2025-05-22 17:37

Mexico Q1 GDP +0.2% q/q; averts recession but signals weakness Headline inflation rose to 4.22%, over cenbank target Economists warn of risks from U.S. trade policies Analysts see further rate cuts despite inflation spike President, finance minister say economy performing solidly MEXICO CITY, May 22 (Reuters) - Analysts sounded alarms over Mexico's economy on Thursday after new data showed feeble growth in the first quarter while inflation spiked outside the central bank's target range for the first time this year. Gross domestic product (GDP) in Latin America's second-largest economy grew 0.2% in the first quarter from the previous three-month period, statistics agency INEGI said, in line with market forecasts in a Reuters poll and a preliminary estimate released last month. Sign up here. While agricultural growth offset declines in manufacturing and services, allowing Mexico to avert the technical recession some had feared, the overall economy still indicated weakness. "Underlying momentum remains fragile and forward-looking indicators suggest a deteriorating outlook," said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics. In annual terms, Mexico's GDP grew 0.8% in the first quarter. "The data show that during the period, industrial production continued to decline and services weakened," Mexican bank Banamex said. Economists warn the Mexican economy, strongly intertwined with the United States, remains at risk of contracting in coming quarters due to the uncertainty unleashed by U.S. President Donald Trump's trade policies and tariffs. "The outlook points to activity remaining weak in the coming quarters," Banamex added. Separate data showed that Mexico's headline inflation unexpectedly sped up to 4.22% in early May, above the 4.01% forecast of analysts polled by Reuters and outside the central bank's target range of 2-4%. Consumer prices rose 0.09% in the first 15 days of the month from the previous 15 days, driven in part by a surprise bump in chicken prices, while the less volatile core price index climbed 0.16% in early May, coming it at 3.97% on an annual basis. The Bank of Mexico cited weak economic activity in its decision last week to cut Mexico's benchmark interest rate by 50 basis points, its third straight cut of that magnitude, bringing it to 8.5%, the lowest since August 2022. Despite the jump in inflation, analysts at Actinver, Pantheon and Capital Economics all see Mexico's central bank cutting its rate again at its June monetary policy meeting. "The central bank once again sounded very dovish at its meeting last week and has made very clear that it's increasingly worried about the growth outlook," Capital Economics' Kimberley Sperrfechter said. Although growth is not part of the central bank's mandate, a weaker outlook is seen adding pressure on the governing board to continue reducing borrowing costs. Speaking alongside President Claudia Sheinbaum on Thursday, Finance Minister Edgar Amador said the GDP figures showed "solid performance and a continued expansion of the economy." Amador's ministry has a more upbeat forecast for Mexico's economy than private sector analysts. A draft budget from the finance ministry last month forecast the economy growing between 1.5% and 2.3% this year. A central bank survey of private sector economists published on May 2 had a median growth forecast of just 0.2% this year. "The Mexican economy is going well," Sheinbaum said on Thursday. "It is not necessary to change the model." https://www.reuters.com/world/americas/mexico-inflation-rises-past-central-bank-target-early-may-2025-05-22/

2025-05-22 17:31

MOSCOW, May 22 (Reuters) - The Russian government said on Thursday that it had extended until April 30, 2026 a requirement for major exporters to sell a certain proportion of their foreign currency earnings. Major exporters must repatriate at least 40% of their foreign currency earnings and sell at least 90% of the repatriated earnings on the domestic market from May 25, the government said. Sign up here. https://www.reuters.com/business/finance/russia-extends-mandatory-sale-forex-revenue-by-exporting-companies-2025-05-22/

2025-05-22 16:56

Weekly jobless claims fall 2,000 to 227,000 Continuing claims increase 36,000 to 1.903 million Business activity picks up in May; price pressures rise Existing home sales fall 0.5% in April; supply increases WASHINGTON, May 22 (Reuters) - The number of Americans filing new applications for unemployment benefits fell last week as companies hoard labor, suggesting the economy maintained a steady pace of job growth in May, but it is becoming harder for those out of work to find new opportunities. The weekly jobless claims report from the Labor Department on Thursday showed unemployment rolls approaching levels last seen in late 2021 amid a reluctance by employers to increase headcount because of economic uncertainty stemming from President Donald Trump's policies, including a shifting position on tariffs, mass deportations of migrants and firings of public workers. Sign up here. "Employers have so far elected to keep their staff headcounts steady despite the swirling winds of unprecedented policy changes for the economy emanating from down in Washington," said Christopher Rupkey, chief economist at FWDBONDS. "There is no serious deterioration in the labor market to date, and the economy is weathering the storm for now." Initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 227,000 for the week ended May 17. Economists polled by Reuters had forecast 230,000 claims for the latest week. Labor market resilience has provided the Federal Reserve cover to hold interest rates steady while policymakers monitor the Trump administration's unfolding policies. Independent surveys, however, point to a pickup in layoffs in the coming months as the administration's import duties hurt demand, snarl supply chains and fuel inflation. A survey from S&P Global on Thursday showed a composite measure of manufacturing and services industries employment tipped into contraction territory in May, "primarily reflecting concerns over future demand prospects but also in response to worries over rising costs and labor shortages." Business activity, however, increased this month following a truce in the trade war between the U.S. and China. S&P Global said the pausing of higher tariffs for 90 days likely resulted in some companies front-running imports and orders. Economists are expecting layoffs in the transportation, warehousing and retail sectors as tariffs weigh on consumer spending. "A large share of these jobs likely will go as consumers' spending swings from above-trend to below-trend in the third quarter, after tariff-driven price rises have kicked in," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. "The pace of firing will rise and new hiring will decline, lifting weekly claims to about 250,000 by the end of June." The rise in business activity this month was accompanied by a surge in price pressures, hinting at an acceleration in inflation in the coming months and keeping stagflation on the table. Gross domestic product contracted in the January-March quarter for the first time in three years. The data was, however, overshadowed by the passage in the U.S. House of Representatives of Trump's "big, beautiful bill," which the nonpartisan Congressional Budget Office estimated would add about $3.8 trillion to the federal government's $36.2 trillion debt in the next decade, if it becomes law. Stocks on Wall Street were trading slightly higher and the dollar gained versus a basket of currencies. The 30-year Treasury yield reached its highest level in 19 months before easing. LONG UNEMPLOYMENT SPELLS The claims data covered the period during which the government surveyed businesses for the nonfarm payrolls component of May's employment report. Claims rose marginally between the April and May survey periods. The economy added 177,000 jobs in April. Economists expect job growth to slow below 100,000 per month, the level they say is needed to keep up with growth in the working-age population. Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will shed more light on the health of the labor market in May. The so-called continuing claims increased by 36,000 to a seasonally adjusted 1.903 million during the week ending May 10, moving back to levels last seen in November 2021, the claims report showed. "This report suggests that May employment growth should still be decent, though the gradual rise in continuing claims does point to some upward pressure on unemployment," said Abiel Reinhart, an economist at J.P. Morgan. Employers' hesitancy to add to headcount has left many people who lose their jobs to experience long spells of unemployment. The median duration of unemployment jumped to 10.4 weeks in April from 9.8 weeks in March. While the labor market is holding up, the housing market continues to struggle and could remain sluggish as the bond market selloff drives up mortgage rates. Existing home sales slipped 0.5% in April to a seasonally adjusted annual rate of 4.00 million units, the National Association of Realtors said in a third report. Sales last month were the slowest for April since 2009, marking a weak start to the spring selling season. Housing inventory soared 9.0% to 1.45 million units, the highest in more than four years. "The market is slowly but steadily shifting in favor of buyers, but more listings will be needed to bring sales out of the cellar," said Daniel Vielhaber, an economist at Nationwide. "High mortgage rates and uncertainty about forward financial conditions may cause many buyers to put off a home purchase this year and wait for a more stable environment. We see the housing market slump continuing through the end of the year." https://www.reuters.com/world/us/us-weekly-jobless-claims-fall-labor-market-remains-stable-2025-05-22/

2025-05-22 16:10

Fed's Waller says rate cuts possible later this year Key to easing policy is whether tariffs settle at lower end of range, he says Waller says markets are showing concern about government deficits NEW YORK, May 22 (Reuters) - Federal Reserve Governor Christopher Waller said on Thursday he still sees a path to interest rate cuts later this year, and added that market pricing shows investors are worried the current Republican-backed budget and tax bill in Congress does not do enough to deal with the U.S. deficit. Waller, who was interviewed on Fox Business' "Mornings with Maria" program, said the key to the outlook depends on where the Trump administration's tariff policy settles out. If those tariffs hit the lower end of the range relative to some of the more draconian levels seen at the start of President Donald Trump's global trade war, then the outlook appears solid, he added. Sign up here. "If we can get the tariffs down close to the 10% and then that's all sealed, done and delivered somewhere by July, then we're in good shape for the second half of the year, and then we're in a good position to kind of move with rate cuts through the second half of the year," Waller said. He did not say how or when he expects the Fed to lower its benchmark interest rate, which is currently in the 4.25%-4.50% range. Financial markets are looking toward a modest amount of rate-cutting later in the year, even as Fed officials and many analysts in the private sector acknowledge huge uncertainty around the outlook because of trade policy. Many of the more aggressive aspects of the tariff policy are suspended pending the success of negotiations with U.S. trade partners, so there remains little clarity on how things will shake out. Economists generally believe tariffs of the sort favored by Trump will drive up inflation while lowering growth and employment. The president's retreat on tariffs has caused forecasters to lower what had been high odds the economy would fall into recession. 'NOT SUSTAINABLE' Waller also addressed the Trump administration's budget and tax bill plan, which appears likely to add significant amounts of borrowing to already massive U.S. deficits. Financial markets have wobbled as Republicans have moved forward on the legislation, with government bond yields rising. Higher borrowing costs add restraint to economic activity and could affect how the Fed thinks about future monetary policy choices. "The markets are watching the fiscal policy" now being considered "and they have some concerns about whether it's going to be reducing the deficit. I mean, we ran $2 trillion deficits the last few years. This is just not sustainable," Waller said. "Markets are looking for a little more fiscal discipline, they're concerned," Waller said. As the version of the bill passed on Thursday by the U.S. House of Representatives also needs to go through the Senate, Waller noted markets might demand a premium to buy government debt until it's clear government spending will moderate. Republicans control both chambers in Congress. Waller said there's a general level of concern right now over U.S. assets. "There does seem to be, you know, a risk-off on American assets across the board, not just government debt, but everything," Waller said. "And whether that continues in the future or not, I don't know." Waller said that if the economy gets back "on a good path" and inflation "stays down," then "you might see a resurgent demand for American assets." He also said he continues to believe that any tariff-related inflation will be a one-time episode that Fed policymakers can look through. Waller said a 10% tariff regime should have only a modest impact on price increases and noted that he has seen nothing so far to suggest the tariffs would create persistent upward pressure on prices. https://www.reuters.com/sustainability/boards-policy-regulation/feds-waller-sees-path-rate-cuts-later-this-year-fox-business-reports-2025-05-22/

2025-05-22 16:08

LONDON, May 22 (Reuters) - The former Swedish central banker leading the Bank for International Settlements' work on digital currencies, Cecilia Skingsley, is to leave the Switzerland-based umbrella body two years early to take a government job back in her homeland. Skingsley began a five-year term as head of the BIS' 'Innovation Hub' in September 2022 but the ex-Riksbank deputy governor will leave to take up a role next month as County Governor of the County Administrative Board of Stockholm. Sign up here. The BIS' innovation unit was set up in 2019 to identify and develop new technologies and rapidly expanded to seven financial centres from London to Hong Kong. Reports earlier this year, however, said it was set to be pared back by new BIS General Manager Pablo Hernandez de Cos who takes the helm in July. Central bank digital currencies in particular have become a geopolitical hot topic and late last year the BIS suddenly quit a flagship project it had been collaborating on with China and a number of other Asian central banks. The BIS' current chief Agustín Carstens said that under Skingsley, the Innovation Hub had made, "great strides towards fulfilling our strategic goal of helping central banks face the challenges of the future". The central bankers' central bank, as it is dubbed, added that it would announce the recruitment process for her successor "in due course" with Deputy General Manager and former Swiss central banker Andréa Maechler standing in in the interim. https://www.reuters.com/world/china/head-bis-digital-currency-hub-leaves-post-early-2025-05-22/

2025-05-22 15:09

NEW YORK, May 22 (Reuters) - The U.S. Treasury market remains orderly and U.S. government bonds remain liquid safe-haven assets, a spokesperson at the International Monetary Fund said on Thursday, adding the Fund was monitoring tax plans taking shape in Congress. Long-term U.S. government bond yields have been rising sharply this week after a downgrade of the U.S. credit rating by Moody’s and as Republicans discussed a sweeping tax package that analysts said could add trillions to the U.S. sovereign debt pile. Sign up here. “Although there has been some volatility in markets, market functioning, including in the U.S. Treasury market, has so far been orderly,” the IMF's director of communications, Julie Kozack, told reporters on Thursday. The Republican-controlled U.S. House of Representatives on Thursday passed a sweeping tax and spending bill by a single vote which would enact much of President Donald Trump's policy agenda. It will add about $3.8 trillion to the federal government's $36.2 trillion in debt over the next decade, according to the nonpartisan Congressional Budget Office. “We will look to assess a final bill once it has passed through the Senate and also once it’s been enacted,” said Kozack. She added a trade breakthrough between the United States and China earlier this month could improve global economic growth prospects, despite continued uncertainty. “The reduction in tariffs and the easing of tensions does provide some upside risk to our global growth forecast,” she said. “All of this said, of course, the outlook, the global outlook in general, does remain one of high uncertainty, and so that uncertainty is still with us.” https://www.reuters.com/business/us-treasuries-sell-off-remains-orderly-imf-says-2025-05-22/