2024-12-19 12:34

LONDON, Dec 19 (Reuters) - The Bank of England kept its main interest rate unchanged at 4.75% on Thursday but policymakers became more divided about whether rate cuts were needed to tackle a slowing economy. Three of the BoE's nine-person Monetary Policy Committee voted for a quarter-point rate cut instead, much higher than the one member economists polled by Reuters had expected. But BoE Governor Andrew Bailey said the central bank needed to stick to its existing "gradual approach" to cutting rates. MARKET REACTION: STOCKS: London's FTSE-100 stock index (.FTSE) , opens new tab cut its losses following the decision and was down around 1.1% by 1224 GMT. The domestically focussed FTSE-250 (.FTMC) , opens new tab moved similarly. FOREX: Sterling dipped against the dollar and was last up 0.2% at $1.2596, from $1.2628 before the decision. BONDS AND MONEY MARKETS: Rates-sensitive two-year gilt yields edged lower and were last unchanged on the day at 4.47% while traders continued to expect two more BoE rate cuts next year. COMMENTS: FLORIAN IELPO, HEAD OF MACRO, LOMBARD ODIER, GENEVA: “The Bank of England will follow the ECB in 2025. They can easily afford to lower rates progressively.” “I expect inflation to get more under control, which will open the door for BoE to recalibrate its monetary policy.” "There should be some weakness in the UK economy then the BoE will be in a position to accelerate the pace of rate cuts.” HUSSAIN MEHDI, DIRECTOR INVESTMENT STRATEGY, HSBC ASSET MANAGEMENT, LONDON: "While we think risks are tilted towards more rate reductions amid signs of weakening demand for labour, the reality is inflation is proving stubborn and persistent." "In the 'multi-polar' world of economic fragmentation, the UK economy will likely need to adjust to a new reality of higher-for-longer rates and a terminal interest rate that might not drop much below 4%." YAEL SELFIN, CHIEF ECONOMIST, KPMG, LONDON: "The BoE struck a cautious tone in today’s minutes, highlighting continued upside risks and uncertainty to the medium-term inflation outlook." "The MPC's ability to ease interest rates next year will be constrained by the challenging inflation backdrop, in addition to the expected pick-up in economic activity. This will put the BoE in a unique position relative to its counterparts in Europe, particularly the ECB." "With underlying inflationary pressures set to remain elevated over the coming year, the MPC is unlikely to shift from its gradual approach. We expect interest rates to fall by around 75 basis points next year, down to 4%." KIRSTINE KUNDBY-NIELSEN, ANALYST, DANSKE BANK, COPENHAGEN: "The vote split was a bit unexpected ... that's definitely what markets are reacting to. Gilt yields are a little lower and euro-sterling is rising after the statement." "They are highlighting a gradual approach to easing monetary policy is still warranted and I think this should be interpreted as quarterly cuts. I think we'll get a cut at the meetings where we get updated projections and a press conference." CHRIS SCICLUNA, HEAD OF ECONOMIC RESEARCH, DAIWA CAPITAL MARKETS, LONDON: "There is a very decent case for a rate cut and the market pricing has become more hawkish. It looks like markets were too influenced by events in the U.S. economy and you can see that by what's happened in U.S. and UK bond yields in the last three weeks." "The UK economy is behaving far more like the euro zone economy than the U.S. one. The UK economy is flatlining and that suggests the monetary policy stance is too tight." "There was a case for a rate cut today and there is a case for several cuts next year." "I expect a cut in Feb when the BoE updates its projections." NEIL BIRRELL, CHIEF INVESTMENT OFFICER, PREMIER MITON INVESTORS, LONDON: "As expected, the Bank of England left the base rate unchanged. Clearly the spectre of inflation is its major concern rather than a stagnating economy." "Ongoing poor news out of the all-important consumer sector is a concern, but that has been parked until the new year, when we will have heard from the major retailers on the Christmas period. It's difficult to get enthused about the outlook for the economy at the moment and the path for interest rate cuts isn’t helping." Sign up here. https://www.reuters.com/world/uk/view-boe-keeps-rates-hold-policymakers-more-divided-2024-12-19/

2024-12-19 12:29

LONDON, Dec 19 (Reuters) - The pound slipped on Thursday after the Bank of England held interest rates but three policymakers voted to lower borrowing costs, denting a rebound against the dollar as markets swung in the wake of the Federal Reserve's decision on Wednesday. British government bond yields also reversed course slightly, as the six-three vote surprised investors who had been expecting only one official to opt for a reduction. The BoE held its main rate at 4.75% but Deputy Governor Dave Ramsden and external members Swati Dhingra and Alan Taylor voted for a 25 basis point (bp) cut to 4.5%. BoE Governor Andrew Bailey said the central bank needed to stick to a "gradual approach" to cutting rates, citing uncertainty about the economy. The pound was last up 0.2% at $1.2603, having risen as much as 0.7% earlier in the day as it recovered from a sharp drop in the previous session. The U.S. Fed cut interest rates on Wednesday but policymakers said they now envisage just two rate cuts next year instead of the previous four, sending the dollar surging and the pound down more than 1%. Britain's 10-year government bond yield fell slightly after the BoE decision and was last up 2 bps at 4.584%, from 4.6% before the decision. British bond yields rose on Thursday before the BoE decision, reflecting a jump in U.S. government yields overnight. Yields move inversely to prices. "There is a very decent case for a (BoE) rate cut and the market pricing has become more hawkish," said Chris Scicluna, head of economic research at Daiwa Capital Markets. "The UK economy is behaving far more like the euro zone economy than the U.S. one. The UK economy is flatlining and that suggests the monetary policy stance is too tight." The UK's FTSE 100 (.FTSE) , opens new tab was last down 1.1%, having traded around 1.4% lower before the BoE's announcement, after a sharp overnight sell-off in U.S. stocks. Mid-sized companies on the FSTE 250 (.FTMC) , opens new tab index also perked up somewhat, with the gauge last down 1%. Policymakers in Britain have been focused on underlying price pressures, which many see as still too strong. Data this week showed growth in UK wages sped up in the three months to October and inflation rose to an eight-month high of 2.6% in November. Yet growth has stalled. Data last week showed Britain's economy shrank for a second month in a row in October. Sign up here. https://www.reuters.com/markets/currencies/pound-rocked-by-tough-talking-fed-ahead-boe-decision-2024-12-19/

2024-12-19 12:17

LONDON, Dec 19 (Reuters) - The pound slipped on Thursday after the Bank of England held interest rates but three policymakers voted to lower borrowing costs, denting a rebound against the dollar as markets swung in the wake of the Federal Reserve's decision on Wednesday. Britain's 10-year government bond yield fell and was last up 1 basis point at 4.569%, from 4.598% before the decision. The BoE held rates at 4.75%. The U.S. Fed cut interest rates on Wednesday but policymakers said they now envisage fewer rate cuts next year, sending the dollar surging and the pound down more than 1%. British bond yields rose on Thursday before the BoE decision, reflecting a jump in U.S. government yields overnight. Yields move inversely to prices. The UK's FTSE 100 (.FTSE) , opens new tab was last down 1.1%, having traded around 1.4% lower before the BoE's announcement, after a sharp sell-off in U.S. stocks on Wednesday. Sign up here. https://www.reuters.com/markets/europe/pound-bond-yields-dip-after-boe-holds-rates-three-officials-dissent-2024-12-19/

2024-12-19 12:14

Bangladesh hopes to reopen major power deal awarded to Adani Power by ex-PM Dhaka says Adani didn't remit savings from India tax break it received Adani says it met all contractual obligations Bangladesh already owes Adani several hundred million dollars for past energy DHAKA, Dec 19 (Reuters) - Bangladesh's interim government has accused energy supplier Adani Power of breaching a multi-billion-dollar agreement by withholding tax benefits that a power plant central to the deal received from New Delhi, according to documents seen by Reuters. In 2017, the Indian company controlled by billionaire Gautam Adani signed an agreement with Bangladesh to provide power from its coal-fired plant in eastern India. Dhaka has said it hopes to renegotiate the deal, which was awarded by then-Prime Minister Sheikh Hasina without a tender process and costs Bangladesh far more than its other coal power deals, according to Bangladesh power agency documents and letters between the two parties reviewed by Reuters, as well as interviews with six Bangladesh officials. Dhaka has been behind on payments to Adani Power since supply started in July 2023. It owes several hundred million dollars for energy that has already been supplied, though the two sides dispute the exact size of the bill. Bangladesh's de facto power minister Muhammad Fouzul Kabir Khan told Reuters the country now had enough domestic capacity to cope without the Adani supply, though not all domestic power generators were operational. Nobel peace prize laureate Muhammad Yunus took power in August after a student-led revolution ousted Hasina, who critics accuse of stifling democracy and mismanaging the economy. She ran Bangladesh for most of the last two decades and was a close ally of Indian Prime Minister Narendra Modi. Reuters is reporting for the first time that the contract came with an additional implementation agreement that addressed the transfer of tax benefits. The news agency is also revealing details about Bangladesh's plan to reopen the 25-year deal, and that it hopes to use the fallout from U.S. prosecutors' November indictment of Adani and seven other executives for their alleged role in a $265 million bribery scheme to press for a resolution. Adani Power has not been accused of wrongdoing in Bangladesh. A company spokesperson said in response to Reuters' questions that it had upheld all contractual obligations and had no indication Dhaka was reviewing the contract. The company did not answer questions about the tax benefits and other issues raised by Bangladesh. Adani Group has called the U.S. allegations "baseless." TAX EXEMPTIONS Adani Power's Godda plant runs off imported coal and was built to serve Bangladesh. The company said the Bangladesh deal helped further Indian foreign policy objectives and Delhi in 2019 declared the plant part of a special economic zone. It enjoys incentives such as exemptions on income tax and other levies. The power supplier was required to inform Bangladesh swiftly of changes in the plant's tax status and to pass on the "benefit of a tax exemption" from India's government, according to the contract and implementation agreement signed on Nov. 5, 2017 between Adani Power and the state-run Bangladesh Power Development Board (BPDB). But Adani Power did not do so, according to letters sent by BPDB on Sept. 17, 2024 and Oct. 22, 2024 that urged it to remit the benefits. The agreements and letters are not public but were seen by Reuters. Two BPDB officials, who spoke on condition of anonymity because they were not authorised to talk to the media, said they did not receive responses. BPDB estimates savings of roughly 0.35 cents per unit of power if the benefit was passed on, the officials said. The Godda plant supplied 8.16 billion units in the year to June 30, 2024, according to an undated Bangladesh government summary of power purchases seen by Reuters, suggesting potential savings of about $28.6 million. Power minister Khan said the savings would be a key part of future discussions with Adani Power. 'NEGOTIATED HASTILY' Bangladesh in November scrapped a 2010 law that allowed Hasina to award some energy deals without a competitive bidding process. The absence of tenders is unusual, said Tim Buckley, director of Australia's Climate Energy Finance think-tank, adding that auctions ensure "the best price possible." In September, Yunus's government appointed a panel of experts to examine major energy deals signed by Hasina. A Bangladesh court has separately ordered a probe of the Adani deal. Another panel asked to study the economy said in a white paper submitted to Yunus on Dec. 1 that the U.S. charges against Adani meant Bangladesh should "scrutinise" the power deal, which it described as "negotiated hastily." Hasina, who has not been seen in public since she fled to India, could not be reached. Her son and adviser Sajeeb Wazed told Reuters he was not aware of the Adani Power deal but that he was "sure there was no corruption." "I can only assume the Indian government lobbied for this deal so it was made," he said in response to allegations of political interference. Modi's office and other Indian officials did not respond to requests for comment. HARDBALL On Oct. 31, Adani Power halved the power supply from Godda in response to the payment dispute with Bangladesh. The company in a July 1 letter seen by Reuters also rejected a request from BPDB to extend a discount it had offered until May - resulting in savings of about $13 million for Bangladesh. It said it would not consider further discounts until payment was cleared. Adani Power contends it is owed $900 million, while BPDB says arrears are about $650 million. Bangladesh suffers from a dollar shortage and BPBD officials told Reuters they haven't been able to obtain sufficient foreign currency for payment. The halving of supply particularly angered Bangladesh, BPDB Chair Md. Rezaul Karim said, because it came after Dhaka in October remitted $97 million to Adani Power - its highest monthly payment this year. The dispute revolves around how power tariffs are calculated, with the 2017 agreement pricing off an average of two indices. The unit cost of energy from Godda was 55% above the average of all Indian power sold to Dhaka, according to the summary of Bangladesh's power purchases. Bangladesh is pressing for Adani Power to use other benchmarks that would lower the tariff after one of the indices was revised last year, said three BPDB sources. Adani Power has rejected that, one of them said, adding the two sides were meeting soon. The agreements stipulate that arbitration be carried out in Singapore, but Khan said Bangladesh's next move depended on the outcome of the court-ordered investigation. "If it is proven that bribery or irregularities had happened, then we will have to follow the court order if any cancellation happens," he said. ($1 = 119.0000 taka) Sign up here. https://www.reuters.com/business/energy/adani-under-bribery-scrutiny-pressed-by-bangladesh-reopen-power-deal-2024-12-19/

2024-12-19 12:10

Policy rate cut to 2.5% as expected Riksbank says may cut once more in H1 2025 More cautious on cuts than previously STOCKHOLM, Dec 19 (Reuters) - Sweden's central bank cut its key interest rate by quarter of a percentage point to 2.50% as expected on Thursday, but said that after easing policy five times this year, it saw reasons to be more cautious as it enters 2025. The Swedish economy has been treading water for the past two years after the Riksbank jacked up rates to fight surging inflation - which peaked at around 10% in late 2022. The central bank started cutting rates again in May and inflation is now below its 2% target. But while households and businesses remain wary about spending, inflation has edged up again in recent months. "If the outlook for inflation and economic activity remains unchanged, the policy rate may be cut once again during the first half of 2025," the Riksbank said in a statement. "The interest rate has been reduced rapidly and monetary policy affects the economy with a lag. This argues for a more tentative approach when monetary policy is formulated going forward." Governor Erik Thedeen said the outlook for rates was broadly the same as the central bank had indicated before it made a larger-than-usual half-percentage-point cut last month. "We are signalling the same cuts as we did in September and November, or if anything slightly more," Thedeen told reporters. "We speeded up the cuts at the end of this year and now it's reasonable to wait to see their effects." The Swedish crown strengthened after the announcement. "We now expect just one more 25 basis point cut next year, in March, as we think the economy will start to pick up soon, dissuading policymakers from too much more policy loosening," Adrian Prettejohn, Europe Economist at Capital Economics said. Analysts in a Reuters poll had been unanimous in seeing a quarter-point cut. They forecast two more cuts in the first half of next year with the policy rate stabilizing at 2.00%. Norway's central bank kept its key rate on hold on Thursday. The Bank of England will announce its policy decision later in the day. Sign up here. https://www.reuters.com/markets/europe/swedish-central-bank-cuts-policy-rate-may-ease-again-early-2025-2024-12-19/

2024-12-19 12:02

WARSAW, Dec 19 (Reuters) - Poland still expects 2.8-2.9% economic growth in the fourth quarter, Finance Minister Andrzej Domanski said on Thursday. "This will be a strong quarter for the Polish economy," Andrzej Domanski told a press conference He said he considered it "absolutely crucial" for there to be more growth engines in the following quarters and years, pointing at investments and export. "I hope that the situation will also improve when it comes to exports, because here, due to the weakness in the economies of euro zone countries, unfortunately we see problems," Domanski said. "The zloty exchange rate remains unfavourable for Polish exporters." Poland expects its gross domestic product to grow 3.1% in 2024 and 3.9% in 2025. Sign up here. https://www.reuters.com/markets/europe/poland-expects-28-29-gdp-growth-q4-2024-12-19/