2025-08-26 16:34

New head of central bankers' central bank backs independence Speech comes as US Fed faces Trump's criticism Central banks need to continue cooperation, remain flexible LONDON, Aug 26 (Reuters) - The new head of the Bank for International Settlements on Tuesday stressed the need for central banks to focus on inflation and, amid Donald Trump's escalating attacks on the Fed, for their independence to be protected. Uncertainty surrounding the world's most important monetary authority, the Federal Reserve, has risen this year as the U.S. President has repeatedly criticised its Chair Jerome Powell and on Monday announced he was firing one of its governors, Lisa Cook. Sign up here. "A clear price stability mandate, independence and accountability are the anchor, hull and mast of the monetary policy vessel," Pablo Hernandez de Cos, who in July took over as General Manager of BIS, often dubbed the central bankers' central bank, said in a speech in Mexico. In his first prominent speech in the new role, de Cos did not mention Trump or the Fed directly but laid out what he described as the "foundations" for central bank credibility. Independence was vital so central bankers are able to set interest rates and use tools, such as quantitative easing, "based on economic considerations in the long-term public interest, free from short-term political interference," the former Bank of Spain Governor said. He said there needed to be "institutional, functional, personal and financial independence, all of which must be underpinned by a robust legal framework". Trump's interventions this year, which included him calling for Powell to be replaced and questioning the central bank's refurbishment costs, have marked an unprecedented assault on the Fed's independence. Monday's proposed firing of Cook triggered a selloff in U.S. longer-term government debt on Tuesday, pushing the gap between 30-year yields and those on 2-year Treasuries to its widest in over three years. De Cos also stressed the need for "accountability", calling it a key counterpart to independence and the factor that "underpins the legitimacy of central bank policies." He pointed to how central banks had initially underestimated the post-COVID surge in inflation. That had posed a "major test" to monetary policy frameworks and their institutional pillars, de Cos said. They have been largely successful bringing inflation back down since then with "forceful" interest rate rises, albeit after a painful cost of living shock. He also outlined the shared challenges economies face, such as rising geopolitical tensions, debt, trade tariffs, aging populations, artificial intelligence and climate change. That difficult outlook means central banks will need frameworks that are "robust" in very different scenarios and forums such as the BIS, which holds regular behind-closed-doors meetings of the world's top central bankers. "Such a forum is particularly valuable in these uncertain times," de Cos said. https://www.reuters.com/business/finance/new-bis-head-stresses-importance-central-bank-independence-accountability-2025-08-26/

2025-08-26 16:30

Independent central banks achieve lower inflation Credibility keeps investors, public on side Past money-printing opens flank to criticism FRANKFURT, Aug 26 (Reuters) - U.S. President Donald Trump's attacks on Federal Reserve policymakers are emerging as the biggest threat in decades to central bank independence, which is widely seen as key to keeping down inflation and maintaining stability in the global financial system. Trump's unprecedented threat to fire Fed governor Lisa Cook over alleged mortgage-related improprieties and his relentless pressure on Fed chair Jerome Powell to cut interest rates are already testing the boundaries of presidential power over the U.S. central bank. Sign up here. They are also leading central bankers worldwide to worry about their independence from governments and calling into question a principle that has helped them keep inflation lower and more stable since the mid-1980s. That was when Fed chair Paul Volcker established the Fed's inflation-fighting credibility and independence from the Treasury, reining in price growth with high interest rates and setting an example that would be followed by scores of central banks in subsequent decades. "People don't realize how different the world has been in the past 30 years from what it was before in terms of inflation stability," Jordi Galí, a professor at the Barcelona School of Economics, said. The world's biggest central banks such as the Fed, the European Central Bank and the Bank of Japan are unique institutions in that they are typically led by political appointees and yet they don't take orders from their governments. This is because they have a very specific mandate, which is typically to keep inflation around 2% although some central banks like the Fed are also tasked with taking employment into account. This set-up leaves them free to set interest rates at the levels they see fit to achieve that goal. But independence is a relatively new concept and some central banks, like those of China, Turkey and other developing countries, are still influenced by their governments when setting policy. The Fed itself has been formally independent since 1951 but it only established its reputation in the 1980s when Volcker raised interest rates to double digits to stop runaway prices, which had been the result of energy shocks and Fed mismanagement of the supply of money. Since then, more than a hundred central banks, including the Bank of England in 1998, have been granted increasing degrees of formal independence, such as the ability to make decisions irrespective of government wishes and a prohibition to lend to the government. The results have been striking. Central banks that went all the way from being part of the government to fully independent saw a long-run reduction in annual inflation of approximately 3.7 percentage points in rich countries, according to a study published earlier this year by the Centre for Economic Policy Research. That reduction is even greater in poorer countries at 10.3 percentage points. These results account for the fact that inflation was falling anyway as a result of structural trends such as globalisation, weaker labour power and technological advances. In the latest example, most independent central banks have brought the post-pandemic surge in inflation under control in two or three years. By contrast, the Great Inflation period of the 20th century lasted from 1965 to 1982, with increasingly vicious relapses. "Even the recent inflationary surge was dealt with very well," professor Gali added. "The proof is that inflation has come down -- not fully, in some places more than others -- but to me, it's been the clearest demonstration up to now of the success of the frameworks that central banks all over the world have been adopting." Other studies show that inflation tends to be more stable and commercial banks less risky where the central bank is independent. This is because the public and investors have faith in the central bank keeping inflation in check and therefore they don't raise their demands in terms of wages, prices and returns. By contrast, investors have started demanding a greater premium for owning U.S. government bonds since Trump said he planned to sack Cook, with the 10-year debt rising 2.5 basis points to 4.30% on Tuesday . PRINTING MONEY Central banks also have the power to print money, particularly at times of financial turmoil or when prices risk falling into a downward spiral, known as deflation. At such times, some degree of coordination with governments over crisis-fighting measures tends to take place, whether publicly or behind the scenes. These coordinated efforts helped bring the global financial crises of the late-2000s to an end and allowed European Central Bank President Mario Draghi to quash speculation on a demise of the euro in 2012, when he pledged to do "whatever it takes" to preserve the euro. "During crises in particular, the independence and the credibility of the central bank is the most valuable asset," Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, said. "It would be a very serious issue if the Fed, or any central bank, were to be given orders by the president." In the last decade as the economy was recovering from the financial crisis, inflation was too low and rates were already at zero, central banks collectively bought several trillion dollars' worth of government debt and other assets. This had a number of effects, from juicing up returns on stocks, bonds and real estate to breaking a taboo about central banks financing -- albeit indirectly -- their governments. Central bankers were criticised for worsening economic inequality by enriching the owners of those assets, who tend to be wealthy. And that display of financial power may also have whetted politicians' appetite for more direct control. "In some sense, the central banks revealed themselves as the mega powers that they really are, and that raises more questions about control, independence, the legitimacy of technocrats who operate in a sort of insulated bubble of political process," said Maurice Obstfeld, a former chief economist at the International Monetary Fund and now senior fellow at the Peterson Institute. https://www.reuters.com/business/finance/mantra-central-bank-independence-shaken-by-trump-moves-fed-2025-08-26/

2025-08-26 14:43

LONDON, Aug 26 (Reuters) - Bank of England Monetary Policy Committee member Catherine Mann said on Tuesday that she saw a strong case to keep Bank Rate on hold for a prolonged period but stood ready to cut rates forcefully if downside risks to growth materialise. Mann voted against this month's quarter-point rate cut to 4% - as she has against most of the BoE's rate cuts over the past year - and said she believed that upside risks to inflation identified by the BoE in May were now beginning to crystallise. Sign up here. "A more persistent hold on Bank Rate is appropriate right now, to maintain the tight - but not tighter - monetary policy stance needed to lean against inflation persistence persisting," Mann said in remarks released by the BoE. "However, I stand ready for a forceful policy action, in the form of larger, more rapid Bank Rate cuts, should the downside risks to domestic demand start materialising," she added in the speech to be given later on Tuesday at a conference to mark the Bank of Mexico's 100th anniversary. Earlier this month the BoE revised up its near-term inflation forecast to 4% for September and forecast that inflation would not be back at its 2% target until the second quarter of 2027. In March, Mann talked about U.S. research showing that households became more focused on inflation once it reached 4%, but she said on Tuesday that subsequent BoE research showed this threshold was lower in Britain at 3.0-3.6%. Mann also highlighted how wage growth in Britain was running faster than could easily be explained by the central bank's models of supply and demand in the labour market and that forecast pay growth of 3.5-4.0% for the end of this year was too high to bring inflation back to 2%. Higher interest rates would bring inflation back to target sooner, but Mann said tightening monetary policy was not the right choice due to the weak growth outlook and her desire to avoid raising rates only to then have to cut them soon after. "The trade-off between persistent inflation persistence and quite weak GDP growth remains," she said. https://www.reuters.com/world/uk/bank-englands-mann-sees-case-persistent-hold-rates-2025-08-26/

2025-08-26 13:01

August export plan revised up by 200,000 bpd due to refinery outages Export planning uncertain due to ongoing strikes and repair schedule shifts Usti-Luga port operates at half capacity after pipeline damage MOSCOW, Aug 26 (Reuters) - Russia has revised up its crude oil export plan from western ports by 200,000 barrels per day (bpd) in August from the initial schedule after Ukrainian drone attacks disrupted refinery operations and freed up more crude for shipment, three people familiar with the matter said. Export planning remains uncertain, however, due to ongoing strikes and shifting repair schedules, so delays and volume revisions are likely, they said. Sign up here. "Attacks are ongoing and repair deadlines change daily. It’s unclear how much Russia can load this month or next," one person said. Russian oil sellers were yet to receive final loading plans for September, though normally they have the full plan a week before the loading month. Russia's Energy Ministry and Transneft oil pipeline monopoly did not immediately respond to requests for comment. The disruptions come at a time when Moscow is seeking to raise revenues despite Western sanctions and U.S. pressure on key buyers to reduce imports of its oil. Loadings from Primorsk, Novorossiisk and Ust-Luga are expected to reach about 2 million barrels per day (bpd), up from an initial plan of 1.8 million bpd, the sources said. The adjustment follows attacks on 10 Russian refineries this month, which shut down facilities accounting for at least 17% of national processing capacity, or 1.1 million bpd, according to Reuters calculations. Ukraine also targeted the Druzhba , opens new tab pipeline and the Unecha , opens new tab pumping station in the Bryansk region, a key route for crude deliveries to Ust-Luga, further limiting Russia’s export capacity. One source estimated that the damage to the Druzhba pipeline and the Ust-Luga route could reduce exports by up to 500,000 bpd. Vessel availability at the end of August is also constrained, limiting Russia’s ability to boost shipments, that person said. Another source said Ust-Luga port is currently operating at half of its 700,000 bpd capacity and it was not clear when the terminal may start to operate in full. The volumes are being diverted to Novorossiisk and Primorsk, the source added. Russian western port loadings are typically adjusted based on refinery throughput, as most plants are located in central Russia. Eastern exports remain largely unaffected. https://www.reuters.com/business/energy/russia-raises-august-oil-export-plan-after-drone-strikes-disrupt-refineries-2025-08-26/

2025-08-26 12:53

SAO PAULO, Aug 26 (Reuters) - Brazil's mid-month consumer price index posted its first drop in two years in August as electricity costs fell, official data showed on Tuesday, with the 12-month reading edging closer to the upper end of the central bank's target range. Prices in Latin America's largest economy fell 0.14% in the month to mid-August, statistics agency IBGE said, down from a 0.33% increase in the previous month. Economists polled by Reuters expected a 0.19% drop. Sign up here. The monthly decline was the first for the IPCA-15 index since July 2023, and comes as interest rates stand at a nearly 20-year high as part of the central bank's bid to tame persistent inflation. The overall price drop was mainly driven by lower housing costs, with electricity costs decreasing sharply due to a one-off discount related to hydroelectric dam Itaipu's results, according to IBGE. Closely watched food and beverage prices also slipped in the month, alongside declines in transport and communication costs. Annual inflation came in at 4.95% in the early August reading, IBGE said, down from 5.30% a month earlier but slightly above the 4.91% expected by economists in the Reuters poll. The key figure slipped below 5% for the first time since February in good news for Brazil's central bank, which targets inflation at 3% - plus or minus 1.5 percentage points - and has pledged to bring it back to that level. The bank last month interrupted an aggressive tightening cycle that had added 450 basis points to its benchmark interest rate, bringing it to 15%, the highest level since July 2006. https://www.reuters.com/world/americas/brazils-mid-month-inflation-index-posts-first-drop-two-years-2025-08-26/

2025-08-26 12:39

Areas evacuated are in Pakistan's agricultural heartland Floods from water release could inflame India-Pakistan tensions Floods have caused havoc in Pakistan's northwest, now moving east Eastern rivers experiencing heavier rainfall due to climate change, says minister LAHORE, Pakistan, Aug 26 (Reuters) - Pakistan evacuated at least 150,000 people in areas along three rivers in its agricultural heartland to escape flooding, as neighbouring India warned it plans to release excess water from a dam, officials said on Tuesday. The arch-rivals have been ravaged by intense rain and flooding in recent weeks. The release of excess water in addition to heavy rains threatens to further flood parts of Pakistan's Punjab province, which serves as the country's breadbasket and accounts for a large part of its food supply. Sign up here. The nuclear-armed nations have been in a tense stand-off since a brief conflict in May, their worst fighting in decades, and any flooding blamed on New Delhi could inflame ties. Pakistani officials said they received a second warning from India on Monday that it intends to release water from the rapidly filling Madhopur Dam, on its side of Punjab province. The forced evacuations started on Friday ahead of the Indian warning and have continued to date, said a spokesperson at Pakistan's National Disaster Management Authority. The total number also includes at least 35,000 who had left voluntarily after multiple early warnings since August 14, she said. Army troops are also taking part in the evacuation drive. India routinely releases water from its dams when they get too full, with the excess flowing into Pakistan. An Indian government source said they had not mentioned a specific dam but the intense rain led them to share the second warning with Pakistan through diplomatic channels. Asked if more warnings could be issued, he said it was possible. New Delhi had warned Pakistan on Sunday that large volumes of water would flow into its waterways due to the heavy rainfall. Three rivers - Ravi, Sutlej and Chenab – flow into Pakistan from Indian territory. Those rivers are seeing medium to high flooding, the Pakistani authority said on Tuesday, warning of more intense rains in Punjab and Pakistan's Kashmir in the next 12 to 24 hours. Mazhar Hussain, a Pakistani disaster management official, said India will release a controlled amount of water from dams in the coming days. Hundreds of villages situated on the embankment of the three rivers have been evacuated, he said. Sixteen villages are at risk of flooding, said Deputy Commissioner Saba Asghar Ali after visiting Pasrur city near the Indian border. Arrangements for food, medicines, washrooms, and other necessities have been made in the relief camps set up in the area, she said, adding that there may be a need to relocate a population of 5,000 and 1,450 livestock to safer locations. "Due to climate change, eastern rivers are experiencing heavier rainfall compared to the past," said Kazim Raza Pirzada, the Punjab province irrigation minister. AGRICULTURAL HEARTLAND Pakistan's northwest has been hammered by intense floods, accounting for half of the 799 people killed this monsoon season. The northern region of Gilgit Baltistan has suffered accelerated glacial melting, while the southern city of Karachi was partly submerged last week. Now the worst of the flooding is threatening the eastern Punjab province, home to half of Pakistan's 240 million people. The province produces the majority of Pakistan's staple crops and the areas along the three rivers boast large tracts of fertile agricultural lands. The warning from India on Sunday came after New Delhi put in abeyance a decades-old treaty with Islamabad on sharing water from the Indus River network. India suspended the treaty after blaming Pakistan for a deadly attack on Hindu tourists in Indian Kashmir, which sparked the hostilities in May. Islamabad denied any involvement. An Indian official said on Sunday that the warning was shared on "humanitarian grounds", and not under the 1960 Indus Waters Treaty, following heavy rains in the northern Jammu and Kashmir. Floods in the region have killed at least 60 people this month. https://www.reuters.com/sustainability/land-use-biodiversity/pakistan-evacuates-150000-people-rival-india-warns-floods-2025-08-26/