gettyimages-1077072190-FED_ASSA_MEETING.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Ben Bernanke, former chairman of the U.S. Federal Reserve, speaks during the American Economic Association and Allied Social Science Association Annual Meeting on Friday, Jan. 4, 2019. Bernanke is one of three winners of the 2022 Nobel prize in economics. Bloomberg | Bloomberg | Getty Images</figcaption></figure>



U.S.-based economists Ben Bernanke, Douglas Diamond and Philip Dybvig were awarded the Nobel prize in economic sciences for 2022 for their research on banks and financial crises.



Bernanke was chairman of the Federal Reserve from 2006 to 2014 and is now at the Brookings Institute in Washington, D.C. Diamond is a professor at the University of Chicago Booth School of Business, and Dybvig is a professor at the Olin Business School of Washington University in St. Louis.



The Nobel committee said their work in the early 1980s had “significantly improved our understanding of the role of banks in the economy, particularly during financial crises,” and in showing why it is vital to avoid bank collapses. They added this was “invaluable” during the 2008-09 financial crisis and the coronavirus pandemic.



Bernanke’s analysis of the Great Depression in the 1930s showed how and why bank runs were a major reason the crisis was so long and severe. Diamond and Dybvig’s work, meanwhile, looked at the socially important role banks play in smoothing the potential conflict between savers wanting access to their money and the economy needing savings to be put into investments; and how governments can help prevent bank runs by providing deposit insurance and acting as a lender of last resort.



The winners of the prize — officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel — receive 10 million Swedish krona ($883,000) each.



The Royal Swedish Academy of Sciences select the winners from a list of candidates recommended by the Economic Sciences Prize Committee. This makes its selection from names submitted by around 3,000 professors, previous winners and academy members by invitation. People cannot nominate themselves.



In a press conference following the announcement, Diamond was asked whether he had any warning for banks, institutions and governments given current rising interest rates and predictions of another financial crisis.



Diamond said: “Financial crises, in the way that Phil Dybvig and I think about them, become worse when people start to lose faith in the stability of the system. And that is all related to basically how profitable they think the banking sector is, in addition to being stable.”



“So in periods when things happen unexpectedly, like I think people are surprised how quickly nominal interest rates have gone up around the world, that can be something that sets off some fears in the system. We saw some of this in the United Kingdom in their liability-driven sector of the insurance market.”



“So I guess the best advice is to be prepared for making sure that your part of the banking sector is both perceived to be healthy and to stay healthy and to respond in a measured and transparent way to changes in monetary policy.”



Asked about whether he foresaw another financial crisis, he said the world was “much better prepared” than in 2008, and regulatory improvements had made the system less vulnerable.



“The banking sector itself is in very solid shape, good net worth, good risk management,” he said. “The problem is that these vulnerabilities of the fear of runs and dislocations and crises can show up anywhere, not just commercial banks.”



The insight he and Dybvig had tried to provide, he said, was that it is all about being able to issue short-term, liquid liabilities, like deposits or shares, which are more liquid than underlying assets. He again cited the insurance sector in the U.K., when he said the “mismatch” came when there were calls for more collateral from insurance companies. The Bank of England has been forced to intervene to reduce market turmoil and protect pension funds following a controversial government budget.



Last year, the economics prize was split three ways. It went to David Card, for his work on labor economics; and Joshua D. Angrist and Guido W. Imbens for their contributions to the analysis of causal relationships.



Unlike the five other Nobel prizes, which have been handed out since 1901 and were bestowed in the will of Swedish inventor, chemist and engineer Alfred Nobel, the economics award was established in 1969 by Sweden’s central bank in his honor. It is the last to be announced each year.



The renowned Nobel Peace Prize was awarded Friday to Belarusian human rights activist Ales Bialiatski, Russian human rights organization Memorial and the Ukrainian NGO Center for Civil Liberties.



This year’s prize for physics went to Alain Aspect, John Francis Clauser and Anton Zeilinger, for discoveries in quantum mechanics. The Nobel committee said they had used “groundbreaking experiments” investigating particles in entangled states to begin a new era of quantum technology.



The chemistry prize was split between Carolyn R. Bertozzi, for her work using click and bioorthogonal chemistry to map cells and develop more targeted cancer treatments; and Morten Meldal and K. Barry Sharpless, who the committee said “laid the foundations of click chemistry,” which involves connecting biocompatible molecules.



The medicine prize was awarded to Svante Paabo “for his discoveries concerning the genomes of extinct hominins and human evolution.”



The prize for literature went to French author Annie Ernaux.

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Nobel economics prize awarded to U.S.-based economists including Bernanke for work on financial crises

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="728" height="485" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/CHPGQPUYKZPTLAGLVJQZZINT4A.jpg" alt="" class="wp-image-420375" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/CHPGQPUYKZPTLAGLVJQZZINT4A.jpg 728w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/CHPGQPUYKZPTLAGLVJQZZINT4A-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/CHPGQPUYKZPTLAGLVJQZZINT4A-135x90.jpg 135w" sizes="auto, (max-width: 728px) 100vw, 728px" /><figcaption>U.S. Ambassador to the United Nations Linda Thomas-Greenfield speaks with delegates during a meeting of the United Nations Security Council after North Korea fired a ballistic missile over Japan for the first time in five years, at U.N. headquarters in New York, U.S., October 5, 2022. REUTERS/Eduardo Munoz</figcaption></figure>



UNITED NATIONS, Oct 6 (Reuters)&nbsp;&#8211;&nbsp;The United States accused Russian mercenaries on Thursday of exploiting natural resources in the Central African Republic, Mali, Sudan and elsewhere to help fund Moscow&#8217;s war in Ukraine, a charge Russia rejected as &#8220;anti-Russian rage.&#8221;



U.S. Ambassador to the United Nations, Linda Thomas-Greenfield, said the Wagner Group of mercenaries are exploiting natural resources and &#8220;these ill-gotten gains are used to fund Moscow&#8217;s war machine in Africa, the Middle East, and Ukraine.&#8221;



&#8220;Make no mistake: people across Africa are paying a heavy price for the Wagner Group&#8217;s exploitative practices and human rights violations,&#8221; Thomas-Greenfield told a U.N. Security Council meeting on the financing of armed groups through illicit trafficking of natural resources in Africa.



Wagner, staffed by veterans of the Russian armed forces, has fought in Libya, Syria, the Central African Republic, Mali and other countries. It was founded in 2014 after Russia annexed Ukraine&#8217;s Crimea peninsula and started supporting pro-Russia separatists in Ukraine&#8217;s eastern Donbas region.



Russian U.N. Ambassador Vassily Nebenzia said he regretted that Thomas-Greenfield raised the issue of &#8220;Russian support to African partners.&#8221;



&#8220;This exposes their real plans and aims &#8211; what they really need from African countries,&#8221; said Nebenzia, without elaborating.



Russia&#8217;s Feb. 24 invasion of Ukraine came at a time of heightened rivalry between the West, China and Russia over Africa&#8217;s natural resources, trade and security ties. Some states worry about being squeezed in the middle of an intense geopolitical rivalry.



Russia has been trying to chip away at its international isolation after nearly three-quarters of the General Assembly voted to reprimand Moscow and demand it withdraw its troops within a week of its Feb. 24 invasion of neighboring Ukraine.



Next week, the 193-member General Assembly is due to vote on whether to condemn Moscow&#8217;s move to annex four partially occupied regions in Ukraine after staging what it called referendums.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N31624G&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



(Reporting by Michelle Nichols, additional reporting by Ronald Popeski; Editing by David Gregorio)

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U.S. accuses Russia of exploiting Africa resources to fund Ukraine war

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-820x547.jpg" alt="" class="wp-image-416649" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>IMF managing director Kristalina Georgieva speaks during a panel discussion at the COP26 UN Climate Summit in Glasgow on November 3, 2021. (Photo by Daniel LEAL / AFP) (Photo by DANIEL LEAL/AFP via Getty Images)</figcaption></figure>



WASHINGTON, Oct 6 (Reuters) &#8211; The International Monetary Fund is discussing a lending program with Malawi, which is in a &#8220;very difficult situation,&#8221; IMF Managing Director Kristalina Georgieva said on Thursday.



Georgieva, answering questions from students at Georgetown University, said IMF loans could help bring in other lenders and aid.



In Malawi&#8217;s case, she said, the IMF hoped to see the World Bank and other organizations also provide grants. 



This is a developing story&#8230;



(Reporting by Andrea Shalal; editing by John Stonestreet)

BRITAIN-UN-CLIMATE-COP26

IMF discussing program for Malawi, Georgieva says

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="516" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/PX47AV3OGVODBAQQ2I46RGINQA-820x516.jpg" alt="" class="wp-image-420282" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/PX47AV3OGVODBAQQ2I46RGINQA-820x516.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/PX47AV3OGVODBAQQ2I46RGINQA-300x189.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/PX47AV3OGVODBAQQ2I46RGINQA-143x90.jpg 143w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/PX47AV3OGVODBAQQ2I46RGINQA-768x483.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/PX47AV3OGVODBAQQ2I46RGINQA-1536x966.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/PX47AV3OGVODBAQQ2I46RGINQA-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>FILE PHOTO: Prosus&#8217; logo is pictured on a smartphone in this illustration taken, December 4, 2021. REUTERS/Dado Ruvic/Illustration</figcaption></figure>



AMSTERDAM, Oct 3 (Reuters) &#8211; Investor Prosus NV PRX.ASsaid on Monday a $4.7 billion deal to buy BillDesk, which would have been one of the largest in India&#8217;s financial technology sector,was &#8220;terminated&#8221;, saying conditions of the deal had not been met.



Indian antitrust regulator had approved the acquisition on Sept. 5, more than a year after it was announced, despite&nbsp;concerns BillDesk&#8217;s combination with Prosus-owned PayU would lead to concentration on India&#8217;s payments market.<a href="https://www.reutersconnect.com/all?search=all%3AL1N2Q20CB&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



But in&nbsp;a short statement, Prosus said &#8220;certain conditions were not fulfilled&#8221; by a Sept. 30 deadline and &#8220;the agreement has terminated automatically in accordance with its terms.&#8221;



BillDesk could not immediately be reached for comment.



A spokesperson for Prosus said there was no break fee associated with the deal, but declined to comment on reasons for the cancellation.



&#8220;The consistent pushback from investors had been around the valuation and price being paid for BillDesk,&#8221; said Citi analysts in a note.



&#8220;With no further details &#8230; what we don’t know is whether Prosus’ PayU could make another offer for BillDesk at a lower price.&#8221;



Fintech valuations have fallen sharply since Prosus announced plans to buy BillDesk.



Prosus CEO Bob van Dijk said in the company&#8217;s annual report in June that the merger of PayU with BillDesk would create a &#8220;top-10 online payments company globally&#8221;, substantially increasing the company&#8217;s scale in India and strengthening its digital banking arm &#8212; &#8220;pending regulatory approval.&#8221;



BillDesk processed $92 billion of payments in the year ended March 31, 2021 and had a net profit of 2.71 billion Indian rupees ($37.05 million) for that period.



Prosus shares were down 0.9% at 53.51 euros at 0955 GMT in Amsterdam.



(Reporting by Toby Sterling, Editing by Louise Heavens and Bernadette Baum)

Illustration shows smartphone with Prosus’ logo displayed

Prosus scraps $4.7 bln BillDesk deal, one of India’s biggest

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107121858-gettyimages-1242990420-114a2675-820x547.jpeg" alt="" class="wp-image-420259" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107121858-gettyimages-1242990420-114a2675-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107121858-gettyimages-1242990420-114a2675-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107121858-gettyimages-1242990420-114a2675-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107121858-gettyimages-1242990420-114a2675-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107121858-gettyimages-1242990420-114a2675-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107121858-gettyimages-1242990420-114a2675-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>“It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our economy,” Finance Minister Kwasi Kwarteng said in a statement. Rob Pinney | Getty Images News | Getty Images</figcaption></figure>



LONDON — The U.K. government on Monday reversed a planned scrapping of the top rate of income tax, after a public backlash and major market turbulence.



“It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our economy,” Finance Minister Kwasi Kwarteng said in a statement.



“As a result, I’m announcing we are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened.”



The cuts were poorly received by financial markets and a scrapping of the 45% tax paid on incomes over £150,000 ($166,770) was seen as politically toxic as Brits deal with a cost-of-living crisis.



In the days following their announcement, the pound dropped to an all-time low, mortgage deals were pulled from the market and U.K. government bonds began to sell-off at a historic rate, causing the Bank of England to begin a temporary purchase program to calm volatility.



<h2 class="wp-block-heading" id="h-pound-briefly-jumps"><a></a>Pound briefly jumps</h2>



The British pound rose sharply Monday morning on reports that the U.K. government would announce the U-turn. Sterling was 0.8% higher against the dollar at one stage, but dipped to $1.1212 by 7:30 a.m. London time after the formal announcement. It takes it back to the level it was at before Kwarteng unveiled a raft of tax cuts on Sept. 23.



With the ruling Conservative Party plunging in opinion polls since the so-called “mini budget,” which was also criticized by the International Monetary Fund in a rare move, several of its own politicians have spoken out against the proposals.



<h2 class="wp-block-heading">Major U-turn</h2>



Grant Shapps, the former transport secretary, said in a BBC interview Monday morning the reversal in the top rate tax cut was a “sensible response” because a tax cut for “the people who need them least &#8230; jarred for people in a way which was unsustainable.”



It represents a major and humiliating U-turn for new Prime Minister Liz Truss, who was insisting as recently as Sunday she was “absolutely committed” to the cut.



She also revealed the decision was taken by Kwarteng and had not been announced to her whole cabinet. The plan would have delivered an average £10,000 annual benefit to the country’s 660,000 top earners, the Treasury had said.



Truss said in a tweet Monday: “The abolition of the 45pc rate had become a distraction from our mission to get Britain moving.”



“Our focus now is on building a high growth economy that funds world-class public services, boosts wages, and creates opportunities across the country.”

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UK government abolishes plan to cut tax on high earners in major U-turn

By Victoria Waldersee and Emma-Victoria Farr







FRANKFURT, Sept 29 (Reuters) – Porsche AG made its debut on the stock market on Thursday, with a price tag of about 75 billion euros ($72.45 billion) after Volkswagen priced shares at the top end of the range, braving turbulent market conditions.







<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="536" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/Porsche-Emblem_Max-Pixel-820x536.jpg" alt="Porsche Logo" class="wp-image-420162" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/Porsche-Emblem_Max-Pixel-820x536.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/Porsche-Emblem_Max-Pixel-300x196.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/Porsche-Emblem_Max-Pixel-138x90.jpg 138w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/Porsche-Emblem_Max-Pixel-768x502.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/Porsche-Emblem_Max-Pixel.jpg 960w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Porsche </figcaption></figure>



The bumper flotation, expected to generate around 19.5 billion euros ($19.0 billion), comes as instability in European markets has deterred other share sales by carmakers, including in luxury brands.



The sale values Porsche AG close to the market capitalisation of its parent Volkswagen, which is worth around 84 billion euros, and puts it ahead of rivals like Ferrari .



Books closed on Wednesday on what is one of Europe’s biggest IPOs and the second largest in Germany since Deutsche Telekom made its debut in 1996, at the top end of the 76.50-82.50 euro range it announced earlier this month.



Shares opened at 84.00 euros apiece and traded at 82.88 euros by 0733 GMT.



Shares in Porsche SE fell 5.7% in early Frankfurt trade. Shares in Volkswagen were down 4.9% in early Frankfurt trade.



Companies in continental Europe have raised the smallest amount this year since the 2009 global financial crisis at $44 billion, of which only $4.5 billion comes from IPOs, based on Refinitiv data.



Volkswagen has said the market’s volatility was precisely why fund managers with money to invest were sorely in need of a stable and attractive stock like Porsche AG.



“Porsche was and is the pearl in the Volkswagen Group,” Chris-Oliver Schickentanz, chief investment officer at fund manager Capitell, said.



“The IPO has now made it very, very transparent what value the market brings to Porsche. That, of course, also has a positive effect on Volkswagen shareholders.”



Faced with tens of billions of costs for a radical shift towards electric mobility and software, Volkswagen executives had long mulled listing Porsche, a move executives hoped would both raise much-needed funds and lift Volkswagen’s own value.



The Porsche and Piech families, in turn, will solidify their control over the carmaker with 25%, plus one ordinary share – carrying voting rights – in Porsche AG, effectively giving them a blocking minority in the namesake brand.



Up to 113,875,000 preferred shares, carrying no voting rights, will be sold to investors over the course of the initial public offering. ($1 = 1.0352 euros)



(Reporting by Victoria Waldersee and Emma-Victoria Farr; writing by Victoria Waldersee and Matthias Williams; Editing by Hugh Lawson, Richard Pullin and Jane Merriman)

Porsche Emblem Luxury Logo Design Vehicle Auto

PORSCHE DEBUTS WITH $72 BLN PRICE TAG IN BUMPER IPO

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="517" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/H7LBUI33NVMVBJLTWW7DYOIAII-820x517.jpg" alt="" class="wp-image-420134" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/H7LBUI33NVMVBJLTWW7DYOIAII-820x517.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/H7LBUI33NVMVBJLTWW7DYOIAII-300x189.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/H7LBUI33NVMVBJLTWW7DYOIAII-143x90.jpg 143w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/H7LBUI33NVMVBJLTWW7DYOIAII-768x485.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/H7LBUI33NVMVBJLTWW7DYOIAII-1536x969.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/H7LBUI33NVMVBJLTWW7DYOIAII-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>A commuter walks past the Bank of England, in London, Britain, September 26, 2022. REUTERS/Peter Nicholls</figcaption></figure>



LONDON — The Bank of England will suspend the planned start of its gilt selling next week and begin temporarily buying long-dated bonds in order to calm the market chaos unleashed by the new government’s so-called mini-budget.



Yields on U.K. government bonds, known as “gilts,” were on course for their sharpest monthly rise since at least 1957 as investors fled British fixed income markets following the new fiscal policy announcements. The measures included large swathes of unfunded tax cuts that have drawn global criticism, including from the IMF.



In a statement Wednesday, the central bank said it was monitoring the “significant repricing” of U.K. and global assets in recent days, which has hit long-dated U.K. government debt particularly hard.



“Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy,” the Bank of England said.



“In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses.”



As of Wednesday, the bank will begin temporary purchases of long-dated U.K. government bonds in order to “restore orderly market conditions,” and said these will be carried out “on whatever scale necessary” to soothe markets.



The bank’s Financial Policy Committee on Wednesday acknowledged the dysfunction in the gilt market posed a material risk to the country’s financial stability, and opted to take immediate action.



The Monetary Policy Committee’s target of an annual £80 billion ($85 billion) reduction of its gilt holdings remains unchanged, the bank said, with the first gilt sales — initially slated for Monday — now taking place on Oct. 31.



A U.K. Treasury spokesperson confirmed that the operation had been “fully indemnified” by the Treasury and said that Finance Minister Kwasi Kwarteng is “committed to the Bank of England’s independence.”



“The Government will continue to work closely with the Bank in support of its financial stability and inflation objectives,” the spokesperson added.



The bank said it will publish a market notice outlining the operational details of the program “shortly.”



Yields on U.K. 30-year gilts and 10-year gilts dropped sharply after the announcement, while sterling initially fell 1.5% against the dollar before recovering slightly to trade at around $1.066 by mid-afternoon in London.



<h3 class="wp-block-heading" id="h-caught-in-a-crossfire">‘Caught in a crossfire’</h3>



Antoine Bouvet, senior rates strategist at ING, said that the Bank of England may need to extend the bond purchases beyond the initial two-week period if volatility in the gilt market continues, and that an additional hike in interest rates was not off the table.



Bouvet told CNBC immediately after the announcement that the bank’s first priority for now had to be the functioning of the gilt market, suggesting the worst outcome would be for the sovereign to be left without market access and unable to secure financing.



“Clearly the gilt market was caught in a crossfire between the Bank of England and the Treasury, and it’s not exactly like that but it looked a lot like they were competing, or working at crossed purposes,” Bouvet said.



“So you have a world where you have a recession and the BOE is trying to cool the economy with hikes, and on the other hand you have the Treasury that is trying to shield the economy from that recession and implementing fiscal measures that are inflationary.”



He added that the Treasury’s statement of support was important, noting that the government would be keen to avoid the impression that the gilt market is in “so much trouble” that it had forced the Bank of England to take hold of rescuing the economy.

A commuter walks past the Bank of England, in London

Bank of England intervenes in bond market after historic sell-off

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107004870-16427966702022-01-21t201709z_969185203_rc2w3s99wb9o_rtrmadp_0_argentina-imf-mexico-820x462.jpeg" alt="" class="wp-image-420118" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107004870-16427966702022-01-21t201709z_969185203_rc2w3s99wb9o_rtrmadp_0_argentina-imf-mexico-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107004870-16427966702022-01-21t201709z_969185203_rc2w3s99wb9o_rtrmadp_0_argentina-imf-mexico-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107004870-16427966702022-01-21t201709z_969185203_rc2w3s99wb9o_rtrmadp_0_argentina-imf-mexico-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107004870-16427966702022-01-21t201709z_969185203_rc2w3s99wb9o_rtrmadp_0_argentina-imf-mexico-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107004870-16427966702022-01-21t201709z_969185203_rc2w3s99wb9o_rtrmadp_0_argentina-imf-mexico.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>The new economic measures laid out by the U.K. government “will likely increase inequality”, according to a spokesperson from the International Monetary Fund. Yuri Gripas | Reuters</figcaption></figure>



LONDON — The new economic measures laid out by the U.K. government “will likely increase inequality,” the International Monetary Fund said in a rare statement.



While the fiscal package — which included hefty tax cuts for Britain’s highest earners — aims to help families and businesses handle the energy shock, the IMF does “not recommend large and untargeted fiscal packages at this juncture,” a spokesperson said in a statement late Tuesday.



The so-called “mini-budget” on Friday was not accompanied by a forecast from Britain’s independent Office for Budget Responsibility, which typically analyses the impact big financial moves would likely have on the economy.



Markets were strongly affected by the new measures, with U.K. bonds sinking and the British pound plummeting to a record low on Monday.



The IMF also looked ahead to the next full budget announcement, set to be laid out by Finance Minister Kwasi Kwarteng on Nov. 23, saying it gives the U.K. government “an early opportunity … to consider ways to provide support that is more targeted and re-evaluate the tax measures, especially those that benefit high income earners.”



<h3 class="wp-block-heading" id="h-large-unfunded-cuts-are-credit-negative">‘Large unfunded cuts are credit negative’</h3>



The “almost unprecedented” fiscal injections have “put the U.K. economy into a difficult situation,” according to Ian Harnett, co-founder and chief investment strategist at research firm Absolute Strategy.



The move made the Bank of England’s position “almost impossible,” he said on CNBC’s “Squawk Box Europe” on Wednesday.



The Bank of England will likely deliver a “significant policy response” following Kwarteng’s fiscal announcement, according to its Chief Economist Huw Pill, who spoke at the Barclays-CEPR International Monetary Policy Forum in London on Tuesday.



While no moves will be made ahead of the bank’s next scheduled meeting in November, the recent announcements “will act as a stimulus,” Pill said, as reported by Reuters.



Credit ratings agency Moody’s, meanwhile, said “large unfunded cuts are credit negative,” prompting fears of larger budget deficits and higher interest rates in the U.K.



“A sustained confidence shock arising from market concerns over the credibility of the government’s fiscal strategy that resulted in structurally higher funding costs could more permanently weaken the UK’s debt affordability,” Moody’s said, according to Reuters.



The “mini-budget” announced by the new U.K. government on Friday was a “new approach for a new era focused on growth,” according to Kwarteng, and included canceling the planned increase in corporation tax from 19% to 25% and scrapping the 45% income tax bracket paid on incomes over £150,000 ($160,000), bringing the top rate down to 40%.



The pound has seen some recovery from its record low of $1.0382 at the start of the week, and sat at around $1.0666 on Wednesday morning.

107004870-16427966702022-01-21t201709z_969185203_rc2w3s99wb9o_rtrmadp_0_argentina-imf-mexico

IMF damns Britain’s tax cuts

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107119439-1663266317422-GettyImages-1220201174-820x462.jpg" alt="" class="wp-image-420075" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107119439-1663266317422-GettyImages-1220201174-820x462.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107119439-1663266317422-GettyImages-1220201174-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107119439-1663266317422-GettyImages-1220201174-160x90.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107119439-1663266317422-GettyImages-1220201174-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107119439-1663266317422-GettyImages-1220201174.jpg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Photo: via CNBC</figcaption></figure>



In focusing on raising interest rates to cool inflation, central banks and governments have overlooked the importance of maintaining stable currencies, said Steve Forbes, chair of Forbes Media.



The British pound briefly fell 4% to an all-time low of $1.0382 on Monday in Asia, following last week’s announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth.



Currencies are weakening against the U.S. dollar as interest rates in the United States continue to rise. Both the Chinese yuan and Japanese yen also fell heavily as the two economies maintain more accommodative monetary policies than the U.S. &nbsp;



“No central banker today&nbsp;— hardly any — talks about stable currencies. It’s about depressing the economy to fight inflation,” Forbes said at the Forbes Global CEO Conference in Singapore on Monday.&nbsp;



Forbes, a Republican who ran for president twice calling for flat income taxes, said many economists and policymakers have stuck to a standard “dogma” or mindset of targeting inflation by hiking interest rates and failed to look beyond that, such as by taking steps to shore up currencies. &nbsp;



<h2 class="wp-block-heading" id="h-the-real-cure"><a></a>‘The real cure’</h2>



Forbes cited favorably an example from the 1980s: After then Fed Chair Paul Volcker reined in inflation with a dramatic interest rate hike of more than 20%, U.S. President Ronald Reagan stabilized the economy and increased production by cutting taxes and introducing deregulation.



The Reagan administration also coordinated global efforts to sell dollars and buy up other currencies.&nbsp;



“Today, unfortunately, not only is the Biden administration putting up obstacles to deal with supply-side problems, but also the Federal Reserve and other central banks think you have to depress the economy to bring inflation down,” he said, disputing the idea that a recession is the only solution to combating inflation.&nbsp;



“They do it by artificially raising interest rates. So they have fewer people employed &#8230; that is not the real cure,” he said.



“The real cure is to stabilize the currency. You don’t have to&nbsp;make people poor to conquer inflation.”



Currency imbalances can create problems for economies. A higher U.S. dollar means more expensive exports, while weaker currencies could mean problems like lower foreign exchange reserves.&nbsp;



Forbes suggested using gold to stabilize currencies — for example, tying the U.S. dollar to gold so the dollar has a fixed value.



“Gold holds its intrinsic value better than anything else on earth … gold is not perfect as a stable value but it is better than anything we have found in over 4,000 years,” he said.&nbsp;



“With unstable currencies you get less productive long-term investments, which is key to economic growth.”



Forbes said that after the Bretton Woods gold standard was introduced in the 1940s — under which the U.S. dollar was fixed to gold and other currencies were fixed to the dollar — economic growth rates were a lot higher. 



However, the Bretton Woods system collapsed in the 1970s.  



Separately, HSBC’s global chief economist, Janet Henry, said at a panel at the same conference that she would not be surprised if sterling continued to fall below the low of $1.0382 on Monday, but she did not expect it to stay at those levels.&nbsp;



“I don’t think there will be currency intervention on the sterling … but the onus is now on the central bank to do more to tighten policies to stabilize the situation,” Henry said.&nbsp;



“I think unless we get severe financial distress they [bank] will wait until the next meeting to show decisive action to raise rates aggressively in the next couple of meetings.”

107119439-1663266317422-GettyImages-1220201174

The ‘real cure’ for inflation has gone ignored, Steve Forbes says

<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/106125846-1568288924889gettyimages-860933734-820x462.jpeg" alt="" class="wp-image-420057" width="820" height="462" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/106125846-1568288924889gettyimages-860933734-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/106125846-1568288924889gettyimages-860933734-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/106125846-1568288924889gettyimages-860933734-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/106125846-1568288924889gettyimages-860933734-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/106125846-1568288924889gettyimages-860933734.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Photo: via CNBC</figcaption></figure>



The British pound plunged to a record low on Monday morning in Asia, following last week’s announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth.



Sterling briefly fell 4% to an all-time low of $1.0382 on Monday in Asia, continuing its sluggish trade in recent months as the U.S. dollar strengthens.



Critics say those economic measures will disproportionately benefit the wealthy and could see the U.K. take on high levels of debt at a time of rising interest rates.



″[It] doesn’t seem like the U.K. government is throwing the market a bone here in terms of having a much more tempered fiscal trajectory, and so I think at this point right now, the path of least resistance is going to remain lower,” Mazen Issa, senior forex strategist at TD Securities, told CNBC before the pound hit a new low.



“Below $1.05, you really look at parity,” he told CNBC’s “Squawk Box Asia.”



“We’ve seen the euro dip below parity — I don’t see a reason why sterling can’t either,” he added.



It’s a “major challenge” for the Bank of England to fight inflation while the government tries to stimulate the economy, said Nicholas Ferres, chief investment officer at Vantage Point Asset Management.



“The Bank of England may even do an emergency policy meeting this week and hike rates, that wouldn’t surprise me if that happened,” he said.



The lack of commitment to fiscal discipline in the U.K., along with the strong dollar, led to the pound weakening sharply, said Saktiandi Supaat, FX strategist at Maybank.



“I think that [the] collapse in the sterling actually led to further risk aversion, generally risk-off sort of sentiment, intensifying further down,” he said.



Billed as a “mini-budget” by U.K. Finance Minister Kwasi Kwarteng, Friday’s fiscal announcement saw a volume of tax cuts not seen in Britain since 1972. Market players immediately predicted that Britain would have to scale up its bond issuance and significantly increase its debt load to pay for the cuts. On Sunday, Kwarteng also talked up the possibility of more tax cuts in the coming months.



<h2 class="wp-block-heading" id="h-asia-pacific-currencies-also-weaken"><a></a>Asia-Pacific currencies also weaken</h2>



In the Asia-Pacific region, Japan, South Korea and China’s currencies weakened against the greenback, while the Australian dollar was about flat.



The Japanese yen traded at 144-levels against the dollar, weaker compared with after authorities intervened in the currency market last week.



South Korea’s won was near 2009 levels at 1,428.52 per dollar.



The U.S. dollar index has been rising strongly this year as the Fed raises interest rates aggressively. In particular, interest rate differentials between the U.S. and Japan have widened significantly as the Bank of Japan sticks to its ultra-low rates.

106125846-1568288924889gettyimages-860933734

Sterling hits record low against dollar as rand, Asian currencies weaken

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/42753534974_9afb2d746d_b-820x547.jpg" alt="" class="wp-image-407618" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/42753534974_9afb2d746d_b-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/42753534974_9afb2d746d_b-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/42753534974_9afb2d746d_b-120x80.jpg 120w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/42753534974_9afb2d746d_b-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/42753534974_9afb2d746d_b.jpg 1024w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Photo via Flickr</figcaption></figure>



The Federal Reserve on Wednesday raised benchmark interest rates by another three-quarters of a percentage point and indicated it will keep hiking well above the current level. In its quest to bring down inflation running near its highest levels since the early 1980s, the central bank took its federal funds rate up to a range of 3%-3.25%, the highest it has been since early 2008, following the third consecutive 0.75 percentage point move.



Stocks seesawed following the announcement, with the Dow Jones Industrial Average most recently up 280 points. The market cut losses as Fed Chairman Jerome Powell discussed the outlook for interest rates and the economy.



Traders have been concerned that the Fed is remaining more hawkish for longer than some had anticipated. Projections from the meeting indicated that the Fed expects to raise rates by at least 1.25 percentage points in its two remaining meetings this year.



“My main message has not changed since Jackson Hole,” Powell said in his post-meeting news conference, referring to his policy speech at the Fed’s annual symposium in August. “The FOMC is strongly resolved to bring inflation down to 2%, and we will keep at it until the job is done.”



The increases that started in March and from a point of near-zero mark the most aggressive Fed tightening since it started using the overnight funds rate as its principal policy tool in 1990. The only comparison was in 1994, when the Fed hiked a total of 2.25 percentage points; it would begin cutting rates by July of the following year. Along with the massive rate increases, Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point of 4.6% in 2023. That implies a quarter-point rate hike next year but no decreases. The “dot plot” of individual members’ expectations doesn’t point to rate cuts until 2024. Fed Chairman Jerome Powell and his colleagues have emphasized in recent weeks that it is unlikely rate cuts will happen next year, as the market had been pricing. Federal Open Market Committee members indicate they expect the rate hikes to have consequences. The funds rate on its face addresses the rates that banks charge each other for overnight lending, but it bleeds through to many consumer adjustable-rate debt instruments, such as home equity loans, credit cards and auto financing. In their quarterly updates of estimates for rates and economic data, officials coalesced around expectations for the unemployment rate to rise to 4.4% by next year from its current 3.7%. Increases of that magnitude often are accompanied by recessions. Along with that, they see GDP growth slowing to 0.2% for 2022, rising slightly in the following years to a longer-term rate of just 1.8%. The revised forecast is a sharp cut from the 1.7% estimate in June and comes following two consecutive quarters of negative growth, a commonly accepted definition of recession. The hikes also come with the hopes that headline inflation will drift down to 5.4% this year, as measured by the Fed’s preferred personal consumption expenditures price index, which showed inflation at 6.3% in July. The summary of economic projections then sees inflation falling back to the Fed’s 2% goal by 2025. Core inflation excluding food and energy is expected to decline to 4.5% this year, little changed from the current 4.6% level, before ultimately falling to 2.1% by 2025. (The PCE reading has been running well below the consumer price index.) The reduction in economic growth came even though the FOMC’s statement massaged language that in July had described spending and production as having “softened.” This meeting’s statement noted: “Recent indicators point to modest growth in spending and production.” Those were the only changes in a statement that received unanimous approval.



Otherwise, the statement continued to describe job gains as “robust” and noted that “inflation remains elevated.” The statement also noted again that “ongoing increases in the target rate will be appropriate.“



The dot plot showed virtually all members on board with the higher rates in the near term, though there were some variations in subsequent years. Six of the 19 “dots” were in favor of taking rates to a 4.75%-5% range next year, but the central tendency was to 4.6%, which would put rates in the 4.5%-4.75% area. The Fed targets its fund rate in quarter-point ranges.



The chart indicated as many as three rate cuts in 2024 and four more in 2025, to take the longer-run funds rate down to a median outlook of 2.9%.



Markets have been bracing for a more aggressive Fed.



Traders had fully priced in the 0.75 percentage point move and even had assigned an 18% chance of a full percentage point move, according to CME Group data. Futures contracts just prior to Wednesday’s meeting implied a 4.545% funds rate by April 2023.



The moves come amid stubbornly high inflation that Powell and his colleagues spent much of last year dismissing as “transitory.” Officials relented in March of this year, with a quarter-point hike that was the first increase since taking rates to zero in the early days of the Covid pandemic.



Along with the rate increases, the Fed has been reducing the amount of bond holdings it has accumulated over the years. September marked the beginning of full-speed “quantitative tightening,” as it is known in markets, with up to $95 billion a month in proceeds from maturing bonds being allowed to roll off the Fed’s $8.9 trillion balance sheet.

Federal Reserve Chairman Jerome Powell Photo: via Flickr

Fed raises rates by another three-quarters of a percentage point, pledges more hikes to fight inflation

It’s not what the Federal Reserve does, but what it says it could do in the future that will be most crucial when the central bank ends its two-day meeting Wednesday.



The Fed is expected to fire off another three-quarter point rate hike — its third in a row. It will also release quarterly forecasts for inflation, the economy, and the future path of interest rates Wednesday at 2 p.m. ET.



The Fed’s projections are always important, but this time they are even more so because investors have been trying to game how&nbsp;<a href="https://www.cnbc.com/2022/09/19/with-inflation-still-high-the-fed-may-be-far-from-where-it-can-stop.html">high it will raise interest rates</a>&nbsp;and how much officials expect their actions could affect the economy.



Fed Chair Jerome Powell speaks at 2:30 p.m. ET, and he is expected to emphasize the central bank will do what it takes to fight inflation and it is unlikely to reverse its rate hikes anytime soon.



<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>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>



“I think he puts up a bulletin board behind him that says ‘Inflation Has to Come Down,’” said Rick Rieder, BlackRock chief investment officer for global fixed income. “I think he’s going to talk tough.”



The new forecasts also come as the central bank moves into a rate hiking zone that some economists expect will be more restrictive and could more seriously impact the economy.



“It’s not what they do, it’s what they say. This is our first actual tightening road map. We had theoretical road maps up until now, but from the Fed’s point of view they’re crossing into a world of tightening. That’s an important thing,” said Diane Swonk, chief economist at KPMG.



The Fed has been lifting rates for seven months now, and will now be moving its target rate above what had been considered the neutral zone when inflation was low. Neutral is considered to be the interest rate level where Fed policy is no longer easy but not yet restrictive. The Fed has considered 2.5% to be neutral, and if it raises by three-quarters of a point, the fed funds rate will be in a range of 3% to 3.25%.



“This is really moving into restrictive monetary policy territory. We will be moving into no man’s land,” Swonk said. “We actually haven’t tightened policy to fight inflation since the early 1980s. Their goal is for a prolonged slowdown that grinds inflation slowly down and only gradually increases the unemployment rate. Whether they get there is another issue.”



<h3 class="wp-block-heading" id="h-rate-expectations-jumped">Rate expectations jumped</h3>



Economists have been ratcheting up their forecasts for how high they expect the Fed to take the fed funds target before stopping the hikes. That level is called the terminal rate.



Expectations for Fed tightening increased dramatically in the past week, after a surprisingly hot August consumer price index report. Fed funds futures on Monday were pricing in a terminal rate of 4.5% by April, up from just around 4% before the inflation report was released last Tuesday.



The&nbsp;<a href="https://www.cnbc.com/2022/09/13/inflation-rose-0point1percent-in-august-even-with-sharp-drop-in-gas-prices.html">CPI rose 0.1%</a>&nbsp;in August, while economists had expected a decline.



“The&nbsp;<a href="https://www.cnbc.com/2022/09/13/inflation-rose-0point1percent-in-august-even-with-sharp-drop-in-gas-prices.html">CPI number</a>&nbsp;last week caused a lot in&nbsp;<a href="https://www.cnbc.com/2022/09/14/stocks-could-retest-lows-after-augusts-inflation-shakes-up-markets.html?&amp;amp;qsearchterm=patti%20domm">terms of market repricing,”</a>&nbsp;said Peter Boockvar, chief investment officer at Bleakley Advisory Group. Stocks have been selling off, and bond yields shot higher after that report, with some short-term Treasury yields rising above 4%. The&nbsp;<a href="https://www.cnbc.com/quotes/US10Y">10-year Treasury yield r</a>ose to 3.59% Tuesday, the highest since April, 2011.



The Fed’s last forecast, in June, estimated the terminal rate for fed funds to be at 3.8% in 2023.



Economists now&nbsp;<a href="https://www.cnbc.com/2022/09/19/with-inflation-still-high-the-fed-may-be-far-from-where-it-can-stop.html">expect the Fed to raise the terminal rate forecast above 4%.</a>&nbsp;Citigroup economists said they could even see a scenario where it could go above 5% if the Fed needs to get more aggressive in its inflation fight.



Goldman Sachs economists, in a report, said they expect the median forecast of Fed officials to show the funds rate at 4% to 4.25% at year-end, with another hike to a peak of 4.25% to 4.5% in 2023. They then expect a cut in 2024 and two more in 2025.



<h3 class="wp-block-heading">Labor market pain</h3>



Swonk expects some of that pain to show up a jump in the unemployment rate to above 5% by the end of next year.



In June, the Fed forecast the unemployment rate would be 3.7% this year, the&nbsp;<a href="https://www.cnbc.com/2022/09/02/august-2022-jobs-report-.html">same level as August.</a>&nbsp;Fed officials also expected unemployment to rise to 3.9% in 2023 and 4.1% by 2024.



“I think they’re going to be a little light on the unemployment rate. I’m in the camp that they have to really increase the unemployment rate to really make progress with inflation,” said Jim Caron, Morgan Stanley Investment Management’s head of macro strategies for global fixed income. “They’re in the camp of ‘We don’t have to do that.’”



Caron said the Fed’s rate hiking is a process that will increase the risk of recession.



“By increasing recession risks, you lower inflation risks because it’s all about reducing demand in the economy,” he said. “The sacrifice is slower growth in the future.”



There are some investors betting the Fed will raise rates by a full percentage point, but most economists envision a 75 basis point increase. A basis point equals 0.01 of a percentage point.



“I think 75 basis points is pretty much baked into the cake,” said Caron. “Now, it’s going to be about what they actually tell us &#8230; . They don’t want to do forward guidance, but the reality is people are still going to look at them for forward guidance.”



<h3 class="wp-block-heading">‘Out-hawk’ the market</h3>



Powell has taken on a more hawkish tone. He gave a&nbsp;<a href="https://www.cnbc.com/2022/08/26/powell-warns-of-some-pain-ahead-as-fed-fights-to-lower-inflation.html">short and direct speech at the Fed’s annual Jackson Hole symposium</a>&nbsp;in late August, where he warned the economy could be in for pain from Fed tightening. The chair stressed that the Fed will use economic data to guide policy, and he has also emphasized that policymakers will hold rates at high levels until inflation eases.



“I think the message will be largely the same as Jackson Hole,” said Michael Gapen, chief U.S. economist at Bank of America. “It will be about getting policy restrictive, getting it there for a period of time with the overarching goal being price stability.”



Caron said it’s possible Powell could sound inadvertently dovish because the Fed has tilted very hawkish.



“I think a 75 basis point move is pretty darn hawkish, the third one in a row,” said Caron. “I don’t think they have to work very hard to ‘out-hawk’ the market.”

107094949-16589488462022-07-27t185755z_1401356456_rc2ikv9v3blg_rtrmadp_0_usa-fed

Fed expected to hike rates by three-quarters of a point again, but its forecast may matter most

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="612" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107121790-1663737204555-gettyimages-1243390963-RUS_Russian_President_Putin_Attends_Official_Events_In_Moscow-820x612.jpeg" alt="" class="wp-image-419965" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107121790-1663737204555-gettyimages-1243390963-RUS_Russian_President_Putin_Attends_Official_Events_In_Moscow-820x612.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107121790-1663737204555-gettyimages-1243390963-RUS_Russian_President_Putin_Attends_Official_Events_In_Moscow-300x224.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107121790-1663737204555-gettyimages-1243390963-RUS_Russian_President_Putin_Attends_Official_Events_In_Moscow-121x90.jpeg 121w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107121790-1663737204555-gettyimages-1243390963-RUS_Russian_President_Putin_Attends_Official_Events_In_Moscow-768x573.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107121790-1663737204555-gettyimages-1243390963-RUS_Russian_President_Putin_Attends_Official_Events_In_Moscow-1536x1146.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107121790-1663737204555-gettyimages-1243390963-RUS_Russian_President_Putin_Attends_Official_Events_In_Moscow-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Russian President Vladimir Putin speaks during a meeting on the military-industrial complex at the Kremlin, September 20, 2022, in Moscow, Russia. Contributor | Getty Images News | Getty Images</figcaption></figure>



Russian President Vladimir Putin on Wednesday announced a partial military mobilization in Russia, putting the country’s people and economy on a wartime footing as Moscow’s invasion of Ukraine continues.



In a rare pre-recorded televised announcement, Putin said the West “wants to destroy our country” and claimed the West had tried to “turn Ukraine’s people into cannon fodder,” in comments translated by Reuters, repeating earlier claims in which he has blamed Western nations for starting a proxy war with Russia.



Putin said “mobilization events” would begin Wednesday without providing many further details, aside from saying that he had ordered an increase in funding to boost Russia’s weapons production.



A partial mobilization is a hazy concept, but it could mean that Russian businesses and citizens have to contribute more to the war effort. Russia has not yet declared war on Ukraine, despite having invaded it in February, and it calls its invasion a “special military operation.”



In what was immediately greeted as an escalatory address, Putin also accused the West of engaging in nuclear blackmail against Russia and warned again that the country had “lots of weapons to reply” to what he said were Western threats — adding that he was not bluffing.



Putin has alluded to Russia’s nuclear weaponry at various points during the conflict with Ukraine but there are doubts over whether Moscow would actually resort to deploying such a weapon, with analysts saying it could be tantamount to starting a third world war.



British Foreign Office Minister Gillian Keegan told Sky News immediately after the speech that Putin’s comments should not be taken lightly.



“Clearly it’s something that we should take very seriously because, you know, we’re not in control — I’m not sure he’s in control either, really. This is obviously an escalation,” she said.



<h2 class="wp-block-heading" id="h-russia-under-pressure"><a></a>Russia under pressure</h2>



Putin’s comments come as Russia’s invasion of Ukraine, which began in late February, approaches the winter period with momentum appearing to be on Ukraine’s side after it launched lightning counteroffensives in the northeast and south to reclaim lost territory.



Speculation mounted Tuesday that Putin could be about to announce a full or partial mobilization of the Russian economy and society, paving the way for possible conscription of Russian men of fighting age, after Moscow-installed officials in occupied areas of Ukraine announced plans to stage immediate referenda on joining Russia.



The votes — set to take place in Donetsk, Luhansk, Kherson and Zaporizhzhia this weekend and with the results widely expected to be rigged in favor of joining Russia — would enable the Kremlin to claim, albeit falsely, that it was “defending” its own territory and citizens.



Plans to hold such votes were widely condemned by Ukraine and its Western allies who said they would not recognize the ballots and efforts to annex more of Ukraine, as Russia did with Crimea in 2014.



Putin on Wednesday repeated earlier claims from Moscow that Russia’s aim is to “liberate” the Donbas, a region in eastern Ukraine in which there are two self-proclaimed, pro-Russian republics, and said he had ordered the government to give legal status to volunteers fighting in the Donbas, Reuters reported.

107121790-1663737204555-gettyimages-1243390963-RUS_Russian_President_Putin_Attends_Official_Events_In_Moscow

Russia’s Putin announces partial military mobilization

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="546" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107084717-16570507572022-07-05t191321z_273521157_rc2v5v9hednt_rtrmadp_0_britain-politics-820x546.jpeg" alt="" class="wp-image-419815" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107084717-16570507572022-07-05t191321z_273521157_rc2v5v9hednt_rtrmadp_0_britain-politics-820x546.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107084717-16570507572022-07-05t191321z_273521157_rc2v5v9hednt_rtrmadp_0_britain-politics-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107084717-16570507572022-07-05t191321z_273521157_rc2v5v9hednt_rtrmadp_0_britain-politics-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107084717-16570507572022-07-05t191321z_273521157_rc2v5v9hednt_rtrmadp_0_britain-politics-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107084717-16570507572022-07-05t191321z_273521157_rc2v5v9hednt_rtrmadp_0_britain-politics-1536x1023.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107084717-16570507572022-07-05t191321z_273521157_rc2v5v9hednt_rtrmadp_0_britain-politics-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>ONS figures showed that real wages in the U.K. over the three months to May experienced their steepest decline since records began in 2001. Henry Nicholls | Reuters</figcaption></figure>



LONDON — U.K. inflation slowed in August on the back of a fall in fuel prices, though food prices continued to rise as the country’s cost-of-living crisis persists.



The consumer price index rose 9.9% annually, according to estimates published Wednesday by the Office for National Statistics, fractionally below a consensus forecast of 10.2% among economists polled by Reuters. It was also down from July’s figure of 10.1%.



Month-on-month, consumer prices rose 0.5%, fractionally below forecasts. Core inflation, which excludes volatile energy, food, alcohol and tobacco, was up 0.8% month-on-month and 6.3% year-on-year, in line with expectations.



“A fall in the price of motor fuels made the largest downward contribution to the change in both the CPIH and CPI annual inflation rates between July and August 2022,” the ONS said in its report.



“Rising food prices made the largest, partially offsetting, upward contribution to the change in the rates.”



Sterling was roughly flat against the dollar on Wednesday morning, trading at around $1.1490.



The U.K. has been hit by a historic cost-of-living crisis this year as food and energy prices skyrocket and pay increases fail to keep pace with inflation, which has led to one of the sharpest falls in real wages on record.



Last week, new British Prime Minister Liz Truss announced an emergency fiscal package capping annual household energy bills at £2,500 ($2,881.90) for the next two years, with an equivalent guarantee for businesses over the next six months and further support in the pipeline for vulnerable sectors.



Analysts expect the measures — estimated to cost the public purse around £130 billion — to sharply reduce the inflation outlook in the short term, but increase it over the medium term.



<h2 class="wp-block-heading" id="h-could-likely-be-a-fluke"><a></a>‘Could likely be a fluke’</h2>



The Bank of England is set to announce its latest monetary policy decision next Thursday after a delay due to the death of Queen Elizabeth II, and is widely expected to opt for a sharp 75 basis point increase to interest rates as it looks to drag down inflation.



At its last meeting, the Bank projected that inflation would peak at 13.3% before the end of the year, and policymakers will be reappraising their outlook in light of Truss’s new energy cap announcement.



“With hope, the cap on energy bills may mean inflation is now close to peaking, though last month’s fall could likely be a fluke and we may see inflation climb further still in the months to come,” said Richard Carter, head of fixed interest research at Quilter Cheviot.



“While the energy plan may help, it comes at the cost of higher levels of borrowing and government spending which could encourage the Bank of England to hike rates even further than originally expected.”

107084717-16570507572022-07-05t191321z_273521157_rc2v5v9hednt_rtrmadp_0_britain-politics

UK inflation rate unexpectedly dips to 9.9% as fuel prices decline

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1243054738-820x547.jpg" alt="" class="wp-image-419725" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1243054738-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1243054738-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1243054738-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1243054738-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1243054738-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/GettyImages-1243054738-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>LONDON, UNITED KINGDOM &#8211; SEPTEMBER 08: Members of the public gather outside Buckingham Palace following the announcement of the death of Queen Elizabeth II in London, United Kingdom on September 08, 2022. Buckingham Palace has announced today that Queen Elizabeth II has died peacefully at Balmoral at the age of 96. (Photo by Wiktor Szymanowicz/Anadolu Agency via Getty Images)</figcaption></figure>



LONDON — The death of Queen Elizabeth II marks the start of a new era for the U.K. — but it’s one fraught with economic uncertainty and dampening national sentiment.



The queen, who at 96 was the U.K.’s longest-reigning monarch, died “peacefully” Thursday at Balmoral Castle, Scotland, hours after doctors expressed concern for her ailing health.



Thousands of Brits gathered outside Buckingham Palace in the pouring rain following the news to pay their respects.



The queen — whose 70-year reign spanned the aftermath of WWII, the winding down of Britain’s vast empire, the 2016 Brexit vote and a global pandemic — had come to symbolize a rare constant in a world of constant change. She is succeeded by her eldest son, who was proclaimed King Charles III hours after her death.



Her passing will be marked by a period of solemn ceremony, during which no government announcements will be made until after her funeral, which will be marked with a public holiday in approximately 10 days.



<h2 class="wp-block-heading" id="h-suspension-of-normal-politics"><a></a>Suspension of normal politics</h2>



The suspension of normal politics comes just days after the U.K. installed its new prime minister Liz Truss, who was appointed Tuesday by the queen herself, in her final act of public service.



Truss enters 10 Downing Street at a time of unique flux for Britain, inheriting a country saddled with its worst economic outlook in years, a deepening energy crisis and increased inequality.



Hours before the queen’s death, Truss set to work outlining her plans to combat the U.K.’s cost-of-living crisis, unveiling a broad stimulus package designed to help Brits with energy bills, which have soared following Russia’s war in Ukraine.



It comes after a petition to boycott energy bills began gaining traction in the U.K.



The Treasury says the package, which is set to cost over £100 billion, will lower peak inflation by 4-5 percentage points. But economists have warned that the move could complicate the Bank of England’s already mammoth task of curbing record-high prices, by spurring spending on goods and wages.



The U.K. central bank delivered its biggest rate hike in 27 years last month, raising the benchmark to 1.75%, in a bid to bring down in inflation, which is currently the highest among G-7 nations at 10.1%. Investors had widely expected a further 50 basis point hike when the BoE meets next week, but some now say it will be forced to lift rates higher and more quickly.



<h2 class="wp-block-heading"><a></a>Rising recessionary risks</h2>



The uncertain outlook comes as the country faces rising recessionary risks. Goldman Sachs warned last week that the U.K. could fall into recession in the fourth quarter of this year, echoing earlier forecasts from the Bank of England.



Briton’s are now bracing for a winter of hardship for both household and businesses.



The British pound has already been on a downward trajectory over the past several months, hitting a 37-year low of $1.1469 on Wednesday.



It piles pressure not only on Truss but also King Charles, Britain’s two new leaders, whose role it will be to rally public sentiment during a period of crisis. The pair are set to meet later Friday in London.



The monarchy also faces ongoing criticism for being outdated and absorbing public finances. Indeed, the cost and ceremony of the queen’s funeral will not be lost on a country in the grips of a cost-of-living crisis.



“King Charles has already got plans — we’ll see them over the coming months and certainly years — to slim down the Royal Family,” Andrew Roberts, a historian and professor at King’s College London, told CNBC Friday.



“We are facing a massive cost-of-living crisis in the U.K., obviously, and what people want to see is the Royal Family reflecting that,” he said, adding that there may be fewer royals participating in high profile events going forward.



Truss on Thursday called on Britain to “come together as a people” and support its new head of state.



“Queen Elizabeth II was the rock on which modern Britain was built,” Truss said in a speech outside No. 10. “With the passing of the second Elizabethan age, we usher in a new era in the magnificent history of our great country.”&nbsp;



She added that Britons should rally round Charles III to “help him bear the awesome responsibility that he now carries for us all,” she added. “God save the King.”

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International

UK PM Liz Truss announces another huge U-turn and names Jeremy Hunt as finance minister

White House is pushing ahead research to cool Earth by reflecting back sunlight

Nobel economics prize awarded to U.S.-based economists including Bernanke for work on financial crises

U.S. accuses Russia of exploiting Africa resources to fund Ukraine war

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PORSCHE DEBUTS WITH $72 BLN PRICE TAG IN BUMPER IPO

Bank of England intervenes in bond market after historic sell-off

IMF damns Britain’s tax cuts

The ‘real cure’ for inflation has gone ignored, Steve Forbes says

Sterling hits record low against dollar as rand, Asian currencies weaken

Fed raises rates by another three-quarters of a percentage point, pledges more hikes to fight inflation

Fed expected to hike rates by three-quarters of a point again, but its forecast may matter most

Russia’s Putin announces partial military mobilization

UK inflation rate unexpectedly dips to 9.9% as fuel prices decline

Queen Elizabeth II’s death marks a new era for Britain, beset by economic uncertainty

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